Grayscale Says No To Proof of Reserves

 Grayscale said it will not follow the trend and perform a proof of reserves because it would no be the safest thing to do.

The cryptocurrency industry was built on top of one slogan: “don’t trust, verify.” But Grayscale is different from the rest of the cryptocurrency-related businesses.

In a recent Twitter thread pondering the need for transparency in the industry after the collapse of FTX, Grayscale attempted to calm its investors’ fears, assuring them that the regulations that apply to its various entities make an FTX-like scenario nearly impossible.

Grayscale Says: Funds Are Safe, Trust Us

Grayscale assures that each of its products is duly registered as a separate entity with its own regulations. They explain that the laws and regulations governing each of its crypto trusts prevent underlying assets from being sold, loaned, or otherwise transferred.

In a subsequent tweet, Grayscale assures that its cryptocurrencies are held by the custody service provided by Coinbase, the only regulated and publicly traded cryptocurrency exchange in the United States.

But now comes the awkward question. What about proof of reserves? Grayscale declined to do such a thing, citing security reasons. They explain that Coinbase, as custodian, does perform periodic validations, but as such, they would not disclose addresses or any information considered confidential so as not to affect the nature of their products:

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6) Coinbase frequently performs on-chain validation. Due to security concerns, we do not make such on-chain wallet information and confirmation information publicly available through a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting procedure.

— Grayscale (@Grayscale) November 18, 2022

Does Proof of Reserves Really Matter?

The Proof of Reserves is simply a way for users to prove that an independent auditor studied and proved the reserves of a specific exchange or business. It uses Merkle Trees to capture data and get a set of fingerprints that let users verify that their funds were properly audited by a third party.

The proposition for proof of reserves has started to get a lot of buzz in the cryptocurrency community in the wake of the FTX meltdown, the latest victim of a cryptocurrency winter that has taken down industry heavyweights such as Terra, 3AC, and Celsius.

The idea is to provide a way for users to verify a business’s assets via cryptographic techniques that ensure data transparency. Binance recently agreed to work alongside Vitalik Buterin to implement a new proof-of-reserves protocol that is supposed to be more efficient and secure than the current methods.

However, Grayscale is adamant that some things should be kept secret.

7) We know the preceding point in particular will be a disappointment to some, but 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 (@Grayscale) November 18, 2022

Grayscale currently holds the largest cryptocurrency trust in the industry, to the point where it was considered the best way to get exposure to the cryptocurrency market among institutional clients. However, following the crypto winter, each share of the trust has traded about 40% below the price of BTC as an underlying asset.

Grayscale has also tried to convert its trust into a Bitcoin ETF, but the SEC has not given the thumbs up for the project to continue.

Saint Kitts and Nevis to Make Bitcoin Cash Legal Tender in 2023

 The Prime Minister Terrance said Saint Kitts and Nevis will engage with Bitcoin Cash mining and make BCH legal tender by March 2023.

The island country located in the Caribbean region – Saint Kitts and Nevis – plans to turn Bitcoin Cash (BCH) into an official payment method inside its borders by March next year.

The announcement positively affected the asset’s price, which jumped above $100.

• The Prime Minister of Saint Kitts and Nevis – Terrance Micheal Drew – disclosed that the government is willing to engage with Bitcoin Cash mining and make the asset legal tender on local soil by March 2023.
• The leader opined that the cryptocurrency represents “future opportunities” and said the initiative will go live once regulators guarantee consumers will have maximum protection.

• BCH jumped to around $103 immediately following the speech and still trades above $100. Still, this is far away from the 2021 price levels when it surpassed $1,500. The all-time high occurred in 2017 when it traded at over $4,300.
• Bitcoin is the only digital asset that currently serves as legal tender. The first country to embrace it was El Salvador in 2021.
• The Central African Republic followed suit this year. The President of the nation – Faustin-Archange Touadéra – argued that “bitcoin’s “disruptive power” will bring “long-term prosperity.” He also urged people to understand the benefits of the asset as it could serve as a lifeboat during the ongoing adverse economic times.

Binance Has No Big Plans for India Due to High Taxation, Says CZ

 

Early this month, the Binance CEO said at Singapore Fintech Festival that high taxes can kill the crypto industry in India.

Binance CEO Changpeng Zhao (CZ) has all but given up on India. Pointing out the 1% transaction tax that came into force on 1 July 2022, CZ said it makes crypto trading unviable in India.

Speaking at the TechCrunch Session: Crypto 2022 on November 17 in Miami, CZ further pointed out that Binance is engaged with blockchain associations and influential persons in India to present the industry’s stance before the policymakers, a TechCrunch report said.

