Coinbase Dismisses Lawsuit Over WBTC Delisting, cbBTC Gains Market Share

Coinbase and BiT Global have agreed to dismiss a lawsuit over the delisting of Wrapped Bitcoin (WBTC) from the crypto exchange. The lawsuit was filed by BiT Global, a digital asset custodian with ties to crypto entrepreneur Justin Sun, after Coinbase announced it would no longer list WBTC. The delisting came after BiT Global announced plans to become involved with the token, which is backed by one-to-one reserves of Bitcoin and is one of the most popular tokens in the world.

BiT Global sued Coinbase in December, arguing that the delisting was a predatory move motivated by the exchange’s desire to increase the value of its own wrapped Bitcoin product, cbBTC, by suppressing its chief competitor. Coinbase countered that the move was motivated by a desire to protect customers from the risk that control of WBTC would fall into the hands of Justin Sun. A federal judge denied BiT Global’s request to halt the delisting, stating there was insufficient evidence that the move would cause imminent and irreparable harm to the crypto custodian.

The lawsuit was dismissed without prejudice, meaning the matter cannot be litigated in the future. Each party will cover their own legal fees. It is unclear what prompted the agreement to dismiss the lawsuit. Coinbase Chief Legal Officer Paul Grewal stated that the company will not be bullied into continuing to list an asset that puts its customers at risk.

Since delisting WBTC, Coinbase has seen its position in the wrapped Bitcoin sector grow substantially. Coinbase's own wrapped Bitcoin product, cbBTC, has steadily gained market share.

BiT Global's involvement with WBTC attracted pushback in the crypto community due to its ties to Justin Sun, with some leaders arguing that Sun’s involvement posed an unacceptable level of risk to WBTC’s stability and trustworthiness. The announcement by BitGo, WBTC’s chief custodian, that it was teaming with BiT Global to diversify custodial jurisdictions and locations for the underlying Bitcoin held to back WBTC, was met with criticism.

Coinbase's decision to delist WBTC and launch its own competitor, cbBTC, was seen as a strategic move to protect its customers and increase the value of its own product. The delisting and subsequent lawsuit highlighted the complexities and risks involved in the crypto industry, particularly when it comes to wrapped tokens and custodial services.