Recognizing you may be hampered by an NDA, could you help walk through the reasoning?
There seems to be a straight line drawn from “the custody arrangements are not what we are comfortable with” all the way to “let’s reduce exposure”. Given the size of Aave’s exposure (vs the more modest exposure at Maker), can you walk us through a worst case scenario? Say we wake up one morning to crypto twitter saying some of the WBTC backing is missing or that redemptions have been halted. What kind of depeg/price drop results in unacceptable losses for Aave?
Let’s also run this same question by a bunch of other asset-backed collateral on Aave: weETH, USDT, USDC, USDe, cbETH, etc. How does the custody arrangement of those collaterals compare to the custody arrangements you’re seeing in your due diligence? While I am not someone who has done diligence on WBTC’s new setup, I find it perplexing what could be unacceptable about the new setup while something like USDT (unclear creditor rights) or USDe (unclear creditor rights) or weETH (4/7 msig) or many other assets.
This isn’t a knock on your analysis, just a real question. What are you seeing in this asset that prompts you to off board while all these other assets over here have pretty poor trust assumptions, too?
Disclosure: I am not affiliated with Aave, BitGo, or any other asset named here, and have no holdings in any of them except a small amount of USDC.