Correspondence 0001193125-23-252439 from Grayscale Bitcoin Trust (BTC) (GBTC) (CIK 0001588489) (GBTC)
Grayscale Bitcoin Trust (BTC) (GBTC) (CIK 0001588489)
Date: Oct. 6, 2023 · CIK: 0001588489 · Accession: 0001193125-23-252439
AI Filing Summary & Sentiment
File numbers found in text: 000-56121
Referenced dates: September 14, 2023
Letter
Division of Corporation Finance Office of Crypto Assets U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549
Dear Mr. Envall and Mr. Lin:
On behalf of our client, Grayscale Investments, LLC, a Delaware limited liability company and the sponsor (the “Sponsor”) of Grayscale Bitcoin Trust (BTC) (the “Trust”), this letter sets forth the Sponsor’s responses to the comment letter of the staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (the “Commission”) dated September 14, 2023, relating to the Trust’s Form 10-K for the fiscal year ended December 31, 2022 (the “2022 10-K”).
In preparing the 2022 10-K, the Sponsor considered prior guidance from the Staff regarding developments in the crypto asset markets, including in particular the sample letter to companies regarding recent developments in crypto asset markets published by the Staff in December 2022. Accordingly, and as more fully discussed below, the Sponsor believes that many of the considerations highlighted in the Staff’s comment letter are appropriately addressed in the 2022 10-K, to the extent material to the Trust and its investors.
For your convenience, we have reproduced the Staff’s comments preceding the Sponsor’s responses below. All capitalized terms used and not defined herein shall have the meaning given to them in the 2022 10-K.
Form 10-K for the Fiscal Year Ended December 31, 2022
Item 1. Business, page 1
1. If material to an understanding of your business, describe in future filings any direct or indirect exposures to other counterparties, custodians, or other participants in crypto asset markets known to:
◾
Have filed for bankruptcy, been decreed insolvent or bankrupt, made any assignment for the benefit of creditors, or have had a receiver appointed for them.
◾
Have experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets.
◾
Have the crypto assets of their customers unaccounted for.
◾
Have experienced material corporate compliance failures.
Response
The Sponsor has evaluated the Trust’s direct and indirect exposure to other counterparties, custodians and participants in the crypto asset markets that have filed for bankruptcy, been decreed insolvent or bankrupt, made any assignment for the benefit of creditors, or have had a receiver appointed and has determined that the risks to the Trust arising from such exposures are primarily related to volatility and disruption in the crypto asset markets, loss of confidence in participants of the digital asset ecosystem and negative publicity surrounding digital asset market participants and digital assets broadly that they may cause. The material risks to the Trust arising from such exposures are discussed in the 2022 10-K under “Part I—Item 1A. Risk Factors—Risk Factors Related to the Digital Asset Markets—Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity” (pages 52-53) and “Part I—Item 1A. Risk Factors—Risk Factors Related to the Digital Asset Markets—Due to the unregulated nature and lack of transparency surrounding the operations of Digital Asset Exchanges, they may experience fraud, business failures, security failures or operational problems, which may adversely affect the value of Bitcoin and, consequently, the value of the Shares” (pages 54-55). The Sponsor does not believe that the Trust at this time has any other material direct or indirect exposures to participants in crypto asset markets that have filed for bankruptcy, been decreed insolvent or bankrupt, made any assignment for the benefit of creditors, or have had a receiver appointed.
The Trust does not have any material direct exposure to counterparties, custodians or other participants in the crypto asset market that have experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets, have the crypto assets of their customers unaccounted for or have experienced material corporate compliance failures. However, the Trust has indirect exposure to such entities to the extent their circumstances cause volatility and disruption in the crypto asset markets, loss of confidence in participants of the digital asset ecosystem or significant negative publicity around digital asset market participants and digital assets broadly. The Sponsor has disclosed such risks in the 2022 10-K under the risk factors referred to in the first paragraph to this response.
To the extent the Trust has any other material direct or indirect exposures to such other counterparties, custodians or participants in crypto asset markets in the future, it will include disclosure regarding such exposures in future filings.
