Correspondence 0001839882-23-028269 from Bitwise Bitcoin ETF (BITB)
Bitwise Bitcoin ETF
Date: Oct. 26, 2023 · CIK: 0001763415 · Accession: 0001839882-23-028269
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-260235
Letter
Via EDGAR Correspondence United States Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 Re: Bitwise Bitcoin ETP Trust File No. 333-260235
Dear Ms. Bednarowski and Mr. Dobbie:
This letter responds to your comments regarding the registration statement filed on Form S-1 for the Bitwise Bitcoin ETP Bitcoin Trust (the “Trust”) with the staff of the Securities and Exchange Commission (the “Staff”) on October 14, 2021 (the “Registration Statement”). Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Registration Statement.
Comment 1 – General
Based on our preliminary review of your registration statement, we have the following initial set of comments. Once you have amended your registration statement and responded to each of these comments, we will provide you with more detailed comments relating to your registration statement, as appropriate.
Response to Comment 1
The Sponsor, on behalf of the Trust, acknowledges and appreciates the Staff’s comments. Pre-Effective Amendment No. 1 to the Registration Statement (the “Amendment”) has been filed on or about the date hereof in order to respond the Staff’s comments and make other updates to the Registration Statement.
Comment 2 – General
Please disclose all omitted information as soon as it has been determined. By way of example, we note that you omit the identification of the initial Authorized Participant, the Exchange, the Transfer Agent, the Marketing Agent and the cash custodian, as well as inclusion of the material agreements as exhibits to the Registration Statement. Please revise to include this information in a subsequent amendment to the Registration Statement. Please also acknowledge that the Staff will need sufficient time to review this information when it is included in a subsequent amendment.
October 25, 2023
Page 2
Response to Comment 2
Pursuant to the Staff’s comment, the Registration Statement has been updated to provide all requested information that is currently available. The Registration Statement will be further amended at a future date to include all currently omitted information. The Sponsor, on behalf of the Trust, represents that such amendment will take place prior the Trust requesting acceleration of the effectiveness of the Registration Statement. The Sponsor confirms the Registration Statement will be amended with executed agreements prior to the time of its request for acceleration of effectiveness of the Registration Statement. The Sponsor acknowledges that the Staff will need time to review such information.
Comment 3 – General
The Staff refers the Trust to the Staff’s December 2022 Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets, located at the following address: https://www.sec.gov/corpfin/sample-letter-companies-regarding-crypto-asset-markets. Please consider the issues identified in the sample letter as applicable to the Trust’s facts and circumstances and revise the disclosure accordingly.
Response to Comment 3
The Sponsor, on behalf of the Trust, has set forth its responses below to Comments 1 through 16 in the above-referenced letter.
1. Provide disclosure of any significant crypto asset market developments material to understanding or assessing your business, financial condition and results of operations, or share price since your last reporting period, including any material impact from the price volatility of crypto assets.
The Sponsor refers the Staff to the sections of the prospectus entitled “Risk Factors” and “Bitcoin, Bitcoin Market and Regulation of Bitcoin.” The disclosure therein contains disclosure which discusses the implications of recent developments in the digital asset market. As the Trust as no operating history, these developments have not had any impact on the financial condition and results of operations. To the extent similar events occur in the future and have such an impact, appropriate disclosure would be included in the Trust’s periodic reports filed pursuant to the Securities Exchange Act of 1934 in a prospectus or prospectus supplement, as applicable.
October 25, 2023
Page 3
2. To the extent material, discuss how the bankruptcies of XX and XX and the downstream effects of those bankruptcies have impacted or may impact your business, financial condition, customers, and counterparties, either directly or indirectly. Clarify whether you have material assets that may not be recovered due to the bankruptcies or may otherwise be lost or misappropriated.
