--- 1c1 ----------------------- < S-1/A 1 d68862ds1a.htm AMENDMENT NO.6 Table of Contents > S-1/A 1 d296375ds1a.htm AMENDMENT NO.9 TO FORM S-1 Table of Contents --- 3c3 ----------------------- < As filed with the Securities and Exchange Commission on June 29, 2016 > As filed with the Securities and Exchange Commission on February 8, 2017 --- 19c15 ----------------------- < Amendment No. 6 to > Amendment No. 9 to --- 37,44c33,35 ----------------------- < Delaware 6221 [ ] < < (State or other jurisdiction of < < incorporation or organization) < < < (Primary Standard Industrial > Delaware 6221 81-6728214 (State or other jurisdiction of incorporation > or organization) (Primary Standard Industrial Classification Code > Number) (I.R.S. Employer Identification No.) --- 46,55c37 ----------------------- < Classification Code Number) < < < (I.R.S. Employer < < Identification No.) < < 1007 Orange Street, Nemours Building, < < Suite 1463, Wilmington, DE 19801 > 301 N. Market Street, Suite 1463, Wilmington, DE 19801 --- 78c60 ----------------------- < David H. Brill, Esq. > Cameron H. Winklevoss --- 82c64,66 ----------------------- < 1007 Orange Street, Nemours Building, Suite > 301 N. Market Street > > Suite 1463, --- 84c68 ----------------------- < 1463, Wilmington, DE 19801 > Wilmington, DE 19801 --- 102c86 ----------------------- < Securities Act of 1933, check the following box. x > Securities Act of 1933, check the following box. ☒ --- 107c91 ----------------------- < of the earlier effective registration statement for the same offering. ¨ > of the earlier effective registration statement for the same offering. ☐ --- 112c96 ----------------------- < registration statement for the same offering. ¨ > registration statement for the same offering. ☐ --- 117c101 ----------------------- < registration statement for the same offering. ¨ > registration statement for the same offering. ☐ --- 127c111 ----------------------- < Large accelerated filer ¨ Accelerated filer ¨ > Large accelerated filer ☐ Accelerated filer ☐ --- 129,130c113,114 ----------------------- < Non-accelerated filer x (Do not check if a smaller reporting company) < Smaller reporting company ¨ > Non-accelerated filer ☒ (Do not check if a smaller reporting company) > Smaller reporting company ☐ --- 142,144c126 ----------------------- < to be < < registered > to be registered --- 149,151c131 ----------------------- < maximum < < offering price > maximum offering price --- 158c138 ----------------------- < maximum > maximum aggregate --- 160,169c140,141 ----------------------- < aggregate < < offering price(1) < < < Amount of < < registration fee(2) < < Winklevoss Bitcoin Shares 1,000,000 $[65.00] $[65,000,000.00] $[ ] > offering price(1) Amount of registration fee(2) Winklevoss Bitcoin > Shares 10,000,000 $[10.00] $[100,000,000.00] $ [ ] --- 177,183c149,155 ----------------------- < [0.10] bitcoin and is offered at a per Share price equal to the price of < [0.10] bitcoin. The price of bitcoin is based on the Gemini Exchange < spot price as of 4:00 p.m. Eastern time. On [ ], 2016, this price was $[ < ], and the price of each Share was $[ ]. The Seed Baskets consist of < [100,000] Shares worth [10,000] bitcoin. (2) $2,470.28 was previously < paid in the initial filing of the registration statement on Form S-1, < filed on July 1, 2013. > [0.01] bitcoin and is offered at a per Share price equal to the price of > [0.01] bitcoin. The price of bitcoin is based on the 4:00 p.m. Eastern > Time Gemini Exchange Auction Price (as defined herein). On [ ], 2017, > this price was $[ ], and the price of each Share was $[ ]. The Seed > Baskets consist of [1,000,000] Shares worth [10,000] bitcoin. (2) > $2,470.28 was previously paid in the initial filing of the registration > statement on Form S-1, filed on July 1, 2013. --- 213c179,180 ----------------------- < Preliminary Prospectus dated June 29, 2016 > Preliminary Prospectus dated [ ], 2017 > --- 215c182,185 ----------------------- < [LOGO] > > > > LOGO --- 224,225c194,195 ----------------------- < is to hold bitcoin, which is a digital commodity (“Digital Asset”) based < on the decentralized, open source protocol of the peer-to-peer Bitcoin > is to hold bitcoin, which is a digital asset (“Digital Asset”) based on > the decentralized, open source protocol of the peer-to-peer Bitcoin --- 228,251c198,224 ----------------------- < (the “Sponsor”), Delaware Trust Company is the trustee of the Trust (the < “Trustee”), [ ] is both the administrator (the “Administrator”) and < trust agency service provider (the “Trust Agency Service Provider”) of < the Trust, and Gemini Trust Company, LLC, an affiliate of the Sponsor, < is the custodian of the Trust (the “Custodian”). The Trust intends to < issue additional Shares on a continuous basis. < < The Trust is expected to issue and redeem Shares from time to time only < in one or more whole blocks of 50,000 Shares (each block of 50,000 < Shares is a “Basket”). The Trust will issue and redeem the Shares in < Baskets only to certain authorized firms (“Authorized Participants” or < “APs”) on an ongoing basis as described in the “Plan of Distribution” < section below. On a creation, Baskets will be distributed to the < Authorized Participants by the Trust in exchange for the delivery to the < Trust of the appropriate number of bitcoin (i.e., bitcoin equal in value < to the value of the Shares being purchased). On a redemption, the Trust < will distribute bitcoin equal in value to the value of the Shares being < redeemed to the redeeming Authorized Participant in exchange for the < delivery to the Trust of one or more Baskets. On each Business Day, the < value of each Basket accepted by the Administrator in a creation or < redemption transaction will be the same (i.e., each Basket will consist < of 50,000 Shares and the value of the Basket will be equal to the value < of 50,000 Shares at their net asset value per Share on that day). The < Trust will not issue or redeem fractions of a Basket. > (the “Sponsor”); Delaware Trust Company is the trustee of the Trust (the > “Trustee”); State Street Bank and Trust Company (“State Street”) is both > the administrator (the “Administrator”) and transfer agent (the > “Transfer Agent) of the Trust; and Gemini Trust Company, LLC, an > affiliate of the Sponsor, is the custodian of the Trust (the > “Custodian”). The Trust intends to issue additional Shares on a > continuous basis. > > The Trust is initially expected to issue and redeem Shares from time to > time only in one or more whole blocks of 100,000 Shares (each block of > 100,000 Shares is a “Basket”). The Trust will issue and redeem the > Shares in Baskets only to certain authorized firms (“Authorized > Participants” or “APs”) on an ongoing basis as described in the “Plan of > Distribution” section below. On a creation, Baskets will be distributed > to the creating Authorized Participant by the Trust in exchange for the > delivery to the Trust of the appropriate number of bitcoin (i.e., > bitcoin equal in value to the net asset value per Share of the Trust > (“NAV”) multiplied by the number of Shares in the Basket). On a > redemption, the Trust will distribute bitcoin equal in value to the NAV > multiplied by the number of Shares in the Basket to the redeeming > Authorized Participant in exchange for the delivery to the Trust of one > or more Baskets. On each Business Day, the value of each Basket accepted > by the Transfer Agent in a creation or redemption transaction will be > the same (i.e., each Basket will initially consist of 100,000 Shares and > the value of the Basket will be equal to the value of 100,000 Shares at > their net asset value per Share on that day). The Trust will not issue > or redeem fractions of a Basket. --- 254,255c227,228 ----------------------- < The Shares will be listed and trade on Bats BZX Exchange, Inc. (“BATS”) < under the symbol “COIN.” > The Shares will be listed on the Bats BZX Exchange, Inc. (“Bats”) under > the symbol “COIN.” --- 258,259c231,232 ----------------------- < starting on page 13. Neither the Securities and Exchange Commission (the < “SEC” or the “Commission”) nor any state securities commission has > starting on page [14]. Neither the