Grayscale Investments, a company that sells cryptocurrency investment products, has declined to provide on-chain proof of reserves or wallet addresses in order to demonstrate the digital currency products’ underlying assets, citing “security concerns.” Grayscale Investments is a cryptocurrency investment product provider. Grayscale laid out information regarding the security and storage of its cryptocurrency holdings in a Twitter thread on November 18 that was dedicated to addressing investor concerns. The company stated that all of the cryptocurrencies that underpin its investment products are stored with Coinbase’s custody service, but it refrained from disclosing the wallet addresses.

Grayscale continued by saying, “We are aware that the previous point, in particular, will be a letdown to some,” but “fear created by others is not a good enough justification to violate intricate security mechanisms that have kept our clients’ funds secure for years.”

In the aftermath of FTX’s ongoing liquidity troubles and ultimately bankruptcy, Grayscale has decided to take this step in response to the mounting pressure being placed on the crypto industry to implement proof of reserves.

Some people on Twitter disagreed with Grayscale’s view that security concerns were behind its decision to withhold its wallet addresses. One user commented that although the addresses of Satoshi Nakamoto, the inventor of Bitcoin, are widely known and are of greater value to attackers, “Satoshi’s Bitcoin remains secure.”

Grayscale distributed a letter that was co-signed by Alesia Haas, the CFO of Coinbase, and Aaron Schnarch, the CEO of Coinbase Custody. The letter detailed Grayscale’s holdings according to its investment products and reaffirmed that the assets “are secure.” Additionally, the letter stated that each product has its “own on-chain addresses,” and that the crypto always belongs “to the applicable Grayscale product.”

Grayscale further said that every one of their products is structured as its own independent legal company, and that “rules, regulations, and contracts […] forbid the digital assets underpinning the goods from being leased, borrowed, or otherwise encumbered.”

Although Grayscale is best known for its Grayscale Bitcoin Trust (GBTC), a security that follows the price of Bitcoin, the company also offers products that follow the price of other cryptocurrencies, like Ether and Solana. Genesis Global, which serves as the liquidity provider for GBTC, announced on November 16 that it had halted withdrawals, citing “unprecedented market turmoil” as the reason. This “unprecedented market turmoil” had led to significant withdrawals from its platform, which exceeded its current liquidity. This has caused investor concerns.

Grayscale is also owned by the cryptocurrency-focused venture capital firm known as Digital Currency Group (DCG), which is also the parent company of Genesis.

Investors are speculating on GBTC’s exposure to Genesis, which may be one reason why the company’s stock is selling at a discount of over 43 percent compared to its net asset value.

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