Grayscale has chosen an alternative route to deal with industry speculations regarding its operational viability. Its business longevity was put into question following the collapse of FTX.
Panic quickly spread across the board, with investors seeking assurance that the firm would not fold in the same manner.
Grayscale was quick to dismiss the scenario by branding it unlikely and nearly impossible, due to regulations it maintains across its various entities.
Grayscale further elaborates that each of its products are duly registered as a separate entity with its own unique regulations.
The regulations prohibit underlying assets from being sold, loaned, or transferred. Grayscale maintains that its cryptocurrencies are held by the custody service provide by Coinbase, the only regulated and publicly traded crypto currency exchange in the U.S.
All that was well understood by investors, so they went directly to demand clarity on the issue of reserves. Investors sought a public declaration of the proof of reserves and Grayscale promptly declined citing security concerns.
They deflected the attention to Coinbase, as a reputable industry insider that regularly carries out validations.
Proof of reserves generally refers to a reputable third-party auditing organization that has gone through the business in questions books and has verified that the stated assets are indeed under the firm’s current ownership.
The proof of reserves movement has gained a lot of traction recently with the FTX meltdown, which is not an isolated event. Other firms to fold include Terra, 3AC, and Celsius.
The method has gained status as a tool for investors to avert danger by verifying assets via cryptographic techniques that promote data transparency.
Grayscale maintains the largest cryptocurrency trust in the industry and is referred as the standard go-to first encounter with the industry for new investors.
However, with the crypto winter, Grayscale shares have traded 40 % below the price of BTC and Grayscale has also tried to convert its trust into a Bitcoin ETF but the SEC was yet to greenlight the venture.