SecProbe.io

United States securities and exchange commission logo
December 12, 2023
David Mann
Chief Executive Officer
Franklin Templeton Digital Holdings Trust
One Franklin Parkway
San Mateo, CA 94403
Re:Franklin Templeton Digital Holdings Trust
Amendment No. 1 to Registration Statement on Form S-1
Filed November 28, 2023
File No. 333-274474
Dear David Mann:
            We have reviewed your amended registration statement and have the following
comments.
            Please respond to this letter by amending your registration statement and providing the
requested information. If you do not believe a comment applies to your facts and circumstances
or do not believe an amendment is appropriate, please tell us why in your response.
            After reviewing any amendment to your registration statement and the information you
provide in response to this letter, we may have additional comments. Unless we note otherwise,
any references to prior comments are to comments in our September 29, 2023 letter.
Amendment No. 1 to Registration Statement on Form S-1
General
1.To the extent that you intend to use a fact sheet, please provide us a copy for our review.
2.Please describe the AML, KYC and any other procedures conducted by the Fund, the
Sponsor, the Prime Broker and the Authorized Participants to determine, among other
things, whether the counter-party in any transactions is not a sanctioned entity.
Cover Page
3.Please revise your cover page to disclose the termination date of the offering, if any.  In
addition, we note your disclosure on the cover page that "[t]he price of the Seed Creation
Units was determined as described above," but the cover page does not describe how the
price of the Seed Creation Units was determined.  Please revise accordingly.

 FirstName LastNameDavid Mann
 Comapany NameFranklin Templeton Digital Holdings Trust
 December 12, 2023 Page 2
 FirstName LastName
David Mann
Franklin Templeton Digital Holdings Trust
December 12, 2023
Page 2
Key Service Providers - The Sponsor, Trustee, Custodians, Administrator and Marketing Agent,
page 6
4.We note your disclosure on page 7 that the Fund pays Bitcoin network fees and similar
transaction fees.  Please revise to briefly describe the situations in which the Fund pays
such fees.  For example, clarify whether the Fund pays such fees only in connection with
paying the Sponsor's Fee and other Fund expenses or whether the Fund pays such fees in
connection with redemptions and creations.
Prospectus Summary, page 6
5.Please revise to disclose here that the Fund is a passive investment vehicle and that it is
not a leveraged product.  In addition, please disclose here whether and to what extent the
Trust's assets may be loaned, pledged or rehypothecated.
Risk Factors Related to Digital Assets, page 8
6.Please revise here to provide quantitative information that demonstrates the volatility of
the price of bitcoin.
Summary of Risk Factors, page 8
7.Please revise here to briefly address the risk that your timing in reaching the market and
your fee structure relative to other bitcoin ETPs could have a detrimental effect on the
scale and sustainability of your product.
The Fund's Objective, page 8
8.We note your disclosure that the Bitcoin Custodian will keep the private keys associated
with the Fund's bitcoin in cold storage or a similarly secure technology.  Please revise to
clarify the percentage of the private keys held in cold storage, and, on page 86, please
describe the "similarly secure technology."  Also revise your disclosure on page 86 to
disclose the Bitcoin Custodian's policies regarding whether the private keys are held in
cold storage or hot storage.  In addition, we note that the Prime Broker holds the Trading
Balance across a combination of omnibus hot wallets, cold wallets or in accounts in the
Prime Broker's name on a trading venue.  Please disclose the percentage held in each or
the policies related to where the Trading Balance is held.
9.We note your disclosure on page 8 that "[a] portion of the Fund’s bitcoin holdings and
cash holdings from time to time may be held with the Prime Broker in the Trading
Balance in connection with creations and redemptions of Creation Units and the sale of
bitcoin to pay the Sponsor’s Fee and Fund expenses not assumed by the Sponsor."  Please
revise to quantify the "portion" that will be held with the Prime Broker or describe the
Fund’s policy as to the amount that can be held with the Prime Broker, if any.

