Coinbase Wrapped BTC ("cbBTC") is a token fully backed 1:1 by native Bitcoin (BTC) held in Coinbase’s secure custody solutions, which include cold storage. This ensures that every unit of cbBTC in circulation corresponds to an equal amount of BTC. As a wrapped asset, cbBTC functions as a transferable token that can be exchanged for the underlying asset. Coinbase users have the ability to unwrap their cbBTC and redeem the equivalent BTC by depositing the tokens into their Coinbase accounts. The token is designed for seamless integration with DeFi applications, allowing users to access decentralized finance opportunities and utilize its financial capabilities.

cbBTC eliminates a major barrier by enabling users to utilize their existing Bitcoin holdings in new onchain ways. Designed for seamless integration with DeFi applications, it allows users to access novel use cases such as supplying Bitcoin as liquidity to DeFi protocols, leveraging it as collateral for borrowing other crypto assets, or using it for payments. Wrapped assets like cbBTC represent a mature concept in the cryptocurrency sector, aiding in bringing more liquid assets onchain and supporting a broad financial ecosystem.

cbBTC maintains a 1:1 fungibility with a dedicated reserve of BTC held at Coinbase. The minting (sending) and burning (redeeming) mechanisms are designed to ensure trust and transparency, offering a smooth user experience. When a user requests a cbBTC withdrawal, Coinbase retains the corresponding amount of BTC in custody to back the newly minted cbBTC.

• Minting: If a user initiates a withdrawal of BTC from their Coinbase account to the Ethereum or Base networks, an equivalent quantity of cbBTC is minted on the network and transferred to the user’s destination address or wallet.
• Burning: Upon depositing cbBTC to a user-specific Coinbase address, the tokens are burned, and the matching amount of BTC is released from Coinbase’s reserve and credited to the user’s Bitcoin account.

The total supply of cbBTC is visible in the token smart contract under totalSupply.

Minting and burning cbBTC relies on a suite of audited and secure Ethereum smart contracts. These contracts manage the creation and destruction of cbBTC as required, guaranteeing that the total cbBTC supply always aligns with the backing BTC reserves. cbBTC utilizes the core components of the Coinbase wrapped token contract previously employed for Coinbase Wrapped Staked ETH (cbETH). The open-source repository for the smart contract code of Coinbase's wrapped tokens, covering both cbBTC and cbETH, is available on Github.

Key roles within the wrapping contract managed by Coinbase include:

• Admin: authorized to upgrade the wrapped token implementation contract
• Owner: authorized to assign all roles excluding the Admin
• Blacklister: authorized to blacklist an address from transferring, minting, and burning
• MasterMinter: authorized to assign minters and define their limits
• Minter: authorized to mint and burn tokens
• Pauser: authorized to pause transfers, mints, and burns for the contract

These roles are secured by Coinbase’s key management systems, and executing them requires approval from multiple individuals across various functions, such as security, engineering, and finance.

To protect the BTC backing cbBTC, Coinbase uses advanced wallets, conducts regular audits, and implements comprehensive monitoring systems. Furthermore, all smart contracts involved in the minting and redemption processes undergo rigorous testing and auditing by third-party security experts. Coinbase commissioned OpenZeppelin to audit the cbETH smart contract, which was also utilized for cbBTC. No material changes were made to the contract code during the deployment of cbBTC.

The underlying BTC reserves supporting cbBTC are held 1:1 at Coinbase, and redemption rights stay with cbBTC holders. For further details on Coinbase’s custodial services and terms specific to cbBTC holders, please consult the relevant Coinbase User Agreement.

Coinbase employs both hot and cold wallets in its custodial infrastructure. Private key materials for cold wallets are stored and secured at facilities in the United States and Europe. As part of its risk mitigation strategy, Coinbase does not store wallet private keys in plaintext format anywhere, and decrypting a private key for either hot or cold wallets requires cryptographic consensus from multiple human operators. No single person controls Coinbase’s wallet private keys. The company performs internal audits of the private key management process and reconciles data between Coinbase wallets and third-party blockchain records. Coinbase does not engage sub-custodians for the storage of digital assets.

Coinbase is dedicated to operating within the legal frameworks of its jurisdictions. The introduction of cbBTC will adhere to all applicable regulations, including Anti-Money Laundering (AML) and Know Your Customer (KYC) standards. Coinbase has secured numerous licenses for operations in the United States and globally, such as multi-state money transmission licenses, and crypto asset trading and custody licenses in New York, Germany, Singapore, Canada, Bermuda, and others. Additionally, Coinbase is registered as a Virtual Asset Service Provider in several countries.