Crypto investment product provider Grayscale has refused to provide on-chain proof of reserves or wallet addresses. Grayscale decided to not show the underlying assets of its digital currency products due to “security concerns”.
Grayscale addressed the investors’ concerns and tweeted that Grayscale has compiled additional information about the safety and security of the assets held by its digital asset products. Though it stated that all crypto underlying its investment products are stored with Coinbase’s custody service, Grayscale didn’t reveal the wallet addresses.
In the aftermath of the FTX collapse, many crypto firms focused their attention on safety, security, and transparency. On the other hand, Grayscale is well-aware of what would be the response of the crypto community with its decision to not provide wallet addresses.
To calm the concerns over transparency, Grayscale tried to defend itself by saying, “We know the preceding point in particular will be a disappointment to some.” It added that panic sparked by others is not a good enough reason to circumvent complex security arrangements that have kept our investors’ assets safe for years.
Moreover, shares of Grayscale Bitcoin Trust (GBTC) fell dramatically by almost 45% over the week. The sudden and unfortunate slump in its share value prompted Grayscale to announce proof-of-reserve on a whim.
However, the announcement wouldn’t be enough to beat volatility, but its reassurance may ease the way toward adopting transparency.
The apparent reason for the declining share value is that Genesis, (an arm of Digital Currency Group (DCG), owner of Grayscale Investments) has halted customer withdrawals from its lending unit. The move has raised concerns about GBTC, putting it under scrutiny.
Binance is the first one to support proof of reserves and just after the FTX crash news shook the crypto community, it shared details of wallet addresses for transparency.
Yesterday, Indian exchange CoinDCX also introduced self-custody for crypto to make things more transparent. The exchange is also working on evaluating proof-of-reserve for the reserve assets and publishing them in a simple dashboard.