The Trust has not yet commenced operations and therefore does not have material assets that may not be recovered due to the bankruptcies or has been misappropriated. The Sponsor confirms that none of the service providers that the Trust has engaged or contemplates engaging have been materially affected by any prominent bankruptcies and other notable events in the digital asset industry. Nonetheless, the Registration Statement, as reflected in the Amendment, now contains extensive disclosure regarding the bankruptcies of FTX, BlockFi Inc., Genesis Global Capital, LLC, Celsius Network, Voyager Digital Ltd., and Three Arrows Capital. Such disclosure can be found in the section of the prospectus entitled “Risk Factors.”
3. If material to an understanding of your business, describe any direct or indirect exposures to other counterparties, customers, 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.
At this time, the Sponsor is unaware of any direct or indirect exposures to other counterparties, customers, custodians, or other participants in crypto asset markets known to: (i) 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; (ii) have experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets; (iii) have the crypto assets of their customers unnacounted for; or (iv) have experienced material corporate compliance failures.
October 25, 2023
Page 4
4. If material to an understanding of your business, discuss any steps you take to safeguard your customers’ crypto assets and describe any policies and procedures that are in place to prevent self-dealing and other potential conflicts of interest. Describe any policies and procedures you have regarding the commingling of assets, including customer assets, your assets, and those of affiliates or others. Identify what material changes, if any, have been made to your processes in light of the current crypto asset market disruption.
With respect to the safeguarding of the Trust’s digital assets, the Sponsor refers the Staff to the disclosure set forth in the section of the prospectus entitled “Custody of the Trust’s Assets,” which includes a description of the safekeeping procedures used by the Trust’s Bitcoin Custodian to hold the Trust’s bitcoin. With respect to policies and procedures that are in place to prevent self-dealing and other potential conflicts of interest, the Sponsor refers the Staff to the disclosure set forth in the section of the prospectus entitled “Conflicts of Interest” and Response to Comment 11 below.
5. Disclose whether you have experienced excessive redemptions or withdrawals, or have suspended redemptions or withdrawals, of crypto assets and explain the potential effects on your financial condition and liquidity.
As the Trust has not commenced operations, this comment is inapplicable to the Trust and the Registration Statement.
6. We note that you own or have issued crypto assets and/or hold crypto assets on behalf of third parties. To the extent material, explain whether these crypto assets serve as collateral for any loan, margin, rehypothecation, or other similar activities to which you or your affiliates are a party. If so, identify and quantify the crypto assets used in these financing arrangements and disclose the nature of your relationship for loans with parties other than third-parties. State whether there are any encumbrances on the collateral. Discuss whether the current crypto asset market disruption has affected the value of the underlying collateral.
The Trust will not issue crypto assets or hold crypto assets on behalf of third parties. Accordingly, the Sponsor does not believe this comment is applicable to the Trust and the Registration Statement.
7. To the extent material, explain whether, to your knowledge, crypto assets you have issued serve as collateral for any other person’s or entity’s loan, margin, rehypothecation or similar activity. If so, discuss whether the current crypto asset market disruption has impacted the value of the underlying collateral and explain any material financing and liquidity risk this raises for your business.
October 25, 2023
Page 5
The Trust will not issue crypto assets. Accordingly, the Sponsor does not believe this comment is applicable to the Trust and the Registration Statement.
8. Describe any material risk to you, either direct or indirect, due to excessive redemptions, withdrawals, or a suspension of redemptions or withdrawals, of crypto assets. Identify any material concentrations of risk and quantify any material exposures.
The Sponsor refers the Staff to the sections of the prospectus entitled “Risk Factors” and “Creation and Redemption of Shares – Suspension or Rejection of Redemption Orders.” In particular, the Sponsor refers the Staff to the risk entitled “Investors may be adversely affected by creation or redemption orders that are subject to postponement, suspension or rejection under certain circumstances” on page 21.
9. To the extent material, discuss any reputational harm you may face in light of the recent disruption in the crypto asset markets. For example, discuss how market conditions have affected how your business is perceived by customers, counterparties, and regulators, and whether there is a material impact on your operations or financial condition.
The sole purpose of the Trust is to hold bitcoin for the benefit of its Shareholders. The Trust does not engage in any other activities in the digital asset market. Therefore, the Sponsor does not view the risk of any reputational harm as material in light of the circumstances.
