SEC’s Fault In Grayscale (GBTC) Bitcoin Proof Of Reserves Issue?

Grayscale Proof Of Reserves: Grayscale Investments, the world’s largest crypto asset manager, is facing backlash from the crypto community for not revealing its proof of reserves. Meanwhile, industry experts are blaming it on the regulatory landscape for the loss of trust around transparency in Grayscale’s Bitcoin products. Earlier in June this year, the U.S. Securities and Exchange Commission (SEC) rejected Grayscale’s spot Bitcoin ETF application. Following the rejection, the company challenged the SEC’s decision in the form of a lawsuit.

Grayscale’s main contention was that the SEC was discriminatory in its assessment of the spot Bitcoin market. It argued that the regulator allows futures-based Bitcoin ETFs, which are exposed to similar legal concerns, while rejecting spot Bitcoin ETFs. In a latest, voices are being heard about the lack of clarity around the SEC’s position as Grayscale’s Bitcoin products comprise a significant form of the total BTC market share.

Proof Of Reserves: Grayscale’s Issues

After the FTX collapse led to a crypto crash, Grayscale’s premium rate for Bitcoin suffered significantly. Currently, the Grayscale Bitcoin Trust (GBTC) Bitcoin premium rate stands around 45% lower than the retail price. This is much worse than the current crypto prices, as Bitcoin (BTC) trades at its two year low range. As of writing, BTC price stands at $16,159, down 2.31% in the last 24 hours, according to price tracking platform CoinMarketCap.

Also Read: Vitalik Buterin Discusses Ethereum Scalability Solution Amid FTX Crisis

After recent calls for transparency in crypto exchanges following the FTX meltdown, several entities are coming forward with the proof of reserves figures. In this context, Grayscale said it will not be making the information public due to security concerns. However, the crypto community reacted with a backlash against the asset management company. Ryan Selkis, founder of crypto intelligence platform Messari Crypto, blamed the Grayscale proof of reserves situation on the SEC. However, he felt Grayscale’s crypto assets are safe at Coinbase and “untouchable.”

“The biggest reason the trusts are broken is due to SEC obstinance in approving Grayscale spot ETFs. It’s inexplicable and the SEC has utterly failed in its mandate to protect investors.”

The Genesis Contagion

On the other side, brokerage company Genesis Trading is facing potential solvency issues due to the contagion effect from the FTX downfall. This leaves Grayscale in a precarious situation as it is owned by Genesis.

Also Read: Barry Silbert’s DCG, Genesis Fallout Could Be Worse Than FTX, Here’s Why

Anvesh reports major developments around crypto adoption and trading opportunities. Having been associated with the industry since 2016, he is now a strong advocate of decentralized technologies. Anvesh is currently based in India. Follow Anvesh on Twitter at @AnveshReddyBTC and reach him out at [email protected]

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