Overview of the Bitcoin Industry and Market
Creation of New Bitcoin, page
2. We note your disclosure that the “Bitcoin Network is designed in such a way that the reward for adding new blocks to the Blockchain decreases over time. Once new Bitcoin tokens are no longer awarded for adding a new block, miners will only have transaction fees to incentivize them, and as a result, it is expected that miners will need to be better compensated with higher transaction fees to ensure that there is adequate incentive for them to continue mining.” Please revise future filings to discuss the potential impact on your business if such fees are not sufficiently high to incentivize miners to continue mining and include a cross-reference to your related risk factor disclosure on pages 48 – 49.
October 6, 2023
Response
The Sponsor intends to include disclosure substantially in the form set forth below under “Part I—Item 1. Business—Overview of the Bitcoin Industry and Market—Creation of New Bitcoin” (with the underlined text marking new text) in the Trust’s Form 10-K for the fiscal year ending December 31, 2023, updated as applicable for any changes after the date of this letter:
“Creation of New Bitcoin
New Bitcoins are created through the mining process as discussed below.
The Bitcoin Network is kept running by computers all over the world. In order to incentivize those who incur the computational costs of securing the network by validating transactions, there is a reward that is given to the computer that was able to create the latest block on the chain. Every 10 minutes, on average, a new block is added to the Blockchain with the latest transactions processed by the network, and the computer that generated this block is currently awarded 6.25 Bitcoin. Due to the nature of the algorithm for block generation, this process (generating a “proof-of-work”) is guaranteed to be random. Over time, rewards are expected to be proportionate to the computational power of each machine.
The process by which Bitcoin is “mined” results in new blocks being added to the Blockchain and new Bitcoin tokens being issued to the miners. Computers on the Bitcoin Network engage in a set of prescribed complex mathematical calculations in order to add a block to the Blockchain and thereby confirm Bitcoin transactions included in that block’s data.
To begin mining, a user can download and run Bitcoin Network mining software, which turns the user’s computer into a “node” on the Bitcoin Network that validates blocks. Each block contains the details of some or all of the most recent transactions that are not memorialized in prior blocks, as well as a record of the award of Bitcoin to the miner who added the new block. Each unique block can be solved and added to the Blockchain by only one miner. Therefore, all individual miners and mining pools on the Bitcoin Network are engaged in a competitive process of constantly increasing their computing power to improve their likelihood of solving for new blocks. As more miners join the Bitcoin Network and its processing power increases, the Bitcoin Network adjusts the complexity of the block-solving equation to maintain a predetermined pace of adding a new block to the Blockchain approximately every ten minutes. A miner’s proposed block is added to the Blockchain once a majority of the nodes on the Bitcoin Network confirms the miner’s work. Miners that are successful in adding a block to the Blockchain are automatically awarded Bitcoin for their effort and may also receive transaction fees paid by transferors whose transactions are recorded in the block. This reward system is the method by which new Bitcoin enter into circulation to the public.
The Bitcoin Network is designed in such a way that the reward for adding new blocks to the Blockchain decreases over time. Once new Bitcoin tokens are no longer awarded for adding a new block, miners will only have transaction fees to incentivize them, and as a result, it is expected that miners will need to be better compensated with higher transaction fees to ensure that there is adequate incentive for them to continue mining.
If the transaction fees for recording transactions on the Bitcoin Network are not sufficiently high to incentivize miners, miners may cease expending processing power to mine blocks and confirmations of transactions on the Bitcoin Blockchain could be slowed. This could increase the likelihood of a malicious actor or botnet obtaining control of the Bitcoin Network and/or result in a loss of confidence in the Bitcoin Network, either of which could in turn materially adversely affect the value of the Shares. See “Part I—Item 1A. Risk Factors—Risk Factors Related to Digital Assets—If the digital asset award for mining blocks and transaction
October 6, 2023
fees for recording transactions on the Bitcoin Network are not sufficiently high to incentivize miners, or if certain jurisdictions continue to limit or otherwise regulate mining activities, miners may cease expanding processing power or demand high transaction fees, which could negatively impact the value of Bitcoin and the value of the Shares.”
