Grayscale is withholding on-chain booking evidence for security reasons

Grayscale Investments, a company that sells cryptocurrency investment products, has refused to provide proof of on-chain reserves or wallet addresses to prove the underlying assets of digital currency products, citing “security concerns.” Grayscale Investments is a provider of cryptocurrency investment products. Grayscale presented information about the security and storage of its cryptocurrency holdings in a Twitter thread on Nov. 18 that was dedicated to addressing investor concerns. The company stated that all cryptocurrencies that support its investment products are stored with Coinbase’s escrow service, but it refrained from disclosing the addresses of the wallets.

Grayscale went on to say: “We realize that the above point, in particular, will be disappointing to some,” but “fear created by others is not a sufficient justification for breaching the intricate security mechanisms that have kept our funds safe.” customers”. during years.”

In the wake of FTX’s ongoing liquidity problems and ultimately bankruptcy, Grayscale has decided to take this step in response to increasing pressure being placed on the crypto industry to implement Proof of Reserves.

Some people on Twitter disagreed with Grayscale’s view that security concerns were behind their decision to withhold their wallet addresses. One user commented that although the addresses of Satoshi Nakamoto, the inventor of Bitcoin, are widely known and are of greater value to attackers, “Satoshi’s Bitcoin is still safe.”

Grayscale distributed a letter co-signed by Alesia Haas, Coinbase’s CFO, and Aaron Schnarch, CEO of Coinbase Custody. The letter detailed Grayscale’s holdings according to its investment products and reaffirmed that the assets “are safe.” In addition, the letter stated that each product has its “own on-chain addresses” and that crypto always belongs “to the corresponding grayscale product.”

Grayscale further said that each of its products is structured as its own independent legal company, and that “the rules, regulations and contracts […] prohibit the digital assets that underpin the goods from being leased, lent or otherwise encumbered”.

Although Grayscale is best known for its Grayscale Bitcoin Trust (GBTC), a security that tracks the price of Bitcoin, the company also offers products that track the price of other cryptocurrencies, such as Ether and Solana. Genesis Global, which serves as a liquidity provider for GBTC, announced on November 16 that it had halted withdrawals, citing “unprecedented market turbulence” as the reason. This “unprecedented market turbulence” had led to significant withdrawals from its platform, which exceeded its current liquidity. This has caused concern among investors.

Grayscale is also owned by the cryptocurrency-focused venture capital firm known as Digital Currency Group (DCG), which is also the parent company of Genesis.

Investors are speculating about GBTC’s exposure to Genesis, which may be one reason the company’s shares are selling at a discount of more than 43 percent compared to their net asset value.

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