CZ Red Flags 1% Transaction Tax

“If you are going to tax 1% on each transaction, there is not going to be that many transactions… To be honest, I don’t think India is a very crypto-friendly environment,” he said.

While CZ maintained his negative outlook on India, first publicly expressed during the Singapore Fintech Festival early this month, Binance is available to Indian users.

“A user could trade 50 times a day, and they will lose like 70% of their money. There is not going to be any volume for an order book type of exchange. So we don’t see a viable business in India today,” he explained.

Indian exchanges have witnessed up to a 90% fall in trading volume after the transaction tax on crypto activities became effective in July.

Binance Sees Spurt in Indian Traders 

The 1% transaction tax on crypto activities became effective on 1 July 2022. And, Binance seems to be a major gainer as traders have deserted Indian exchanges for fear of tax reporting and compliance and thronged to foreign exchanges, including Binance, which is yet to take a call on compliance with new taxes.

The Binance app witnessed 429,000 downloads in August in India, the highest for the year, and over three times more than the runner-up, CoinDCX, media reports said in early September.

“Binance goes to countries where regulations are pro-crypto and pro-business. We don’t go to countries where we won’t have a sustainable business — or any business, regardless of whether or not we go,” he told the panel at the opening session of TechCrunch’s first dedicated event on crypto.

CZ has Not Given Up Entirely 

But the Binance CEO has not completely removed India from his scheme of things.

“We just have to wait. We are in conversation with a number of industry associations and influential people and trying to put some logic there… We are trying to get this message across, but tax policies typically take a long time to change,” Zhao cautioned.

Revolut Distances Itself from FTX While Pushing for Crypto: Report

 Several crypto firms have been affected by the fiasco and many of them are now revealing their exposure to it.

After Sam Bankman-Fried’s crypto empire imploded last week, exchanges are rushing to soothe the nerves of infuriated investors. Digital banking firm, Revolut is the latest one to distance itself from FTX.

In an emailed statement, Revolut told users that it did not have “material exposure” to the bankrupt crypto exchange.

Revolut Monitoring the Situation

The London-based company said it is still monitoring the situation while reminding the volatility associated with digital assets.

“This is a good reminder that crypto is very volatile: the value does go down, as well as up. So, remember to only invest what you can afford to lose.”

It is important to note that the FTX chief tweeted that users could transfer money in fiat currencies between his exchange and Revolut in June last year. Despite this, the latter’s spokesperson has confirmed that the company does not have any direct exposure to FTX.com or its sister trading firm Alameda Research. Additionally, Revolut has very little indirect exposure and does not allow trading in FTX’s native – FTT token.

Other platforms, such as Robinhood Markets, have also confirmed having no direct exposure to FTX. In fact, its Chief Executive Officer Vlad Tenev claimed that customers were turning to the trading app in a “flight to safety” after the collapse.

A NY-based investing company, Public, notified its members this week, assuring that it does not have “any direct exposure” to FTX, Alameda, or FTT. Stephen Sikes, Public’s chief operating officer, went on to assert that customers did not have access to FTT on their platform since it was not listed by US-based firms.

Legal Woes for FTX

FTX is currently battling bankruptcy with an $8 billion deficit in its financial records. This week, the court-appointed Bahamian liquidators claimed signs of “serious fraud and mismanagement” on the bankrupt crypto exchange’s part. Brian Simms, the provisional liquidator, questioned the validity of a Chapter 11 bankruptcy filing by subsidiary FTX Trading and the collective 130 affiliates in Delaware court.

The high-profile collapse will undoubtedly trigger several criminal and civil actions against FTX as well as its executives, such as Bankman-Fried. Furthermore, regulators across the world are also expected to double down their initiatives on crypto regulation.

Big Short Investor Michael Burry Sees This Asset Rising Amid FTX Contagion

 Michael Burry is bullish on gold as the crypto industry continues to suffer from the FTX crash. 

Michael Burry, the fund manager and investor who became popular from the “The Big Short” movie, believes gold will shine as investors seek safety from crypto risks due to the catastrophic collapse of Sam Bankman-Fried’s FTX. 

Burry is notoriously famous for shorting the U.S. housing market and profiting from the 2008 financial crisis. He also netted millions from investing in GameStop in 2019 before the Reddit frenzy and meme stock season in January 2021. 

Big Short Investor: Time for Gold 

The fund manager shared his thoughts on gold in a tweet that has now been deleted. According to Burry, Gold’s time will come as the crypto market continues to suffer from the contagion caused by FTX’s downfall. 

“Long thought that the time for gold would be when crypto scandals merge into contagion,” the fund manager said.

Recall that crypto exchange FTX came crashing down last week after allegedly mismanaging users’ funds for years. The company soon ran into liquidity issues and was unable to process withdrawals. FTX and more than 130 affiliated companies have filed for voluntary Chapter 11 and 15 bankruptcy protection, with estimated liabilities between $11 billion and $16 billion. 

