On Nov. 18, Grayscale, the asset manager running the world’s largest Bitcoin fund, released a statement detailing the security of its digital assets products and affirming that it won’t share its proof of reserves with customers.
“Due to recent events, investors are understandably inquiring deeper into their crypto investments,” the statement begins, which is quite the understatement following the implosion of FTX and the inquiry into Sam Bankman-Fried’s questionable leadership. In no time, the question on everyone’s lips became clear. Will Grayscale be next?
The answer is that it’s unlikely. And that’s largely because the people at the top, the ones who made Grayscale what it is, appear to be more competent than Sam Bankman-Fried ever was.
Let’s look at the facts.
It’s true and possibly undeniable that the crypto industry will take another dive if Grayscale doesn’t fix its balance sheet. The space simply cannot afford another crash, not so soon after FTX and not that of such a key player. Grayscale oversees more than $10 billion in BTC, Ether and other assets and represents its parent company’s biggest revenue generator.
Grayscale’s parent company — the same that owns trading firm Genesis, mining company Foundry, crypto investment app Luno, and media outlet CoinDesk, among others — is Digital Currency Group, whose founder and CEO Barry Silbert shared a note to DCG shareholders on Nov. 23 addressing all the “noise” surrounding the company. He indicated that despite the so-called crypto winter, the company was on track to reach $800 million in revenue and its separate entities were “operating as usual.”
“We have weathered previous crypto winters,” the CEO’s note read, “and while this one may feel more severe, collectively we will come out of it stronger.”
Silbert is an early Bitcoin evangelist and a true cryptocurrency enthusiast. But, unlike Sam Bankman-Fried, he has 28 years of experience under his belt. Before he discovered crypto, he used to be an investment banker in New York and was the CEO of stock trading platform Second Market, which he sold to Nasdaq in 2015. This is not, in other words, his first rodeo.
Silbert, along with Grayscale’s own leadership, has also been putting up a parallel fight with the U.S. Securities and Exchange Commission after regulators rejected its application to turn its flagship Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund (ETF), the first United States one. The SEC did so on the grounds of “failure by the investment manager to answer questions about concerns around market manipulation” and poor investment protection, but you could just as well make the argument that had they accepted the bid, cryptocurrencies would have had the opportunity to “open up to more institutional investment” and potentially avoid the current downturn we’re experiencing.
Grayscale then filed a petition challenging the decision with the U.S. Court of Appeals for the District of Columbia and proceeded to sue the watchdog for what it called an “arbitrary, capricious, and discriminatory” ruling.
In other words: to anyone who cares about the future of crypto and believes in the importance of regulators acting in good faith to propel the industry forward, Grayscale is fighting a good fight.
“Panic sparked by others is not a good enough reason to circumvent complex security arrangements that have kept our investors’ assets safe for years," Grayscale’s Nov. 18 statement noted. They have proven their worth and substantiated their reputation with a decade-long track record of consistent growth. This is unlikely to change anytime soon.
