Grayscale will not share proof of reserves due to “security concerns”.

The SEC on Wednesday denied Grayscale’s application for a spot Bitcoin ETF, citing a failure by the investment manager to respond to questions about market manipulation concerns.

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Grayscale, the wealth manager that operates the world’s largest Bitcoin fund, said in a statement that it would not share its proof of reserves with clients.

“For security reasons, we do not make such on-chain wallet information and confirmation data publicly available via a cryptographic proof-of-reserve or other advanced cryptographic accounting process,” it said in a statement Friday.

Following FTX’s implosion and subsequent bankruptcy proceedings that revealed a lack of client funds, several crypto exchanges promptly released proof of reserve audits to address investor concerns about the safety of their funds. Other, like Binancesay they plan to do so soon.

Grayscale wrote in a tweet that it recognized that failure to disclose proof of reserves would be “disappointment for some,” but added that “panic created by others is not sufficient reason to circumvent complex safeguards” that theirs have kept Investors’ assets have been “safe for years”.

Grayscale’s flagship fund is the Grayscale Bitcoin Trust, known for its GBTC ticker. Even with bitcoin trading at a multi-year low of around $16,000, GBTC is trading at a 45% discount to the price of its underlying asset.

While bitcoin is down 72% over the past 12 months, GBTC is down 82% over the same period ending last Friday. The spread reflects a significant discrepancy between the value of the trust’s sole interest and the open market price for a stake in the trust.

In its Friday statement, Grayscale said each of its digital asset products is established as a “separate legal entity,” and reiterated that those digital asset products are “stored under the custody of the Coinbase Custody Trust Company.”

The company pointed out a Letter from Coinbase CFO Alesia Haas on 11/18, which breaks down an accounting of tokens held at Coinbase Custody. Coinbase currently holds around 635,235 Bitcoin, or $10.2 billion, on behalf of Grayscale.

In a tweetthe company added that the “laws, regulations and documents defining Grayscale’s digital asset products prohibit lending, borrowing or otherwise encumbering the digital assets underlying the products.”

Barry Silbert’s Digital Currency Group is the parent company of Grayscale, Genesis and CoinDesk. Last week, the lending arm of crypto investment bank Genesis Global Trading paused new lending and repayments.

The bank’s credit arm serves an institutional client base and is known as Genesis Global Capital. According to the company’s website, the company had more than $2.8 billion in total active loans at the end of the third quarter.

— CNBC’s Rohan Goswami contributed to this report.

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