FTX’s downfall sent another wave of liquidity crunch across the crypto industry as numerous entities, including Genesis, BlockFi, Galaxy Digital, and Canada’s Ontario Teachers Pension Plan (OTPP), had financial exposure to the exchange before it went bankrupt.

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Meanwhile, gold rallied 8% this month after consecutive losses in the last seven months. According to analysts, investors are bullish on the precious metal due to cooling inflation and crypto risks, among other reasons. 

The Mother of All Crashes in Crypto

Burry’s latest comments come more than a year after he warned about the “mother of all crashes” in crypto. During the bull run last year, the fund manager cautioned that all hype and speculation do is draw in retail investors before the mother of all crashes. 

“When crypto falls from trillions, or meme stocks fall from tens of billions, #MainStreet losses will approach the size of countries. History ain’t changed,” he said. 

The investor further noted that leverage is crypto’s biggest problem, and those who do not know how much leverage there is in the crypto market have more to learn about crypto.

Kraken's Ogilvie says staking adoption set to skyrocket

Prior to the fall of FTX, Ethereum’s shift to proof-of-stake was all the rage in crypto circles. Two months removed from The Merge, Ethereum is still playing catch-up with more mature staking networks like Cosmos and Polkadot, but Kraken’s Tim Ogilvie thinks that’s about to change.

Ogilvie, Kraken’s Head of Staked, told The Block in an interview, adding that a big transition will be seen as “a huge number of assets are likely to get staked over the course of the next six to nine months.”. Ogilvie started Staked at Kraken five years ago, a number of questions about staking remained unanswered in terms of security and whether the mechanism would work.

Despite FTX Bankruptcy, Kevin O’Leary Would Still Invest in SBF

 Mr. Wonderful would still hire Bankman-Fried on his team if the ex-CEO was relegated to a strict crypto trading role. 

The Canadian businessman and Shark Tank star Kevin O’Leary still believes Sam Bankman Fried’s future businesses could be worth investing in, despite losing money on FTX.

O’Leary recently outlined the extent of his exposure to the exchange while arguing that there’s a “silver lining” in the company’s collapse. 

Mr. Wonderful’s Thoughts on FTX

In an interview on Tuesday, Mr. Wonderful admitted that FTX was one of his “bad investments” but remains safe due to his diversification of assets.

Nevertheless, the investor took a “huge hit.” He said he was a shareholder of FTX and FTX US and held multiple accounts with the exchange that are now frozen. 

“I’ve talked to many other institutional investors that use the platform – they also have zero balances,” he added. “Everybody’s talking to their accountants and lawyers, and auditors, and compliance departments about this. It’s an extraordinary situation.”

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O’Leary was previously a spokesperson for FTX. Last month, he suggested that the exchange was the last place he’d expect to “get in trouble.” He’d also predicted in June that crypto would likely see its bottom once a “big player” was wiped out – which he now believes was FTX. 

As another silver lining, O’Leary said the exchange’s blowup is pressuring regulators to provide clearer industry guidelines going forwards. For example, key pieces of crypto legislation – such as the Digital Commodity Act – are getting new focus after remaining stagnant in congress.

How Will O’Leary Store His Funds?

In the meantime, the investor plans to remove all of his assets from unregulated exchanges and move them to a regulated Canadian exchange called Bitbuy. The company is regulated by the Ontario Securities Commission (OSC) and is legally barred from co-mingling user funds in the way FTX is suspected of doing. 

O’Leary explained that cold storage custody of assets isn’t an option for firms mandated to limit their crypto exposure to a certain percentage of their net worth. As such, assets must be available to trade at all times, so he can sell certain assets to remain within their “diversified mandate.”

 “You are going to see billions of dollars leave unregulated and exchanges looking for somewhere in the world where they can be put safely. That, right now, is Canada.”

Unlike the United States, Canada was the first country in the world to approve a Bitcoin Spot ETF, which accurately tracks the spot price of Bitcoin. It has since approved Bitcoin, and Ethereum mixed ETFs as well. 

Still an SBF Supporter

Even after his losses, Mr. Wonderful maintains that FTX’s former CEO, Sam Bankman-Fried, doesn’t have an “evil bone in his body.”

“You can love him or hate him given what’s happened, but I think we can all admit he was one of the most brilliant traders in the crypto universe,” he said. 

When asked if he would back Bankman-Fried in a hypothetical new crypto venture, O’Leary said he would as long as the former billionaire had only “trading control” of assets, unlike “operational control.” Overall he maintained that the crypto tycoon is an “unusual one percent person” in understanding how digital assets work.