10. We note that you are not authorized or permitted to offer your products and services to customers outside of the jurisdictions where you have obtained the required governmental licenses and authorizations. Describe any material risks you face from unauthorized or impermissible customer access to your products and services outside of those jurisdictions. Describe any steps you take to restrict access of U.S. persons to your products and services and any related material risks.
The Shares of the Trust are offered and sold only to Authorized Participants who are registered broker-dealers under the Securities Exchange Act of 1934, members of the Financial Industry Regulatory Authority Inc. and have been confirmed to be U.S. Persons.
11. Describe 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.
October 25, 2023
Page 6
The Trust refers the Staff to the sections of the prospectus entitled “Bitcoin, Bitcoin Market and Regulation of Bitcoin – Regulation of Bitcoin” and “Risk Factors – Regulatory Risk.” Each highlighted section contains voluminous disclosure regarding material risks to the Trust from the possibility of regulatory developments related to crypto assets and crypto asset markets as well as identifying material pending crypto legislation or regulation and describing any material effects it may have on the Trust’s business, financial condition, and results of operations.
12. Describe any material risks you face related to the assertion of jurisdiction by U.S. and foreign regulators and other government entities over crypto assets and crypto asset markets.
The Sponsor refers the Staff to the sections of the prospectus entitled “Bitcoin, Bitcoin Market and Regulation of Bitcoin – Regulation of Bitcoin” and “Risk Factors – Regulatory Risk.” Each highlighted section contains voluminous disclosure regarding material risks faced by the Trust related to the assertion of jurisdiction by U.S. and foreign regulators and other government entities over crypto assets and crypto asset markets.
13. Describe any material risks related to safeguarding your, your affiliates’, or your customers’ crypto assets. Describe any m
Show Raw Text
CORRESP
1
filename1.htm
Richard
Coyle
Partner
Chapman
and Cutler LLP
320
South Canal Street, 27th Floor
Chicago,
Illinois 60606
T
312.845.3724
rcoyle@chapman.com
October
25, 2023
Via
EDGAR Correspondence
United
States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Re: Bitwise
Bitcoin ETP Trust
File No. 333-260235
Dear
Ms. Bednarowski and Mr. Dobbie:
This
letter responds to your comments regarding the registration statement filed on Form S-1 for the Bitwise Bitcoin ETP Bitcoin Trust
(the “Trust”) with the staff of the Securities and Exchange Commission (the “Staff”) on October
14, 2021 (the “Registration Statement”). Capitalized terms used herein, but not otherwise defined, have the meanings
ascribed to them in the Registration Statement.
Comment
1 – General
Based
on our preliminary review of your registration statement, we have the following initial set of comments. Once you have amended your registration
statement and responded to each of these comments, we will provide you with more detailed comments relating to your registration statement,
as appropriate.
Response
to Comment 1
The
Sponsor, on behalf of the Trust, acknowledges and appreciates the Staff’s comments. Pre-Effective Amendment No. 1 to the Registration
Statement (the “Amendment”) has been filed on or about the date hereof in order to respond the Staff’s comments
and make other updates to the Registration Statement.
Comment
2 – General
Please
disclose all omitted information as soon as it has been determined. By way of example, we note that you omit the identification of the
initial Authorized Participant, the Exchange, the Transfer Agent, the Marketing Agent and the cash custodian, as well as inclusion of
the material agreements as exhibits to the Registration Statement. Please revise to include this information in a subsequent amendment
to the Registration Statement. Please also acknowledge that the Staff will need sufficient time to review this information when it is
included in a subsequent amendment.
October 25, 2023
Page 2
Response
to Comment 2
Pursuant
to the Staff’s comment, the Registration Statement has been updated to provide all requested information that is currently available.
The Registration Statement will be further amended at a future date to include all currently omitted information. The Sponsor, on behalf
of the Trust, represents that such amendment will take place prior the Trust requesting acceleration of the effectiveness of the Registration
Statement. The Sponsor confirms the Registration Statement will be amended with executed agreements prior to the time of its request
for acceleration of effectiveness of the Registration Statement. The Sponsor acknowledges that the Staff will need time to review such
information.