 FirstName LastNameDavid Mann
 Comapany NameFranklin Templeton Digital Holdings Trust
 December 12, 2023 Page 3
 FirstName LastName
David Mann
Franklin Templeton Digital Holdings Trust
December 12, 2023
Page 3
The Offering
Fund expenses, page 13
10.We note your disclosure on page 14 that "[i]n the event that any of the foregoing fees and
expenses are incurred with respect to the Fund and other Client Accounts . . ., the Sponsor
will allocate the costs across the entities on a pro rata basis or otherwise on a basis it
considers to be equitable, except to the extent that certain expenses are specifically
attributable to the Fund or another Client Account."  Please revise here to provide a brief
description and revise your disclosure on page 74 to include a detailed description of the
"other Client Accounts," the entities across which the Sponsor will allocate the costs on a
pro rata basis, the types of expenses that may be allocated across the entities on a pro rata
basis, the types of expenses that are specifically attributable to the Fund or another Client
Account and the Sponsor's policies related to allocating the costs across the entities.  We
note that the Sponsor may do so on a pro rata basis or "on a basis it considers to be
equitable."  Disclose the criteria for determining whether the allocation of costs is
equitable.  Also, we note your disclosure on page 75 that "[t]he Trust was formed and is
operated in a manner such that a series is liable only for obligations attributable to such
series."  Please revise to clarify how this statement is consistent with your disclosure
regarding the allocation of costs across the entities of the fees incurred with respect to the
Fund and other Client Accounts.
Forks, page 14
11.We note your disclosure on page 14 that “[t]he Fund does not expect to take any
Incidental Rights or IR Virtual Currency it may hold or to which it may be entitled into
account for purposes of determining the Fund’s NAV."  Please revise to disclose whether
there are any circumstances under which the fund would retain the Incidental Rights or IR
Virtual Currency or take them into account for purposes of determining the fund’s NAV.
The Offering
Termination events, page 17
12.We note your disclosure on page 17 that the Sponsor may terminate and liquidate the
Fund if "the value of the Fund is at a level at which continued operation of the Fund is not
cost-efficient."  Please revise to quantify or otherwise describe what "cost efficient"
means.
Risk Factors Related to the Digital Asset Markets
Due to the unregulated nature and lack of transparency, page 30
13.Please revise to divide this risk factor into separate risk factors with headings that describe
the specific risk highlighted.  In this regard, we note, for example, that this risk factor
currently addresses the risks related to the lack of regulation of crypto asset exchanges, the
risk of fraud and security breaches on crypto asset exchanges, the risk of business failures

 FirstName LastNameDavid Mann
 Comapany NameFranklin Templeton Digital Holdings Trust
 December 12, 2023 Page 4
 FirstName LastNameDavid Mann
Franklin Templeton Digital Holdings Trust
December 12, 2023
Page 4
of crypto asset exchanges and the risks related to reputational harm regarding bitcoin
markets.  In addition, please add separate risk factors that highlight the risks related to
manipulation, front-running and wash trading.
The Index has a limited history, page 32
14.Please expand this risk factor to quantify the CF Benchmark Index's limited history.
Similarly, please expand the last risk factor on page 39 that continues to page 40 to
describe the Sponsor's limited history of operating investment vehicles like the Fund.
Security threats to the Fund's account at the Bitcoin Custodian could result in the halting of Fund
operations..., page 40
15.To the extent material, please expand this risk factor to address the risks related to the
Bitcoin Custodian and the Prime Broker acting in the same capacities for several of the
competing products.
The Declaration of Trust includes provisions that limit Shareholders' voting rights, page 47
16.Please revise to clarify whether you have added additional standards or restrictions related
to a Shareholder's right to bring a derivative action pursuant to Section 3816(e) of the
Delaware Statutory Trust Act.
Risk Factors Related to the Regulation of the Fund and the Shares
If regulators or public utilities take actions that restrict or otherwise impact mining activities,
page 53
17.Please expand this risk factor to address the reasons why bitcoin mining may implicate
different risks than other crypto asset mining such as the differences in proof-of-work and
proof-of-stake, and revise to discuss in greater detail the regulations that states have
passed or are currently considering that impact crypto asset mining.
Business of the Fund
Net Asset Value, page 67
18.We acknowledge your response to prior comment 7 and the related changes to your
disclosure.  Please address the following with respect to your valuation of bitcoin for
financial statement purposes:
•Provide us with your revised financial statement accounting policy for determining
the fair value of bitcoin in accordance with ASC Topic 820;
•Tell us, and revise your disclosure to clearly state, whether you believe the
methodology used to calculate the Index price is consistent with U.S. GAAP;
•As the trust is expected to primarily transact with the bitcoin markets through the
Authorized Participant, confirm for us that your determination of the principal market
will be from the perspective of the Authorized Participant;
•Tell us if you and/or your Authorized Participant plan to transact in multiple

