Grayscale Declines Providing Proof-of-Reserve Citing Security Concerns
- The company recognized that some investors will be disappointed.
- During the recent Binance-FTX transaction debate, it was CZ who first mentioned it.
Following the demise of crypto behemoth FTX, CZ has prompted a flurry of reserve audits at cryptocurrency exchanges. Proof-Of-Reserves was first proposed by Binance’s CEO. Grayscale, a digital asset investing business, has refused to provide its on-chain proof of reserves, citing security concerns.
On Friday afternoon, Grayscale sent an announcement on Twitter explaining that, for security reasons, they don’t share details about their on-chain wallets or confirmations with the public, not even via a cryptographic Proof-of-Reserve or other similarly sophisticated cryptographic accounting technique.
Complex Security Arrangements
The company recognized that keeping its reserve information private would disappoint some investors. And that they were cognizant of the fact that crypto exchanges are under more scrutiny after FTX’s collapse last week.
Grayscale further stated that,
“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”
Both Grayscale’s Bitcoin Trust (GBTC) and its ETHE product saw all-time lows on Thursday. Digital Currency Group, the parent firm of Grayscale is taking the hammer since it has significant exposure to the defunct FTX exchange. In light of the FTX collapse, Genesis, another Grayscale-related company, has temporarily suspended client withdrawals.
During the recent Binance-FTX transaction debate, it was CZ who first mentioned it. Soon after, Binance began posting its reserves on Twitter where anybody could see them. Some other cryptocurrency exchanges, such as Crypto.com and Huobi, followed suit and made some of their reserves public in an effort to increase trust in the industry.
However, CZ advised investors to stay away from these exchanges because of their questionable on-chain activity, especially after they disclosed their reserves.
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