Comment
3 – General
The
Staff refers the Trust to the Staff’s December 2022 Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets,
located at the following address: https://www.sec.gov/corpfin/sample-letter-companies-regarding-crypto-asset-markets.
Please consider the issues identified in the sample letter as applicable to the Trust’s facts and circumstances and revise the
disclosure accordingly.
Response
to Comment 3
The
Sponsor, on behalf of the Trust, has set forth its responses below to Comments 1 through 16 in the above-referenced letter.
1. Provide
disclosure of any significant crypto asset market developments material to understanding
or assessing your business, financial condition and results of operations, or share price
since your last reporting period, including any material impact from the price volatility
of crypto assets.
The
Sponsor refers the Staff to the sections of the prospectus entitled “Risk Factors” and “Bitcoin, Bitcoin Market
and Regulation of Bitcoin.” The disclosure therein contains disclosure which discusses the implications of recent developments
in the digital asset market. As the Trust as no operating history, these developments have not had any impact on the financial
condition and results of operations. To the extent similar events occur in the future and have such an impact, appropriate
disclosure would be included in the Trust’s periodic reports filed pursuant to the Securities Exchange Act of 1934 in a
prospectus or prospectus supplement, as applicable.
October 25, 2023
Page 3
2. To
the extent material, discuss how the bankruptcies of XX and XX and the downstream effects
of those bankruptcies have impacted or may impact your business, financial condition, customers,
and counterparties, either directly or indirectly. Clarify whether you have material assets
that may not be recovered due to the bankruptcies or may otherwise be lost or misappropriated.
The
Trust has not yet commenced operations and therefore does not have material assets that may not be recovered due to the bankruptcies
or has been misappropriated. The Sponsor confirms that none of the service providers that the Trust has engaged or contemplates engaging
have been materially affected by any prominent bankruptcies and other notable events in the digital asset industry. Nonetheless, the
Registration Statement, as reflected in the Amendment, now contains extensive disclosure regarding the bankruptcies of FTX, BlockFi Inc.,
Genesis Global Capital, LLC, Celsius Network, Voyager Digital Ltd., and Three Arrows Capital. Such disclosure can be found in the section
of the prospectus entitled “Risk Factors.”
3. If
material to an understanding of your business, describe any direct or indirect exposures
to other counterparties, customers, 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.
At
this time, the Sponsor is unaware of any direct or indirect exposures to other counterparties, customers, custodians, or other participants
in crypto asset markets known to: (i) 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; (ii) have experienced excessive redemptions or suspended redemptions or withdrawals
of crypto assets; (iii) have the crypto assets of their customers unnacounted for; or (iv) have experienced material corporate compliance
failures.
October 25, 2023
Page 4
4. If
material to an understanding of your business, discuss any steps you take to safeguard your
customers’ crypto assets and describe any policies and procedures that are in place
to prevent self-dealing and other potential conflicts of interest. Describe any policies
and procedures you have regarding the commingling of assets, including customer assets, your
assets, and those of affiliates or others. Identify what material changes, if any, have been
made to your processes in light of the current crypto asset market disruption.
With
respect to the safeguarding of the Trust’s digital assets, the Sponsor refers the Staff to the disclosure set forth in the
section of the prospectus entitled “Custody of the Trust’s Assets,” which includes a description of the
safekeeping procedures used by the Trust’s Bitcoin Custodian to hold the Trust’s bitcoin. With respect to policies and
procedures that are in place to prevent self-dealing and other potential conflicts of interest, the Sponsor refers the Staff to the
disclosure set forth in the section of the prospectus entitled “Conflicts of Interest” and Response to Comment 11
below.
5. Disclose
whether you have experienced excessive redemptions or withdrawals, or have suspended redemptions
or withdrawals, of crypto assets and explain the potential effects on your financial condition
and liquidity.
As
the Trust has not commenced operations, this comment is inapplicable to the Trust and the Registration Statement.
