In spite of Grayscale’s shares trading at a 45 percent discount to bitcoin’s value, the company continues to withhold proof of reserves citing “security concerns.”
Asset management Grayscale, which oversees the largest bitcoin fund in the world, stated in a statement that it will not provide customers with evidence of reserves.
Security issues prevent us from making public such on-chain wallet information and confirmation data via a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting technique,” said a statement released on Friday.
Multiple cryptocurrency exchanges have released proof-of-reserve audits to reassure investors following the collapse of FTX and the accompanying bankruptcy procedures revealing that user cash were gone. Others, like Binance, have stated their intention to do so in the near future.
Grayscale tweeted that it was sorry to “disappoint people” by not providing proof of reserves, but that “fear created by others is not a good enough justification to disregard intricate security mechanisms” that have kept its investors’ assets “secure for years.”
The Grayscale Bitcoin Trust (GBTC) is Grayscale’s flagship fund. GBTC is selling at a discount of 45 percent to the price of bitcoin, despite the fact that the price of bitcoin is near a multiyear low of around $16,000.
Bitcoin is down 72% over the past year, but GBTC is down 82% over the same time period, as of last Friday. The wide gap between the value of the trust’s single holding and the share price on the open market is indicative of a major misalignment between the two.
Grayscale claimed in a statement released on Friday that each of its digital asset offerings is a “separate legal entity” and that all of them are “stored under the custody of Coinbase Custody Trust Company.”
The company referenced Alesia Haas’s letter from November 18th, in which she provided a detailed accounting of the tokens stored in Coinbase Custody. Coinbase currently holds about $635,235 BTC (equivalent to about $10.2 billion) on Grayscale’s behalf.
The company then clarified in a tweet that “rules, regulations, and documents that govern Grayscale’s digital asset offerings restrict the digital assets underlying the products from being leased, borrowed, or otherwise encumbered.”
Grayscale, Genesis, and CoinDesk are all subsidiaries of Digital Currency Group, which is owned by Barry Silbert. Genesis Global Trading, a cryptocurrency investment bank, halted loan originations and redemptions last week.
Genesis Global Capital is the bank’s lending division for institutional clients. According to the company’s website, as of the end of the third quarter, it has made more than $2.8 billion in active loans.