Grayscale denies providing on-chain Proof-of-Reserves citing Clients’ security.

  • Grayscale is the world’s largest public holder of BTC, having 635,256 Bitcoins in their trust. 
  • Grayscale Bitcoin Trust (GBTC) is the sole owner of the digital asset. 
  • All of their assets are stored under Coinbase Custody Trust Company (CCTC) custody.

Grayscale openly denies providing precise on-chain proof of its reserves, citing security risks. 

Since the FTX debacle surfaced, the now-bankrupt firm has been accused of mishandling users’ funds and could not pay them amidst an influx in withdrawal requests. Many exchanges and firms feel obligated to provide cryptographic proof-of-reserves to the customers, with a clear goal of regaining the lost trust. And assure them they will get their assets and funds back in case of insolvency.

In a Twitter post, Grayscale explained why they don’t want to public proof-of-resources. And say that all of the digital assets underlining its products are safe and stored under the custody of Coinbase Custody Trust Company (CCTC). And for security reasons and keeping in mind the best interest of our customers, they will not be releasing any cryptographic proof-of-reserve.

Explaining the conundrum, they said that they knew proceeding in this direction, in particular, would be disappointing to some. Still, they need to break and reinstate something to circum-navigate the complex security arrangements that have kept our investors and assets safe for years, just over disappointment and panic created by others. They are very confident in the existing system. And are disinclined towards change.

Grayscale is the world’s largest public holder of BTC, having 635,256 Bitcoins in possession, more than 3% of the total supply and by the current rate are worth $10,176,483,492 according to BitcoinTreasuries.net.

According to Grayscale, they do not exist to rehypothecate, lend or trade any of its digital assets and all the BTC in its BitcoinTrust is solely owned by the trust. 

“Each Grayscale digital asset are structured as a separate legal entity – a statutory trust for each single asset product and a LLC for each diversified digital asset product – sponsored and managed by Grayscale Investments, but ultimately owned by the products’ shareholders.” 

They further clarified that the grayscale Bitcoin Trust (OTCQX: GBTC) holds bitcoin and only BTC, and each share is backed by a proportional amount of approx 0.00091502 BTC per share as of Nov 18, 2022, of GBTC. And these assets are owned by GBTC and GBTC alone.

As Grayscale does not directly trade in coins and tokens, dealing particularly in shares and stakes of the BTC and ETH they hold, their compliance to adhere to providing a cryptographic Proof-of-Reserve is not necessary according to them. But keeping in mind the current FTX debacle and the distrust it formed among the users and investors regarding the security of the funds. Is the company correct in the decision of not to provide a POR is debatable. 

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