Item 1A. Risk Factors, page 44
3. We note that Digital Currency Group, Inc., the parent company of the Sponsor, is currently party to various litigation claims and legal proceedings and experiencing financial difficulties, as indicated by recent news reports. To the extent material, please include risk factor disclosure in future filings describing the current and potential impacts therefrom on your business, including how such difficulties or any unfavorable outcomes in these claims and proceedings could negatively impact the Sponsor’s ability to continue managing the Trust or conduct its business.
Response
The Sponsor believes the risks to the Trust arising from the litigation claims and legal proceedings against, and any financial difficulties being experienced by, Digital Currency Group, Inc. (“DCG”) consist primarily of: (i) the risk that negative publicity surrounding DCG and its subsidiaries could negatively impact the reputation of the Sponsor and have an adverse impact on the trading price and/or value of the Trust’s Shares, (ii) the risk that these difficulties could lead to sales of a significant number of the Trust’s Shares and negatively impact the trading price of the Shares and (iii) the risk that these financial difficulties or any unfavorable outcomes in these claims and proceedings could cause the ownership of the Sponsor to be affected.
With respect to the first two risks described above, the Sponsor refers the Staff to the disclosure regarding the related difficulties experienced by DCG and its subsidiaries and the potential impact they could have on the Sponsor and the Trust included in the 2022 10-K under “Part I—Item 1A. Risk Factors—Risk Factors Related to the Digital Asset Markets—Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity” (pages 52-53).
With respect to the third risk described above, the Sponsor does not believe there is a material risk at this time that any legal and financial difficulties being experienced by DCG would cause the ownership of the Sponsor to be affected and the Sponsor to be unable to continue managing the Trust or conducting its business. The Sponsor refers the Staff to the more general discussion of the risks of the discontinuance of the Sponsor’s services in the 2022 10-K under “Part I—Item 1A. Risk Factors—Risk Factors Related to Potential Conflicts of Interest—Shareholders cannot be assured of the Sponsor’s continued services, the discontinuance of which may be detrimental to the Trust” (page 72).
To the extent there are any updates with respect to the risks to the Sponsor and the Trust arising from any legal and financial difficulties of DCG that are material to the Trust, the Sponsor will disclose such updates in future filings.
4. To the extent material, discuss in future filings any reputational harm you may face in light of the recent disruption in the crypto asset markets. For example, discuss how market conditions have
October 6, 2023
affected how your business is perceived by counterparties and regulators, and whether there is a material impact on your operations or financial condition.
Response
The Sponsor has evaluated the recent disruption in crypto markets and believes that such disruption could cause the Trust to face reputational harm primarily as a result of (i) market participants’ loss of confidence in crypto asset markets and acceptance of Bitcoin and digital assets more generally, (ii) changes in how regulators view the crypto industry and, consequently, how they may view the Trust, the Sponsor and/or the other service providers of the Trust, and (iii) negative publicity surrounding digital asset market participants, including affiliates of the Sponsor and the Trust, and digital assets more broadly.
The aforementioned risks, to the extent material to the Trust, are disclosed in the 2022 10-K under “Part I—Item 1A. Risk Factors—Risk Factors Related to the Digital Asset Markets—Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity” (pages 52-53).
To the extent there are any material updates with respect to any reputational harm that the Trust may face in light of the recent disruption in the crypto asset markets, including how market conditions might affect how the Trust’s business is perceived by counterparties and regulators, and material impacts on the Trust’s operations or financial condition, the Sponsor will disclose such updates in future filings.
5. Describe in future filings any material risks to your business from the possibility of regulatory developments related to crypto assets and crypto asset markets. Identify material pending crypto legislation or regulation and describe any material effects it may have on your business, financial condition, and results of operations.