6. We
note that you own or have issued crypto assets and/or hold crypto assets on behalf of third
parties. To the extent material, explain whether these crypto assets serve as collateral
for any loan, margin, rehypothecation, or other similar activities to which you or your affiliates
are a party. If so, identify and quantify the crypto assets used in these financing arrangements
and disclose the nature of your relationship for loans with parties other than third-parties.
State whether there are any encumbrances on the collateral. Discuss whether the current crypto
asset market disruption has affected the value of the underlying collateral.
The
Trust will not issue crypto assets or hold crypto assets on behalf of third parties. Accordingly, the Sponsor does not believe this comment
is applicable to the Trust and the Registration Statement.
7. To
the extent material, explain whether, to your knowledge, crypto assets you have issued serve
as collateral for any other person’s or entity’s loan, margin, rehypothecation
or similar activity. If so, discuss whether the current crypto asset market disruption has
impacted the value of the underlying collateral and explain any material financing and liquidity
risk this raises for your business.
October 25, 2023
Page 5
The
Trust will not issue crypto assets. Accordingly, the Sponsor does not believe this comment is applicable to the Trust and the Registration
Statement.
8. Describe
any material risk to you, either direct or indirect, due to excessive redemptions, withdrawals,
or a suspension of redemptions or withdrawals, of crypto assets. Identify any material concentrations
of risk and quantify any material exposures.
The
Sponsor refers the Staff to the sections of the prospectus entitled “Risk Factors” and “Creation and Redemption of
Shares – Suspension or Rejection of Redemption Orders.” In particular, the Sponsor refers the Staff to the risk entitled
“Investors may be adversely affected by creation or redemption orders that are subject to postponement, suspension or rejection
under certain circumstances” on page 21.
9. To
the extent material, discuss any reputational harm you may face in light of the recent disruption
in the crypto asset markets. For example, discuss how market conditions have affected how
your business is perceived by customers, counterparties, and regulators, and whether there
is a material impact on your operations or financial condition.
The
sole purpose of the Trust is to hold bitcoin for the benefit of its Shareholders. The Trust does not engage in any other activities in
the digital asset market. Therefore, the Sponsor does not view the risk of any reputational harm as material in light of the circumstances.
10. We
note that you are not authorized or permitted to offer your products and services to customers
outside of the jurisdictions where you have obtained the required governmental licenses and
authorizations. Describe any material risks you face from unauthorized or impermissible customer
access to your products and services outside of those jurisdictions. Describe any steps you
take to restrict access of U.S. persons to your products and services and any related material
risks.
The
Shares of the Trust are offered and sold only to Authorized Participants who are registered broker-dealers under the Securities Exchange
Act of 1934, members of the Financial Industry Regulatory Authority Inc. and have been confirmed to be U.S. Persons.
11. Describe
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.
October 25, 2023
Page 6
The
Trust refers the Staff to the sections of the prospectus entitled “Bitcoin, Bitcoin Market and Regulation of Bitcoin –
Regulation of Bitcoin” and “Risk Factors – Regulatory Risk.” Each highlighted section contains voluminous
disclosure regarding material risks to the Trust from the possibility of regulatory developments related to crypto assets and crypto
asset markets as well as identifying material pending crypto legislation or regulation and describing any material effects it may
have on the Trust’s business, financial condition, and results of operations.
12. Describe
any material risks you face related to the assertion of jurisdiction by U.S. and foreign
regulators and other government entities over crypto assets and crypto asset markets.
The
Sponsor refers the Staff to the sections of the prospectus entitled “Bitcoin, Bitcoin Market and Regulation of Bitcoin –
Regulation of Bitcoin” and “Risk Factors – Regulatory Risk.” Each highlighted section contains voluminous disclosure
regarding material risks faced by the Trust related to the assertion of jurisdiction by U.S. and foreign regulators and other government
entities over crypto assets and crypto asset markets.
13. Describe
any material risks related to safeguarding your, your affiliates’, or your customers’
crypto assets. Describe any m