Securities and Exchange Commission > (the “SEC” or the “Commission”) nor any state securities commission has --- 263a237,238 ----------------------- > Table of Contents > --- 271c246 ----------------------- < BATS. It is expected that the Shares will be sold to the public at > Bats. It is expected that the Shares will be sold to the public at --- 274c249 ----------------------- < trading price of the Shares on BATS at the time of each sale. > trading price of the Shares on Bats at the time of each sale. --- 277,286c252,261 ----------------------- < certain conditions, purchased [100,000] Shares in exchange for [10,000] < bitcoin worth $[ ], which comprise the initial Baskets (the “Seed < Baskets’), as described in the “Plan of Distribution.” Delivery of the < Seed Baskets will be made on or about [ ]. It is expected that the < Initial Purchaser will distribute these Shares to the public through < sale on BATS. The Trust will receive all proceeds from the offering of < the Seed Baskets in set amounts of bitcoin in an amount equal to the < full price for the Seed Baskets. Each Share in the Seed Baskets < represents [0.10] bitcoin, and each Seed Basket consists of 50,000 < Shares worth [5,000] bitcoin. > certain conditions, purchased [1,000,000] Shares in exchange for > [10,000] bitcoin worth $[ ], which comprise the initial [ten (10)] > Baskets of the Trust’s Shares (the “Seed Baskets’), as described in the > “Plan of Distribution.” Delivery of the Seed Baskets will be made on or > about [ ]. It is expected that the Initial Purchaser will distribute > these Shares to the public through sale on Bats. The Trust will receive > all proceeds from the offering of the Seed Baskets in set quantities of > bitcoin in a quantity equal to the full price for the Seed Baskets. Each > Share in the Seed Baskets represents [0.01] bitcoin, and each Seed > Basket consists of 100,000 Shares worth [1,000] bitcoin. --- 290,293c265,268 ----------------------- < distribution of the Shares to the public through sale on BATS. < Purchasers of the Shares may be subject to customary brokerage charges. < Investors should review the terms of their brokerage accounts for < details on applicable charges. > distribution of the Shares to the public through sale on Bats. Purchases > of the Shares may be subject to customary brokerage charges. Investors > should review the terms of their brokerage accounts for details on > applicable charges. --- 303,304c278,279 ----------------------- < p.m. Eastern time Gemini Exchange Spot Price (as defined herein) of 0.10 < bitcoin on the date of formation of the Trust. > p.m. Eastern Time Gemini Exchange Auction Price (as defined herein) of > 0.01 bitcoin on the date of formation of the Trust. --- 306c281 ----------------------- < The date of this prospectus is [ ], 2016. > The date of this prospectus is [ ], 2017. --- 320c295 ----------------------- < The Offering 7 > The Offering 8 --- 322c297 ----------------------- < Risk Factors 13 > Risk Factors 14 --- 324c299 ----------------------- < Use of Proceeds 39 > Use of Proceeds 42 --- 326c301 ----------------------- < Overview of The Bitcoin Industry and Market 39 > Overview of The Bitcoin Industry and Market 42 --- 328c303 ----------------------- < Business of the Trust 65 > Business of the Trust 69 --- 330c305 ----------------------- < Description of the Trust 70 > Description of the Trust 74 --- 332c307 ----------------------- < The Sponsor 73 > The Sponsor 77 --- 334c309 ----------------------- < The Trustee 76 > The Trustee 80 --- 336c311 ----------------------- < The Administrator 77 > The Administrator 81 --- 338c313 ----------------------- < The Trust Agency Service Provider 78 > The Transfer Agent 82 --- 340c315 ----------------------- < The Custodian 79 > The Custodian 83 --- 342c317 ----------------------- < Authorized Participants 80 > Authorized Participants 84 --- 344c319 ----------------------- < Description of the Shares 81 > Description of the Shares 85 --- 346c321 ----------------------- < Custody of the Trust’s Bitcoin 83 > Custody of the Trust’s Bitcoin 87 --- 348c323 ----------------------- < Creation