Response
The Sponsor believes that the risks faced by the Trust arising from the possibility of regulatory developments related to crypto assets and crypto asset markets consist primarily of: (i) the risk that regulatory d
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CORRESP 1 filename1.htm CORRESP Hillary A. Coleman +1 212 450 4733 hillary.coleman@davispolk.com Davis Polk & Wardwell LLP 450 Lexington Avenue New York, NY 10017 davispolk.com October 6, 2023 Re: Grayscale Bitcoin Trust (BTC) Form 10-K for the Fiscal Year Ended December 31, 2022 Filed March 1, 2023 File No. 000-56121 Eric Envall David Lin Division of Corporation Finance Office of Crypto Assets U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Dear Mr. Envall and Mr. Lin: On behalf of our client, Grayscale Investments, LLC, a Delaware limited liability company and the sponsor (the “Sponsor”) of Grayscale Bitcoin Trust (BTC) (the “Trust”), this letter sets forth the Sponsor’s responses to the comment letter of the staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (the “Commission”) dated September 14, 2023, relating to the Trust’s Form 10-K for the fiscal year ended December 31, 2022 (the “2022 10-K”). In preparing the 2022 10-K, the Sponsor considered prior guidance from the Staff regarding developments in the crypto asset markets, including in particular the sample letter to companies regarding recent developments in crypto asset markets published by the Staff in December 2022. Accordingly, and as more fully discussed below, the Sponsor believes that many of the considerations highlighted in the Staff’s comment letter are appropriately addressed in the 2022 10-K, to the extent material to the Trust and its investors. For your convenience, we have reproduced the Staff’s comments preceding the Sponsor’s responses below. All capitalized terms used and not defined herein shall have the meaning given to them in the 2022 10-K. Form 10-K for the Fiscal Year Ended December 31, 2022 Item 1. Business, page 1 1. If material to an understanding of your business, describe in future filings any direct or indirect exposures to other counterparties, custodians, or other participants in crypto asset markets known to: ◾ Have filed for bankruptcy, been decreed insolvent or bankrupt, made any assignment for the benefit of creditors, or have had a receiver appointed for them. ◾ Have experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets. ◾ Have the crypto assets of their customers unaccounted for. ◾ Have experienced material corporate compliance failures. Response The Sponsor has evaluated the Trust’s direct and indirect exposure to other counterparties, custodians and participants in the crypto asset markets that have filed for bankruptcy, been decreed insolvent or bankrupt, made any assignment for the benefit of creditors, or have had a receiver appointed and has determined that the risks to the Trust arising from such exposures are primarily related to volatility and disruption in the crypto asset markets, loss of confidence in participants of the digital asset ecosystem and negative publicity surrounding digital asset market participants and digital assets broadly that they may cause. The material risks to the Trust arising from such exposures are discussed in the 2022 10-K under “Part I—Item 1A. Risk Factors—Risk Factors Related to the Digital Asset Markets—Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity” (pages 52-53) and “Part I—Item 1A. Risk Factors—Risk Factors Related to the Digital Asset Markets—Due to the unregulated nature and lack of transparency surrounding the operations of Digital Asset Exchanges, they may experience fraud, business failures, security failures or operational problems, which may adversely affect the value of Bitcoin and, consequently, the value of the Shares” (pages 54-55). The Sponsor does not believe that the Trust at this time has any other material direct or indirect exposures to participants in crypto asset markets that have filed for bankruptcy, been decreed insolvent or bankrupt, made any assignment for the benefit of creditors, or have had a receiver appointed. The Trust does not have any material direct exposure to counterparties, custodians or other participants in the crypto asset market that have experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets, have the crypto assets of their customers unaccounted for or have experienced material corporate compliance failures. However, the Trust has indirect exposure to such entities to the extent their circumstances cause volatility and disruption in the crypto asset markets, loss of confidence in participants of the digital asset ecosystem or significant negative publicity around digital asset market participants and digital assets broadly. The Sponsor has disclosed such risks in the 2022 10-K under the risk factors referred to in the first paragraph to this response. To the extent the Trust has any other material direct or indirect exposures to such other counterparties, custodians or participants in crypto asset markets in the future, it