Grayscale, a crypto hedge fund, has refused to disclose proof of reserves. They cited security concerns.
Grayscale does not have any proof of reserves
The billion-dollar asset manager firm has tried to reassure shareholders and investors that funds are safe, without disclosing proof of reserves. The company tried to calm investors’ fears by posting on Twitter, stating that FTX-level disasters would not occur because of the regulations protecting its different entities. Grayscale, however, refused to disclose its crypto holdings unlike other crypto firms who have been clamouring to divulge their crypto holdings.
A proof of reserves method can be used to determine the amount of funds held by a cryptocurrency exchange or platform. This is done through an independent auditor. An exchange may hire the services of a third party crypto auditor to show that it has assets according to customer holdings. This is known as the Merkle Tree technique.
“Complex Security Arrangements” Not to Be Avoided
Grayscale claims that each product is registered and regulated separately. The team also revealed that all crypto used in its investment products is stored at Coinbase’s custody facility. Coinbase is the only US-regulated crypto exchange that is publicly traded.
The team tweeted:

“Due to security issues, we do not make such information about on-chain wallets and confirmation information public through a cryptographic Proof of Reserve or other advanced cryptographic accounting procedures. Although we know that the above point will disappoint some, panic caused by others is not enough to bypass complex security arrangements that have protected our investors’ assets for many years.

Coinbase As Custodian
The company stated that periodic validations performed by Coinbase as custodian are sufficient for all concerns. To protect the nature of their products, addresses and any other confidential information would not be disclosed. A letter signed by Coinbase Custody CEO Aaron Schnarch and Coinbase CFO Alesia Hays has been released. This letter explains that Grayscale’s assets and holdings are secure and each product has its own on-chain address.
Investors are concerned
This revelation has caused a stir among investors. Grayscale’s refusal of releasing proof of reserves has raised concerns after leading trading platforms and exchanges, such as Binance and Crypto.com, have revealed their proof of reserves following the FTX crisis. Some investors believe that revealing proof of reserves does not pose a security risk. Take Satoshi Nakamoto (BTC founder), whose wallet addresses are well-known and have never been subject to security concerns.
Investors should also be concerned that Genesis Global was the liquidity provider for Grayscale Bitcoin Trust (GBTC). Investors are wondering if Grayscale will fall as Genesis stops withdrawals because of its exposure to FTX.
Disclaimer: This article is intended for informational purposes only. This article is not intended to be used for legal, tax, investment or financial advice.

  

Grayscale, a crypto hedge fund, has refused to disclose proof of reserves. This was due to security concerns. Grayscale Does Not Provide Proof of Reserves. The asset management company, worth billions of dollars, has tried to reassure shareholders and investors that their funds are safe. The company tried to calm investors’ fears by posting on Twitter to assure them that a FTX-level disaster would not occur because of the regulations protecting its different entities. Grayscale, however, refused to disclose its crypto holdings unlike other crypto firms who have been clamouring to divulge theirs. Through an independent auditor, the proof of reserves method can be used to determine the amount of funds held by a cryptocurrency exchange or platform. An exchange may hire the services of a third party crypto auditor to show that it has assets as per customer holdings. This is called the Merkle Tree method. Will Not Circumvent “Complex Security Arrangements”Grayscale claims that each of its products is registered and regulated as a separate entity. The team also revealed that all crypto used in its investment products is stored at Coinbase’s custody facility. Coinbase is the only US-regulated, publicly traded crypto exchange. It performs frequent onchain validation. The team tweeted.
“Due to security issues, we do not make such information about on-chain wallets and confirmation information public through a cryptographic Proof of Reserve or other advanced cryptographic accounting procedures. Although we know that the above point will disappoint some, panic caused by others is not enough to bypass complex security arrangements that have protected our investors’ assets for many years.
Coinbase As CustodianThe company stated that periodic validations performed by Coinbase as custodian are sufficient in all cases. To protect the nature of their products, addresses and any other confidential information would not be disclosed. A letter signed by Coinbase Custody CEO Aaron Schnarch and Coinbase CFO Alesia Hays has been released. This letter explains that all Grayscale’s assets and holdings are secure and each product has its own on-chain address. However, investors have been scathing about this revelation. Grayscale’s refusal of releasing proof of reserves is a concern. This comes after leading trading platforms and exchanges, such as Binance and Crypto.com, have made public their proof of reserves following the FTX crisis. Some investors believe that revealing proof of reserves does not pose a security risk. They cite Satoshi Nakamoto as an example, whose wallet addresses are well-known and have never been subject to security concerns. Investors should also be concerned that Genesis Global was the liquidity provider for Grayscale Bitcoin Trust (GBTC). Investors are wondering if Grayscale will fall as Genesis stops withdrawals because of its exposure to FTX. Disclaimer: This article is intended for informational purposes only. This article is not intended to be used for legal, tax, investment or financial advice.