SecProbe.io

CORRESP
1
filename1.htm

CORRESP

 Dechert

 LLP

 Three Bryant Park

 1095 Avenue of the

Americas New York, NY

 10036-6797 +1 212 698

3500 Main +1 212 698 3599

 Fax www.dechert.com

ALLISON M FUMAI

allison.fumai@dechert.com

+1 212 698 3526 Direct

+1 698 698 3599 Fax

 VIA EDGAR

October 11, 2023

 Division of Corporation Finance

Office of Crypto Assets

 Securities and Exchange Commission

100 F Street, N.E.

 Washington, DC 20549

Re:

 Ark 21Shares Bitcoin ETF

Amendment No. 1 to Registration Statement on Form S-1

Filed September 7, 2023

 File No. 333-
257474

 To Whom it May Concern:

 On
behalf of Ark 21Shares Bitcoin ETF (“Trust”), submitted herewith via the EDGAR system are the responses to the comments of the staff of the Office of Crypto Assets of the Division of Corporation Finance (the
“Staff”) of the Securities and Exchange Commission (“SEC”) with respect to Amendment No. 1 to the Trust’s registration statement on Form S-1 filed on
September 7, 2023 (“Registration Statement”). This letter is in response to the comments of the Staff of the SEC provided in correspondence dated September 29, 2023.

For your convenience, we have restated your comments below followed by our responses. Capitalized terms used but not defined in this letter have the meaning
given to them in the Registration Statement. We will incorporate any changes referenced below into a future amendment to the Registration Statement.

Comment 1: 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: The Trust acknowledges this comment.

Comment 2: We note that your registration statement includes a number of blanks or omitted information, including, for example, the name of the initial
Authorized Participant and any other Authorized Participants you expect to participate in the distribution, the names of and other required disclosures related to the executive officers of the Sponsor, the material terms of your agreements with your
service providers as well as the exhibits containing these agreements. Please revise to include this information in your next amendment, or tell us when you intend to do so. Please also confirm your understanding that the Staff will need sufficient
time to review this information, and we may have additional comments at that time.

 Response: The Trust acknowledges this comment and understands
that the Staff will need sufficient time to review this information and may have additional comments at such time. With respect to the items specifically raised in the Staff’s comment, the Trust responds as follows:

•

 With respect to the identity of the Authorized Participants participating in the distribution, the Sponsor has
engaged in discussions with certain additional potential authorized participants regarding their interests in

facilitating primary market activity for the Trust. The Trust expects Mirae Asset Securities (USA) Inc. to participate as an Authorized Participant, among other potential Authorized Participants.
The Trust hereby confirms that a form of Initial Authorized Participant Agreement will be filed as an exhibit in a subsequent amendment filing, and the impacted disclosure will be revised accordingly.

•

 With respect to the names of and other required disclosures related to the executive officers of the Sponsor, the
impacted disclosure will be revised accordingly.

•

 With respect to the material terms of the Trust’s agreements with its service providers, the Trust hereby
confirms that forms of the Sponsor Agreement, Initial Authorized Participant Agreement, Marketing Agreement, Sub-Advisory Agreement, Custodial Services Agreement, Fund Administration and Accounting Agreement,
Transfer Agency Agreement, Index License Agreement, and Marketing Agent Agreement will be filed as exhibits in a subsequent amendment, and impacted disclosure will be revised accordingly.

Comment 3: We refer you to our December 2022 Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets, located on our website
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 your facts and circumstances, and revise your disclosure
accordingly.

 Response: The Trust hereby confirms that it has considered the issues identified in the sample letter as applicable to the
Trust’s facts and circumstances. With respect to the issues identified therein, the Trust responds as follows:

•

 With respect to disclosure of any significant crypto asset market developments material to understanding or
assessing the Trust’s business, financial condition and results of operations, or share price, including any material impact from the price volatility of crypto assets, the Trust currently includes applicable disclosure in its Registration
Statement, and the Trust believes this disclosure is appropriate.