will include disclosure regarding such exposures in future filings. Overview of the Bitcoin Industry and Market Creation of New Bitcoin, page 8 2. We note your disclosure that the “Bitcoin Network is designed in such a way that the reward for adding new blocks to the Blockchain decreases over time. Once new Bitcoin tokens are no longer awarded for adding a new block, miners will only have transaction fees to incentivize them, and as a result, it is expected that miners will need to be better compensated with higher transaction fees to ensure that there is adequate incentive for them to continue mining.” Please revise future filings to discuss the potential impact on your business if such fees are not sufficiently high to incentivize miners to continue mining and include a cross-reference to your related risk factor disclosure on pages 48 – 49. October 6, 2023 2 Response The Sponsor intends to include disclosure substantially in the form set forth below under “Part I—Item 1. Business—Overview of the Bitcoin Industry and Market—Creation of New Bitcoin” (with the underlined text marking new text) in the Trust’s Form 10-K for the fiscal year ending December 31, 2023, updated as applicable for any changes after the date of this letter: “Creation of New Bitcoin New Bitcoins are created through the mining process as discussed below. The Bitcoin Network is kept running by computers all over the world. In order to incentivize those who incur the computational costs of securing the network by validating transactions, there is a reward that is given to the computer that was able to create the latest block on the chain. Every 10 minutes, on average, a new block is added to the Blockchain with the latest transactions processed by the network, and the computer that generated this block is currently awarded 6.25 Bitcoin. Due to the nature of the algorithm for block generation, this process (generating a “proof-of-work”) is guaranteed to be random. Over time, rewards are expected to be proportionate to the computational power of each machine. The process by which Bitcoin is “mined” results in new blocks being added to the Blockchain and new Bitcoin tokens being issued to the miners. Computers on the Bitcoin Network engage in a set of prescribed complex mathematical calculations in order to add a block to the Blockchain and thereby confirm Bitcoin transactions included in that block’s data. To begin mining, a user can download and run Bitcoin Network mining software, which turns the user’s computer into a “node” on the Bitcoin Network that validates blocks. Each block contains the details of some or all of the most recent transactions that are not memorialized in prior blocks, as well as a record of the award of Bitcoin to the miner who added the new block. Each unique block can be solved and added to the Blockchain by only one miner. Therefore, all individual miners and mining pools on the Bitcoin Network are engaged in a competitive process of constantly increasing their computing power to improve their likelihood of solving for new blocks. As more miners join the Bitcoin Network and its processing power increases, the Bitcoin Network adjusts the complexity of the block-solving equation to maintain a predetermined pace of adding a new block to the Blockchain approximately every ten minutes. A miner’s proposed block is added to the Blockchain once a majority of the nodes on the Bitcoin Network confirms the miner’s work. Miners that are successful in adding a block to the Blockchain are automatically awarded Bitcoin for their effort and may also receive transaction fees paid by transferors whose transactions are recorded in the block. This reward system is the method by which new Bitcoin enter into circulation to the public. The Bitcoin Network is designed in such a way that the reward for adding new blocks to the Blockchain decreases over time. Once new Bitcoin tokens are no longer awarded for adding a new block, miners will only have transaction fees to incentivize them, and as a result, it is expected that miners will need to be better compensated with higher transaction fees to ensure that there is adequate incentive for them to continue mining. If the transaction fees for recording transactions on the Bitcoin Network are not sufficiently high to incentivize miners, miners may cease expending processing power to mine blocks and confirmations of transactions on the Bitcoin Blockchain could be slowed. This could increase the likelihood of a malicious actor or botnet obtaining control of the Bitcoin Network and/or result in a loss of confidence in the Bitcoin Network, either of which could in turn materially adversely affect the value of the Shares. See “Part I—Item 1A. Risk Factors—Risk Factors Related to Digital Assets—If the digital asset award for mining blocks and transaction October 6, 2023 3 fees for recording transactions on the Bitcoin Network are not sufficiently high to incentivize miners, or if certain jurisdictions continue to limit or otherwise regulate mining activities, miners may cease expanding processing