 FirstName LastNameDavid Mann
 Comapany NameFranklin Templeton Digital Holdings Trust
 December 12, 2023 Page 5
 FirstName LastNameDavid Mann
Franklin Templeton Digital Holdings Trust
December 12, 2023
Page 5
markets.  If so, please ensure that your accounting policy reflects that fact and
describes the types of markets in which you and/or your Authorized Participant
expect to transact.  In that regard, we note that ASC 820-10-35-36A includes
definitions of four types of markets (e.g. brokered market, dealer market, exchange
market, and principal to principal market);
•Confirm for us that your principal market will be one which you and/or your
Authorized Participant will be able to access and clarify whether you anticipate your
principal market to be one in which you and/or your Authorized Participant will
normally transact.  Refer to ASC Topics 820-10-35-6A and 820-10-35-5A
respectively;
•In your disclosure you state you will "utilize an exchange-traded price from the
principal market for bitcoin as of the Fund's financial statement measurement date".
Please revise your disclosure to state, if true, that you intend to use a price from the
reporting entity's principal market; and
•Tell us how the third party vendor will be involved in determining the fair value of
bitcoin for financial statement purposes, including the determination of the principal
market.  In that regard, we note your disclosure that you will engage a third-party
vendor to obtain a price from a principal market for bitcoin.  Please confirm for us
that you expect the third party vendor to determine the principal market for the
reporting entity, and not a principal market for bitcoin in general (as suggested by
your disclosure). Reference is made to ASC Topic 820-10-35-6A which indicates the
principal market shall be considered from the perspective of the reporting entity.
19.We note your disclosure on page 68 that "[i]f the CF Benchmarks Index is not available or
the Sponsor determines, in its sole discretion, that the CF Benchmarks Index should not be
used, the Fund’s holdings may be fair valued in accordance with the policy approved by
the Sponsor."  Please revise to disclose here whether the Sponsor has selected a
methodology to use if the CF Benchmarks Index is not available, and, if so, please
describe the methodology.  In addition, please disclose the "policy approved by the
Sponsor."  To the extent that the Sponsor has not selected an alternative methodology,
please describe the Sponsor's criteria or policies related to selecting a different
methodology.  Further, we note your disclosure on page 47 that "[t]here are no predefined
criteria to make a good faith assessment as to which of the rules the Sponsor will apply."
Please revise to disclose here the rules that the Sponsor may apply related to determining
the net asset value of the Fund.  Please disclose whether the Sponsor will notify investors
that the CF Benchmarks Index was not and/or will not be used, and, if so, how the
Sponsor will notify investors.
20.Please disclose whether an intra-day indicative value per Share is calculated throughout
the day, and, if so, please disclose the methodology of the calculation and where the
calculation is published.
21.Please disclose whether the Administrator or the Sponsor monitors for unusual pricing
such that the price may be corrected after 4:00 p.m. ET.

 FirstName LastNameDavid Mann
 Comapany NameFranklin Templeton Digital Holdings Trust
 December 12, 2023 Page 6
 FirstName LastNameDavid Mann
Franklin Templeton Digital Holdings Trust
December 12, 2023
Page 6
Valuation of Bitcoin; The CF Benchmarks Index, page 68
22.Please tell us what you mean by your disclosure on page 72 that "[t]he selection of
exchanges for use in the CF Benchmarks Index is based on the accessible venues on
which the Fund will primarily execute transactions" and that "[t]he Index Administrator
may make changes to the Constituent Exchanges comprising the Index from time to time
for this or other reasons."  Also disclose the characteristics of a trading venue that is
eligible to be a Constituent Exchange for the CF Benchmarks Index.
23.Please revise to describe the oversight procedures to ensure that the Index is administered
through the Index Administrator's codified policies for index integrity, and provide a brief
description of the material codified policies for Index integrity.  In addition, we note your
disclosure on page 72 that the Trust will notify the Shareholders in a prospectus
supplement and a current report on Form 8-K or in its annual or quarterly reports of
changes to the Constituent Exchanges.  Please revise to clarify if the Trust will notify
Shareholders in the same way for any other material changes made to the CF Benchmarks
Index.
Fund Expenses, page 73
24.We note your disclosure on page 73 that "[t]he Sponsor may, at its discretion and from
time to time, waive all or a portion of the Sponsor’s Fee for stated periods of
time."  Please revise to disclose the criteria the Sponsor will consider or the reasons the
Sponsor may choose to waive the fee.  Also disclose whether, and, if so, how the Sponsor
will notify Shareholders of the "stated periods of time" for the waiver.  In addition, we
note your disclosure that there is a cap on the ordinary legal fees and expenses that the
Sponsor will pay but that the Sponsor may determine to assume legal fees and expenses in
excess of the cap.  Please disclose the criteria the Sponsor will consider or the reasons the
Sponsor may choose to pay expenses beyond the cap amount, and, if so, whether and how
Shareholders will be notified.  Also please disclose whether there is a cap on the aggregate
expenses that the Sponsor will assume, and, if so, please disclose.
25.We note you