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Grayscale won’t share proof of reserve due to ‘security concerns’


The SEC on Wednesday rejected Grayscale’s application for a spot bitcoin ETF, citing the investment manager’s failure to respond to questions about concerns surrounding market manipulation.

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grayscalethe world’s largest executive asset manager bitcoin fund, said in a statement that it will not share proof of reserve with clients.

“Due to security concerns, we do not make publicly available on-chain wallet information and confirmation data through cryptographic Proof-of-Reserve or other advanced cryptographic accounting procedures,” a statement today Friday said.

follow the boom of FTX and its subsequent bankruptcy proceedings revealed that customer’s money is missingMany crypto exchanges have launched proof of reserve audits to assuage investors’ concerns about the safety of their funds. Other, like Binancesay they plan to do so soon.

Grayscale wrote in a tweet that it realized that failure to disclose proof of reserves would be a “disappointment for some”, but added that “panic caused by others is not is a good enough reason to circumvent the complicated confidentiality agreements” that have kept it’s investor assets “safe for years.”

Grayscale’s flagship fund is the Grayscale Bitcoin Trust, known by GBTC stocks. Even as bitcoin trades at multi-year lows around $16,000, GBTC is trading at 45% discount off the price of the underlying asset.

While bitcoin is down 72% in the past 12 months, GBTC recorded a loss of 82% during the same period, as of last Friday. The spread reflects the substantial difference between the value of the trust’s sole holdings and the open market price for a share in the trust.

In its statement on Friday, Grayscale said each of its digital asset products is set up as a “separate legal entity” and reiterated that those digital asset products “are stored under the custody of Coinbase Custody Trust Company”.

The company indicated a letter sent by Coinbase CFO Alesia Haas on Nov 18, which breaks the accounting of tokens held at Coinbase Custody. Currently, Coinbase holds about 635,235 bitcoins on behalf of Grayscale, or $10.2 billion.

in a tweetThe company added that “laws, regulations, and documents that define Grayscale’s digital asset products prohibit the digital assets underlying the products from being loaned, borrowed, or otherwise compromised. hamper.”

Barry Silbert’s Digital Currency Group is the parent company of Grayscale, Genesis, and CoinDesk. Last weekThe lending arm of crypto investment bank Genesis Global Trading has halted new loans and repayments.

The bank’s lending division serves an institutional client base and is called Genesis Global Capital. At the end of the third quarter, it had more than $2.8 billion in total active loans, according to the company’s website.

— Rohan Goswami of CNBC contributed to this report.

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