•

 With respect to disclosure of how bankruptcies within the digital asset industry, and the downstream effects of
those bankruptcies, the Trust currently includes applicable disclosure in its Registration Statement, and the Trust believes this disclosure is appropriate.

•

 With respect to disclosure of 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; or

•

 Have experienced material corporate compliance failures;

The Trust currently has no operating history. The Trust currently includes applicable disclosure in its Registration Statement discussing these
risks more generally, including in the context of significant market and regulatory developments for the digital assets industry. The Trust believes this disclosure is appropriate.

•

 With respect to disclosure of steps taken to safeguard customers’ crypto assets and any policies and
procedures that are in place to prevent self-dealing and other potential conflicts of interest, the Trust currently includes applicable disclosure in its Registration Statement. This disclosure will be further revised in a subsequent amendment
filing in response to Comments 8 and 11, as applicable, below.

•

 With respect to excessive redemptions or withdrawals, or suspended redemptions or withdrawals, of digital assets,
the Trust currently has no operating history and has not experienced redemptions or withdrawals, or suspended redemptions or withdrawals, of digital assets. However, the Trust currently includes applicable disclosure in its Registration Statement
discussing these risks more generally, including in relation to the potential impact of these risks on the Trust’s financial condition and liquidity. The Trust believes this disclosure is appropriate.

•

 With respect to digital assets serving as collateral for any loan, margin, rehypothecation, or other similar
activities to which the Trust or its affiliates are a party, the Trust believes this issue is not applicable to the facts and circumstances of the Trust.

•

 With respect to digital assets serving as collateral for any other person’s or entity’s loan, margin,
rehypothecation or similar activity, the Trust believes this issue is not applicable to the facts and circumstances of the Trust.

•

 With respect to material risks to the Trust, either direct or indirect, due to excessive redemptions,
withdrawals, or a suspension of redemptions or withdrawals, of digital assets, the Trust currently has no operating history and has not experienced redemptions or withdrawals, or suspended redemptions or withdrawals, of digital assets, as discussed
previously. However, the Trust currently includes applicable disclosure in its Registration Statement discussing these risks more generally, including in relation to the potential impact of these risks on the Trust’s financial condition and
liquidity. The Trust believes this disclosure is appropriate.

•

 With respect to any reputational harm the Trust may face in light of the recent disruption in digital asset
markets, the Trust currently includes applicable disclosure in its Registration Statement, and the Trust believes this disclosure is appropriate.

•

 With respect to material risks the Trust faces from unauthorized or impermissible customer access from outside of
permissible jurisdictions, and the Trust currently includes disclosure in its Registration Statement clarifying that it is not offering to sell the Shares in any jurisdiction where the offer or sale of the Shares is not permitted, and the Trust
believes this disclosure is appropriate. Moreover, the Trust does not expect to issue any digital assets and, therefore, does not believe that the risks associated with, for example, the unauthorized access to certain digital assets by U.S. persons,
are applicable to the Trust.

•

 With respect to material risks relating to the possibility of regulatory developments related to crypto assets
and crypto asset markets, the Trust currently includes applicable disclosure in its Registration Statement, and the Trust believes this disclosure is appropriate.

•

 With respect to material risks related to the assertion of jurisdiction by U.S. and foreign regulators and other
government entities over digital assets and digital asset markets, the Trust currently includes applicable disclosure in its Registration Statement, and the Trust believes this disclosure is appropriate.

•

 With respect material risks related to safeguarding the digital assets and if policies and procedures surrounding
the safeguarding of digital assets, conflicts of interest, or comingling of assets are not effective, the Trust currently includes applicable disclosure in its Registration Statement. As previously noted, this disclosure will be further revised in a
subsequent amendment filing in response to Comments 8 and 11, as applicable, below.

•

 With respect to gaps identified with respect to risk management processes and policies in light of current
digital asset market conditions as well as any changes they have made to address those gaps, the Sponsor is updating its policies to identify and address applicable risk management issues.

•

 With respect to material financing, liquidity, or other risks the Trust faces related to the impact that the
current digital asset market disruption has had, directly or indirectly, on the value of digital assets used as collateral, the Trust believes this issue is not applicable to the facts and circumstances of the Trust.

