Grayscale refuses to share crypto reserves over 'security concerns'

Yahoo Finance crypto reporter David Hollerith explains Grayscale's decision to no longer show user reserves on its platform.

Video transcript

DAVE BRIGGS: Show your coins. That's been the call to crypto companies around the world, following the FTX implosion. But Grayscale, the asset manager running the world's largest Bitcoin fund, won't be doing so. David Hollerith here with that story. David, why are they not going to comply?

DAVID HOLLERITH: Yeah, Dave, that's right. So we spoke with Grayscale last Friday, in which they also released a blog post indicating that they weren't going to do this because they already report quarterly their holdings to the FCC. And also, the main thing they cited was that it would be a-- it would jeopardize security to report the wallet addresses that they hold their Bitcoin in.

So, obviously, this has sort of led to a discount in the Grayscale Bitcoin Trust, which trades-- it's not an ETF, but it trades similar as an OTC product. And that discount has widened to about 45% today. And it leads to this other situation, which has been going on. Genesis Training, crypto's largest crypto lender, paused client withdrawals last week. And now Genesis is in the process of trying to raise money to fill the hole in their loan book.

And we're expected to hear plans about that earlier this week. But the important thing to know is that Genesis is owned by Digital Currency Group, which also owns Grayscale. And there's been some speculation at this point about how something happening at Genesis could potentially impact Grayscale. And then, obviously, you have this huge sort of wave of exchanges trying to prove their reserves to show that they have their coins and they haven't been doing something else with customer deposits, like FTX clearly was.

So there's been a lot of speculation here. And I think that some of it has been tamed, given that Grayscale sort of reported their position. But until we hear more from Genesis, there's going to be a lot of uncertainty of people awaiting, you know, what the potential fallout could be from crypto's biggest lender potentially not getting the money they need to allow customer withdrawals.

DAVE BRIGGS: Yeah, seems to be a lot of distrust industrywide until we get some clarity on all this. David Hollerith, good stuff. Thank you, my friend. Rachelle.