Unable to agree with the SEC on a spot Bitcoin ETF, Garyscale criticized the SEC for its proposed new rule.
The SEC has proposed a new rule on how investment companies should hold their cryptocurrencies. This new rule proposed by the SEC makes investment companies responsible for keeping their clients' crypto funds safe.
Criticizing this proposal by the SEC, Grayscale CEO Michael Sonnenshein stated that such a rule could prohibit Grayscale from using Coinbase to hold its assets.
Grayscale CEO, who wrote a letter to the SEC describing his criticism, stated that they are hiding $ 5.4 billion worth of cryptocurrencies on Coinbase.
Stating that this rule would make it impossible for Grayscale to continue to store Bitcoin (BTC) and Ethereum (ETH) on Coinbase, Michael Sonnenshein stated in the letter:
“The SEC's proposed rule could upset Grayscale's model of storing $5.4 billion of customer assets.
As an enterprise-grade asset manager, we do not store client assets ourselves. Instead, we work with specialist third-party custodians to provide this service, as is the norm for traditional asset managers.
We have been working with Coinbase since 2019 for this custody service. Client funds are held by Coinbase through the Coinbase Custody Trust Company.
Coinbase Custody keeps Grayscale's assets in offline cold storage via unique on-chain addresses and does not mix with funds from other clients, according to the agreement.
In our ten years of operation, our clients have never experienced a loss in assets.
In short, the methods we and others rely on to protect client assets are working, and we caution the SEC against taking steps that will introduce significant new costs, risks, and burdens without additional benefit.”
Coinbase Chief Legal Officer Paul Grewal also criticized the SEC's proposal.
*Not investment advice.