Investors are understandably curious about their cryptocurrency investments. To answer these questions, Grayscale Investments LLC, a digital currency investment service provider, made an announcement on Twitter regarding the safety and security of its assets on November 18th.
Crypto Exchange FTX filed for bankruptcy last week after it lost the public’s confidence in its accounting of billions of dollars. In the wake of this disaster, Proof-of-Reserves, an approach where exchanges display their balance, has been brought up again to regain investors’ faith.
Nine other exchanges, including KuCoin, OKX, and Gate.io, made similar plans after Binance disclosed its intentions to share a proof-of-reserves. Others, like BitMEX, stated they will testify to the reserves directly, while some, like Gate.io, chose auditor-assisted proof-of-reserve validation.
However, Grayscale has cited “security concerns” as the reason for declining to offer on-chain proof of reserves or wallet addresses of its digital currency products.
The company said:
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 Says It “Takes Transparency Seriously”
The company stated that it takes transparency seriously and has a long history of cooperating positively with authorities to increase complete and equitable risk disclosures for its digital asset offerings.
According to the statement:
The holdings of Grayscale’s digital asset products are safe and secure. Balances are reflected in historical public filings and have been evaluated by our third-party auditors.
In addition, each of the company’s digital asset products is established as a different legal entity from one another, “a statutory trust for single asset products and a limited liability company for diversified products.”
Moreover, the company highlighted that as a custodian for each product, Coinbase Custody holds all of the digital assets that underpin its digital asset offerings.
Grayscale’s digital asset offerings are governed by laws, rules, and legal agreements that forbid lending, borrowing, and other forms of encumbrance on the digital assets that underlie the products.
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