Grayscale won’t share proof of reserves, while Coinbase vouches for its products

    21 Nov 2022

    Grayscale Investments won’t show proof of reserves, citing “security concerns” after Bitcoin and Ether products fall to new all-time lows. Meanwhile, Coinbase testified to the security of Grayscale’s digital assets products held in Coinbase Custody, the WSJ reported.

    Crypto firms are under pressure now to share information about the health of their reserves after FTX filed for bankruptcy protection. However, crypto investment firm Grayscale said it will not show proof of reserves, citing security concerns.

    “Due to security concerns, we do not make such on-chain wallet information and confirmation information publicly available through a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting procedure,” Grayscale tweeted on Nov. 18.

    The firm acknowledged its decision to keep its reserve information private would be a “disappointment” to some investors. Crypto firms are being pressed to show more information about their reserves after crypto behemoth FTX filed for bankruptcy protection earlier this month.

    “But panic sparked by others is not a good enough reason to circumvent complex security arrangements that have kept our investors’ assets safe for years,” Grayscale said. 

    Meanwhile, Coinbase Custody Trust Company, a subsidiary of crypto exchange Coinbase Global, testified to the security of Grayscale Investments’ digital assets products held at Coinbase Custody.

    According to the WSJ report, Coinbase CFO Alesia Haas said on Nov. 18 the cryptocurrencies underlying each Grayscale product are segregated, in cold storage, and can’t be lent by Coinbase Custody.

    “We will never, directly or indirectly, lend, pledge, hypothecate or rehypothecate any of the digital assets underlying any Grayscale products,” Coinbase stated.

    Grayscale, a subsidiary of crypto conglomerate Digital Currency Group, offers the world’s largest Bitcoin fund. Known to many by its ticker symbol GBTC, the $10.6 billion Grayscale Bitcoin Trust saw its discount widen to 43% as of Nov. 17, according to YCharts.

    At the same time, another subsidiary of DCG, crypto lender Genesis, recently halted withdrawals. According to the WSJ, Genesis was seeking an emergency loan of $1 billion from investors before it told clients it was suspending redemptions this week.

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