SecProbe.io

CORRESP
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    December 29, 2023

    Filed via EDGAR

    Sonia Bednarowski, Sandra Hunter Berkheimer,

    David Irving and Robert Telewicz

    U.S. Securities and Exchange Commission

    Division of Corporation Finance – Office of Crypto Assets

    100 F Street, NE

    Washington, DC 20549

            Subject:

            Franklin Templeton Digital Holdings Trust (the “Trust”)

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

            (File No. 333-274474)

    Dear Ms. Bednarowski, Ms. Berkheimer, Mr. Irving and Mr. Telewicz:

    On behalf of the Trust, submitted herewith via the EDGAR system are the responses to the comments of the staff (the “Staff”) of the U.S.
      Securities and Exchange Commission (the “Commission”) provided via written correspondence dated December 12, 2023 with regard to the Trust’s pre-effective Amendment No. 1 to its Registration Statement on Form S-1 (the “Registration Statement”) with
      respect to the Franklin Bitcoin ETF series of the Trust (the “Fund”), which was filed with the Commission on November 28, 2023 under the Securities Act of 1933 (the “1933 Act”).  The Staff’s comments are summarized below, followed by the Trust’s
      responses thereto.  Terms not defined herein have the meaning set forth for that term in the Registration Statement.

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

    General

            1.

            Comment: To the extent that you intend to use a fact sheet, please provide us a copy for our review.

            Response: The Trust acknowledges this comment and will provide a copy of the proposed fact sheet supplementally when available.

            2.

            Comment: 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.

            Response: The disclosure has been revised as requested.

            Cover Page

            3.

            Comment: 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.

            Response: The disclosure has been revised as requested.

            Key Service Providers - The Sponsor, Trustee, Custodians, Administrator and Marketing Agent, page 6

          4.

            Comment: 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.

            Response: The Sponsor is not required to pay extraordinary or non-routine expenses and the Fund may incur certain other non-recurring expenses not assumed by the Sponsor, which may include
              certain Bitcoin network fees and similar transaction fees.  The Trust notes, however, that Bitcoin network fees and similar transaction fees incurred in connection with the creation and redemption process will be borne by authorized
              participants (and not the Fund). The disclosure has been revised accordingly.

            Prospectus Summary, page 6

            5.

            Comment: 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.

            Response: The disclosure has been revised as requested.

            Risk Factors Related to Digital Assets, page 8

            6.

            Comment: Please revise here to provide quantitative information that demonstrates the volatility of the price of bitcoin.

            Response: The disclosure has been revised as requested.

            Summary of Risk Factors, page 8

            7.

            Comment: Please revise here to briefly address the risk that your timing in reaching the

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            market and your fee structure relative to other bitcoin ETPs could have a detrimental effect on the scale and sustainability of your product.

            Response: The disclosure has been revised as requested.

            The Fund’s Objective, page 8

            8.

            Comment: 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.

            Response:  The Trust has removed the above cited references to “similarly secure technology.”  The disclosure has been revised as requested.

            9.

            Comment: 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.

            Response: The disclosure has been revised as requested.

            The Offering

            Fund expenses, page 13

            10.

            Comment: 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

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            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.

            Response: The above-cited reference to non pro-rata cost allocation has been removed. The disclosure has been revised as requested.

            Forks, page 14

            11.

            Comment: 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.

            Response: The disclosure has been revised as requested.

            The Offering

            Termination events, page 17

            12.

            Comment: 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.

            Response: The above-cited disclosure has been revised.

            Risk Factors Related to the Digital Asset Markets

            Due to the unregulated nature and lack of transparency, page 30

            13.

            Comment: 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 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.

            Response: The Fund respectfully submits that the format is appropriate in describing the interrelated risks arising from the lack of transparency and regulatory infrastructure within the
              digital asset markets. For added clarity, the Fund has added sub-captions as appropriate in response to this comment.

            The Index has a limited history, page 32

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            14.

            Comment: 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.

            Response: The disclosure has been revised as requested.

            Security threats to the Fund’s account at the Bitcoin Custodian could result in the halting of Fund operations..., page 40

            15.

            Comment: 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.

            Response: The disclosure has been revised as requested.

            The Declaration of Trust includes provisions that limit Shareholders’ voting rights, page 47

            16.

            Comment: 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.

            Response: The description of the Declaration of Trust has been revised to describe the additional standards/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.

            Comment: 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.

            Response: The disclosure has been revised as requested.

            Business of the Fund

            Net Asset Value, page 67

            18.

            Comment: 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;

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            • 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 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.

            Response: With respect to the first bullet point, the disclosure has been revised to disclose the methodology to be utilized in the Fund’s financial statements for determining fair value of
              bitcoin in accordance with ASC Topic 820. The disclosure has been further revised throughout to clarify that the Fund will only accept creations and redemptions in exchange for cash and as otherwise appropriate to provide the requested
              disclosures in response to these comments.

            19.

            Comment: We note your