and Redemption of Shares 84 > Creation and Redemption of Shares 89 --- 350c325 ----------------------- < Valuation of Bitcoin and Definition of NAV 88 > Valuation of Bitcoin and Definition of NAV 94 --- 352c327 ----------------------- < Expenses; Sales of Bitcoin 89 > Expenses; Sales of Bitcoin 96 --- 354c329 ----------------------- < Book-Entry-Only Shares 91 > Book-Entry-Only Shares 98 --- 356c331 ----------------------- < Books and Records; Statements, Filings and Reports 93 > Books and Records; Statements, Filings and Reports 100 --- 358c333 ----------------------- < Description of the Trust Documents 94 > Description of the Trust Documents 101 --- 360c335 ----------------------- < Description of the Trust Servicing Agreement 101 > Description of the Administration Agreement 108 --- 362c337 ----------------------- < Description of the Trust Agency Service Provider Agreement 104 > Description of the Transfer Agency and Services Agreement 110 --- 364c339 ----------------------- < Description of the Trust Custody Agreement 107 > Description of the Trust Custody Agreement 112 --- 366c341 ----------------------- < United States Federal Income Tax Consequences 110 > United States Federal Income Tax Consequences 116 --- 368c343 ----------------------- < Erisa and Related Considerations 114 > ERISA and Related Considerations 120 --- 370c345 ----------------------- < Plan of Distribution 115 > Plan of Distribution 121 --- 372c347 ----------------------- < Legal Matters 117 > Legal Matters 123 --- 374c349 ----------------------- < Experts 117 > Experts 123 --- 376c351 ----------------------- < Where You Can Find More Information 117 > Where You Can Find More Information 123 --- 378c353 ----------------------- < Glossary of Defined Terms 118 > Glossary of Defined Terms 124 --- 382c357 ----------------------- < Statement of Financial Condition F-2 > Sample Financial Statements F-2 --- 468,479c443,455 ----------------------- < the Trust Agreement between the Sponsor (as grantor) and the Trustee < (the “Trust Agreement”), which sets forth the respective rights and < duties of the Sponsor and the Trustee and authorizes the Sponsor, on < behalf of the Trust, to enter into a custody agreement (the “Trust < Custody Agreement”) with the Custodian. The Custodian, an affiliate of < the Sponsor, serves as custodian to the Trust under the Trust Custody < Agreement, which establishes the segregated custody account of the Trust < that will be used to hold the bitcoin deposited with the Custodian on < behalf of the Trust (the “Trust Custody Account”). The Custodian will < use its proprietary and patent-pending offline (i.e., air-gapped) < hardware and software security technology (“Cold Storage System”) to < store the Trust’s bitcoin. > the Amended and Restated Declaration of Trust and Trust Agreement > between the Sponsor (as grantor) and the Trustee (the “Trust > Agreement”), which sets forth the respective rights and duties of the > Sponsor and the Trustee and authorizes the Sponsor, on behalf of the > Trust, to enter into a custody agreement (the “Trust Custody Agreement”) > with the Custodian. The Custodian, an affiliate of the Sponsor, serves > as custodian to the Trust under the Trust Custody Agreement, which > establishes the segregated custody account of the Trust that will be > used to hold the bitcoin deposited with the Custodian on behalf of the > Trust (the “Trust Custody Account”). The Custodian will use its > proprietary and patent-pending offline (i.e., air-gapped) hardware and > software security technology (“Cold Storage System”) to store the > Trust’s bitcoin. --- 481c457 ----------------------- < The Trust only holds bitcoin, which is a digital commodity1 that is not > The Trust only holds bitcoin, which is a digital asset1 that is not --- 506,517c482,493 ----------------------- < Baskets will be distributed to the Authorized Participants by the Trust < in exchange for the delivery to the Trust of the appropriate number of < bitcoin (i.e., bitcoin equal in value to the value of the Shares being < purchased). On a redemption, the Trust will