Update: Dev Update #8 confirms that the Smoke Grenade is being removed.

Eric Williamson has announced on Twitter that another item will be joining Sub-Machine Guns in the vault (meaning it will no longer drop) in next week’s update:

No details have been given about what the item is, however it may be a hint towards a new weapon releasing next week to take it’s place. Possibly one of those covered in our upcoming weapons post yesterday.

It’s also very possible the Smoke Grenade will be removed, replaced by the upcoming ‘Stink Bomb’ found in the game files.