The SEC on Wednesday rejected Grayscale’s application to create a spot Bitcoin ETF, citing the investment manager’s failure to respond to questions about concerns about market manipulation.
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Grayscale, the asset manager of the world’s largest bitcoin fund, said in a statement that it would not share its proof of reserves with clients.
“For security reasons, we do not make such online wallet information and confirmation data publicly available via cryptographic reserve confirmation or other advanced cryptographic accounting,” the statement said on Friday.
Following the collapse of FTX and the subsequent bankruptcy proceedings that revealed a lack of customer funds, several cryptocurrency exchanges rushed to release checks confirming the presence of reserves to assuage investor concerns about the safety of their funds. Other, like Binancethey say they plan to do it soon.
Shades of Gray tweeted that they realized that failing to reveal proof of the reserves would be “a disappointment to some”, but added that “the panic caused by others is not reason enough to bypass the complex security measures” that kept it alive. investors’ assets are “safe for years to come”.
Grayscale’s flagship fund is the Grayscale Bitcoin Trust, known under the ticker GBTC. Despite bitcoin trading at a multi-year low near $16,000, GBTC is trading at a 45% discount to its underlying asset price.
While bitcoin has fallen 72% over the past 12 months, GBTC has recorded an 82% loss over the same period as of last Friday. The spread reflects a significant mismatch between the value of sole ownership of a trust and the open market price of a share in the trust.
In a filing Friday, Grayscale said each of its digital asset products is being created as a “separate legal entity” and confirmed that these digital asset products are “held under the custody of the Coinbase Custody Trust Company.”
The company pointed to email sent by Coinbase CFO Alesia Haas on November 18, which breaks down the accounting for tokens held by Coinbase Custody. Coinbase currently holds about 635,235 bitcoins on behalf of Grayscale, or $10.2 billion.
In a tweetThe firm added that “the laws, regulations, and documents that govern Grayscale’s digital asset products prohibit lending, borrowing, or otherwise encumbering the digital assets underlying the products.”
Barry Silbert’s Digital Currency Group is the parent company of Grayscale, Genesis and CoinDesk. Last week, the lending arm of cryptocurrency investment bank Genesis Global Trading suspended the issuance and repayment of new loans.
The bank’s lending arm serves the institutional client base and is known as Genesis Global Capital. According to the company’s website, it had more than $2.8 billion in active loans at the end of the third quarter.
– Rohan Goswami of CNBC contributed to this report.