•

 With respect to the following risks due to disruptions in the crypto asset markets:

•

 Risk from depreciation in the price of Shares;

•

 Risk of loss of customer demand for the Trust’s products and services;

•

 Financing risk, including equity and debt financing;

•

 Risk of increased losses or impairments in the Trust’s investments or other assets;

•

 Risks of legal proceedings and government investigations, pending or known to be threatened, in the United States
or in other jurisdictions against the Trust or its affiliates; and

•

 Risks from price declines or price volatility of crypto assets;

The Trust currently includes certain applicable disclosure in its Registration Statement, and the Trust believes this disclosure is
appropriate.

 Comment 4: Provide a materially complete description of the risks related to bitcoin and the bitcoin network, including, for example:

•

 Volatility in the price of bitcoin;

•

 Environmental risks from bitcoin mining;

•

 The use of bitcoin in illicit transactions; and

•

 The risk that rewards for mining bitcoin are designed to decline over time, which may lessen the incentive for
miners to process and confirm transactions on the bitcoin network.

 Response: With respect to the items specifically raised in
the Staff’s comment, the Trust responds as follows:

•

 With respect to volatility in the price of bitcoin, the Trust currently includes the following disclosure in the
risk factor titled “Bitcoin generally”, which the Trust believes is appropriate:

•

 “… a significant amount of the value of bitcoin is speculative, which could lead to
increased volatility. Investors could experience significant gains, losses and/or volatility in the Trust’s holdings, depending on the valuation of bitcoin….The issuance of bitcoin is determined by a computer code, not by a
central bank, and prices can be extremely volatile. For instance, during the period from December 17, 2017 to December 14, 2018, bitcoin experienced a decline of roughly 84%, and experienced a similar decline in
value from November 2021 to June 2022. There is no assurance that bitcoin will maintain its long-term value in terms of purchasing power in the future, or that acceptance of bitcoin payments by mainstream retail merchants and commercial businesses
will continue to grow. The value of the Trust’s investments in bitcoin could decline rapidly, including to zero.”

•

 With respect to the environmental risks from bitcoin mining, the Trust’s risk disclosure will be revised to
add the following risk factor titled “Electricity Usage”:

 Digital asset mining operations can consume
significant amounts of electricity, which may have a negative environmental impact and give rise to public opinion against allowing, or government regulations restricting, the use of electricity for mining operations. Additionally, miners may be
forced to cease operations during an electricity shortage or power outage, or if electricity prices increase where the mining activities are performed. This could adversely affect the price of bitcoin, or the operation of the Bitcoin network, and
accordingly decrease the value of the Shares.

•

 With respect to the use of bitcoin in illicit transactions, the Trust’s risk disclosure will be revised to
add the following risk factor titled “The actual or perceived use of bitcoin and other digital assets in illicit transactions, which may adversely affect the bitcoin industry and an investment in the Trust”:

Recent years have seen digital assets used at times as part of criminal activities and to launder criminal proceeds, as means of payment
for illicit activities, or as an investment fraud currency. Although the number of cases involving cryptocurrencies for the financing of terrorism remains limited, criminals have nonetheless become more sophisticated in their use of digital assets.

 Although Bitcoin transaction details are logged on the blockchain, a buyer or seller of Bitcoin may never know to whom the public
key belongs or the true identity of the party with whom it is transacting, as public key addresses are randomized sequences of alphanumeric characters that, standing alone, do not provide sufficient information to identify users. Further,
identifying users can be made even more difficult where a user utilizes a tumbling or mixing services (e.g., Tornado Cash) to further obfuscate transaction details.

The bitcoin industry and an investment in the Trust may be adversely affected to the extent that digital assets are increasingly used in
connection with illicit transactions, or are perceived as being used in connection with illicit transactions.

•

 With respect to the risk that rewards for mining bitcoin are designed to decline over time, the Trust currently
includes the following disclosure in the risk factor titled “Operational cost may exceed the award for solving blocks or transaction