power or demand high transaction fees, which could negatively impact the value of Bitcoin and the value of the Shares.” Item 1A. Risk Factors, page 44 3. We note that Digital Currency Group, Inc., the parent company of the Sponsor, is currently party to various litigation claims and legal proceedings and experiencing financial difficulties, as indicated by recent news reports. To the extent material, please include risk factor disclosure in future filings describing the current and potential impacts therefrom on your business, including how such difficulties or any unfavorable outcomes in these claims and proceedings could negatively impact the Sponsor’s ability to continue managing the Trust or conduct its business. Response The Sponsor believes the risks to the Trust arising from the litigation claims and legal proceedings against, and any financial difficulties being experienced by, Digital Currency Group, Inc. (“DCG”) consist primarily of: (i) the risk that negative publicity surrounding DCG and its subsidiaries could negatively impact the reputation of the Sponsor and have an adverse impact on the trading price and/or value of the Trust’s Shares, (ii) the risk that these difficulties could lead to sales of a significant number of the Trust’s Shares and negatively impact the trading price of the Shares and (iii) the risk that these financial difficulties or any unfavorable outcomes in these claims and proceedings could cause the ownership of the Sponsor to be affected. With respect to the first two risks described above, the Sponsor refers the Staff to the disclosure regarding the related difficulties experienced by DCG and its subsidiaries and the potential impact they could have on the Sponsor and the Trust included in the 2022 10-K under “Part I—Item 1A. Risk Factors—Risk Factors Related to the Digital Asset Markets—Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity” (pages 52-53). With respect to the third risk described above, the Sponsor does not believe there is a material risk at this time that any legal and financial difficulties being experienced by DCG would cause the ownership of the Sponsor to be affected and the Sponsor to be unable to continue managing the Trust or conducting its business. The Sponsor refers the Staff to the more general discussion of the risks of the discontinuance of the Sponsor’s services in the 2022 10-K under “Part I—Item 1A. Risk Factors—Risk Factors Related to Potential Conflicts of Interest—Shareholders cannot be assured of the Sponsor’s continued services, the discontinuance of which may be detrimental to the Trust” (page 72). To the extent there are any updates with respect to the risks to the Sponsor and the Trust arising from any legal and financial difficulties of DCG that are material to the Trust, the Sponsor will disclose such updates in future filings. 4. To the extent material, discuss in future filings any reputational harm you may face in light of the recent disruption in the crypto asset markets. For example, discuss how market conditions have October 6, 2023 4 affected how your business is perceived by counterparties and regulators, and whether there is a material impact on your operations or financial condition. Response The Sponsor has evaluated the recent disruption in crypto markets and believes that such disruption could cause the Trust to face reputational harm primarily as a result of (i) market participants’ loss of confidence in crypto asset markets and acceptance of Bitcoin and digital assets more generally, (ii) changes in how regulators view the crypto industry and, consequently, how they may view the Trust, the Sponsor and/or the other service providers of the Trust, and (iii) negative publicity surrounding digital asset market participants, including affiliates of the Sponsor and the Trust, and digital assets more broadly. The aforementioned risks, to the extent material to the Trust, are disclosed in the 2022 10-K under “Part I—Item 1A. Risk Factors—Risk Factors Related to the Digital Asset Markets—Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity” (pages 52-53). To the extent there are any material updates with respect to any reputational harm that the Trust may face in light of the recent disruption in the crypto asset markets, including how market conditions might affect how the Trust’s business is perceived by counterparties and regulators, and material impacts on the Trust’s operations or financial condition, the Sponsor will disclose such updates in future filings. 5. Describe in future filings any material risks to your business from the possibility of regulatory developments related to crypto assets and crypto asset markets. Identify material pending crypto legislation or regulation and describe any material effects it may have on your business, financial condition, and results of operations. Response The Sponsor believes that the risks faced by the Trust arising from the possibility of regulatory developments related to crypto assets and crypto asset markets consist primarily of: (i) the risk that regulatory d