distribute bitcoin equal in < value to the value of the Shares being redeemed to the redeeming < Authorized Participant in exchange for the delivery to the Trust of one < or more Baskets. On each Business Day, the value of each Basket accepted < by the Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value of < the Basket will be equal to the value of 50,000 Shares at their net < asset value per Share on that day). The Trust will not issue or redeem < fractions of a Basket. The investment objective > Baskets will be distributed to the creating Authorized Participant by > the Trust in exchange for the delivery to the Trust of the appropriate > number of bitcoin (i.e., bitcoin equal in value to the net asset value > per Share of the Trust (“NAV”) multiplied by the number of Shares in the > Basket). On a redemption, the Trust will distribute bitcoin equal in > value to the NAV multiplied by the number of Shares in the Basket to the > redeeming Authorized Participant in exchange for the delivery to the > Trust of one or more Baskets. On each Business Day, the value of each > Basket accepted by the Transfer Agent in a creation or redemption > transaction will be the same (i.e., each Basket will initially consist > of 100,000 Shares and the value of the Basket will be equal to the value > of 100,000 Shares at their net asset value per Share on that --- 522,529c498,502 ----------------------- < (CFTC Sept. 17, 2015), available at: < http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfcoinfliprorder09172015.pdf < (“Coinflip”). 2 < < By common convention, Bitcoin with a capital “B” typically refers to the < Bitcoin Network as a whole, whereas bitcoin with a lowercase “b” refers < to the Digital Asset of the Bitcoin Network, including the Trust’s < bitcoin. This naming convention is used throughout this document. > (CFTC Sept. 17, 2015) (“Coinflip”). 2 By common convention, Bitcoin with > a capital “B” typically refers to the Bitcoin Network as a whole, > whereas bitcoin with a lowercase “b” refers to the Digital Asset of the > Bitcoin Network, including the Trust’s bitcoin. This naming convention > is used throughout this document. --- 540,543c513,518 ----------------------- < of the Trust is for the Shares to track the price of bitcoin, as < measured by the spot price at 4:00 p.m. Eastern time on the Gemini < exchange (“Gemini Exchange”) (the “Gemini Exchange Spot Price”) on each < day BATS is open for trading (each a “Business Day”), less the Trust’s > day). The Trust will not issue or redeem fractions of a Basket. The > investment objective of the Trust is for the Shares to track the price > of bitcoin, as measured by the clearing price of a two-sided auction > which occurs daily at 4:00 p.m. Eastern Time on the Gemini Exchange > (“Gemini Exchange”) (the “Gemini Exchange Auction Price”), on each day > Bats is open for trading (each a “Business Day”), less the Trust’s --- 548c523 ----------------------- < the Gemini Exchange Spot Price. The Sponsor believes that, for many > the Gemini Exchange Auction Price. The Sponsor believes that, for many --- 555c530 ----------------------- < traded under the ticker symbol “COIN” on BATS. > traded under the ticker symbol “COIN.” --- 557,569c532,545 ----------------------- < The Trust’s Sponsor is Digital Asset Services, LLC. The Sponsor is a < Delaware limited liability company formed on May 9, 2013, and is < wholly-owned by Winklevoss Capital Management, LLC (“WCM”). Under the < Delaware Limited Liability Company Act and the governing documents of < the Sponsor, WCM, the sole member of the Sponsor, is not responsible for < the debts, obligations and liabilities of the Sponsor solely by reason < of being the sole member of the Sponsor. The Sponsor will be the < exclusive licensee, within the field of use of operation of an < exchange-traded product (“ETP”), of certain patent-pending intellectual < property regarding the operation of the Trust. Winklevoss IP LLC < (“WIP”), an affiliate of the Sponsor, is the owner of and is licensing < to the Sponsor such intellectual property for use by the Trust and the < Custodian and other service providers in the operation of the Trust. > The Trust’s Sponsor is Digital Asset Services, LLC (formerly Math-Based > Asset Services, LLC). The Sponsor is a Delaware limited liability > company formed on May 9, 2013, and is wholly-owned by Winklevoss Capital > Fund, LLC (“WCF”). Under the Delaware Limited Liability Company Act and > the governing documents of the Sponsor, WCF, the sole member of the > Sponsor, is not responsible for the debts, obligations and liabilities > of the Sponsor solely by reason of being the sole member of the Sponsor. > The Sponsor will be the exclusive licensee, within the field of use of > operation of an exchange-traded product (“ETP”), of certain > patent-pending intellectual property regarding the operation of the > Trust. Winklevoss IP LLC (“WIP”), an affiliate of the Sponsor, is the > owner of and is licensing to the Sponsor and its affiliates such > intellectual property for use by the Trust and the Custodian and other > service providers in the operation of the Trust. --- 573c549 ----------------------- < States and their listing on BATS. The Sponsor has agreed to assume the > States and their listing on Bats. The Sponsor has agreed to assume the --- 576,587c552,563 ----------------------- < amounts, reimbursable under the Trust Agreement, (ii) the < Administrator’s monthly fee and expenses reimbursable under the Trust < Servicing Agreement, (iii) the Trust Agency Service Provider’s monthly < fee and expenses under the Trust Agency Service Provider Agreement, (iv) < the Custodian’s monthly fee and expenses reimbursable under the Trust < Custody Agreement, (v) Exchange listing fees, (vi) U.S. Securities and < Exchange Commission (“SEC”) registration fees, (vii) printing and < mailing costs, (viii) costs of maintaining the Trust’s website, (ix) < audit fees, (x) up to $[_] per annum in marketing expenses and (xi) up < to $[100,000] per annum in legal expenses. The Sponsor will also pay the < costs of the Trust’s organization and the initial sale of the Shares, < including the applicable SEC registration fees. > amounts, reimbursable under the Trust Agreement; (ii) the > Administrator’s monthly fee and expenses reimbursable under the > Administration Agreement; (iii) the Transfer Agent’s monthly fee and > expenses reimbursable under the Transfer Agency and Services Agreement; > (iv) the Custodian’s monthly fee and expenses reimbursable under the > Trust Custody Agreement; (v) Exchange listing fees; (vi) U.S. Securities > and Exchange Commission (“SEC”) registration fees; (vii) printing and > mailing costs; (viii) costs of maintaining the Trust’s website; (ix) > audit fees; (x) marketing expenses; and (xi) up to $100,000 per annum in > legal expenses. The Sponsor will also pay the costs of the Trust’s > organization and the initial sale of the Shares, including the > applicable SEC registration fees. --- 601,614c577,585 ----------------------- < thereto to the Trust or the owners of beneficial interests in the Shares < (“Shareholders”), such duties and liabilities will be replaced by the < duties and liabilities of the Trustee expressly set forth in the Trust < Agreement. The Trustee will have no obligation to supervise, nor will it < be liable for, the acts or omissions of the Sponsor, Administrator, < Trust Agency Service Provider, Custodian or any other person. < < [ ], the Administrator of the Trust, is generally responsible for the < day-to-day administration of the Trust under the Trust Servicing < Agreement and in accordance with the provisions of the Trust Agreement. < This includes (i) assisting the Sponsor in receiving and processing < orders from Authorized Participants to create and redeem Baskets and < coordinating the processing of such orders with the Trust Agency Service < Provider (which in > thereto to the Trust or the Sponsor, such duties and liabilities will be > replaced by the duties and liabilities of the Trustee expressly set > forth in the Trust Agreement. The Trustee will have no obligation to > supervise, nor will it be liable for, the acts or omissions of the > Sponsor, Administrator, Transfer Agent, Custodian or any other person. > > State Street Bank and Trust Company (“State Street”), the Administrator > of the Trust, is generally responsible for the day-to-day administration > of the Trust under the Administration Agreement and in accordance --- 625,643c596,614 ----------------------- < this case is, or is an affiliate of, the Administrator) and The < Depository Trust Company (“DTC”), (ii) calculating the net asset value < per Share (“NAV”), (iii) instructing the Custodian to transfer the < Trust’s bitcoin as needed to pay the remuneration due to the Sponsor < (“Sponsor’s Fee”) in bitcoin (such Bitcoin transfers are expected to < occur approximately monthly in the ordinary course), (iv) instructing < the Custodian to transfer the Trust’s bitcoin as needed to pay any < extraordinary Trust expenses that are not assumed by the Sponsor and (v) < selling or directing the sale of the Trust’s remaining bitcoin in the < event of termination of the Trust and distributing the cash proceeds to < the Shareholders of record. < < The Trust’s Trust Agency Service Provider is (or is an affiliate of) the < Administrator and is authorized by the Sponsor under the Trust Agreement < to serve as the transfer agent in accordance with the provisions of the < Trust Agency Service Provider Agreement. The Trust Agency Service < Provider, among other things, provides transfer agent services with < respect to the creation and redemption of Baskets by Authorized < Participants. > with the provisions of the Trust Agreement. This includes (i) > maintaining the Trust’s books of account; (ii) calculating the Trust’s > NAV in accordance with the procedures outlined in the Trust’s > registration statement; (iii) transmitting the NAV per Share to the > Transfer Agent, the Sponsor, Bats, and other entities as directed by the > Sponsor; and (iv) preparing financial information required for the > Trust’s periodic reports and assisting with the audit of the Trust’s > financial statements by the Trust’s independent auditor. > > State Street is also the Trust’s Transfer Agent and is authorized by the > Sponsor under the Trust Agreement to serve as the transfer agent in > accordance with the provisions of the Transfer Agency and Services > Agreement. The Transfer Agent, among other things, provides transfer > agent services with respect to the creation and redemption of Baskets by > Authorized Participants. As of the date of this registration statement, > Convergex Execution Solutions LLC, KCG Americas LLC, and Virtu Financial > BD LLC have each signed an Authorized Participant Agreement with the > Trust and, upon the effectiveness of such agreement and the registration > statement, may create and redeem Baskets as described below. --- 660,667c631,638 ----------------------- < Trust’s private keys used to access and transfer the Trust’s bitcoin. < The Custodian also facilitates the transfer of bitcoin in accordance < with the Administrator’s instructions pursuant to the terms of the Trust < Servicing Agreement. Pursuant to the terms of the Trust Agreement and < the Trust Custody Agreement, the Custodian will store all of the Trust’s < bitcoin on a segregated basis in its unique Bitcoin addresses with < balances that can be directly verified on the Blockchain. It will < provide the Trust’s public Bitcoin addresses to the Administrator. > private keys used to access and transfer the Trust’s bitcoin. The > Custodian also facilitates the transfer of bitcoin in accordance with > the Administrator’s instructions pursuant to the terms of the > Administration Agreement. Pursuant to the terms of the Trust Custody > Agreement, the Custodian will store all of the Trust’s bitcoin on a > segregated basis in its unique Bitcoin addresses with balances that can > be directly verified on the Blockchain. It will provide the Trust’s > public Bitcoin addresses to the Administrator. --- 670,676c641,666 ----------------------- < Exchange Spot Price. The Gemini Exchange is owned and operated by the < Custodian and affiliated with the Sponsor. As a facility of a New York < State-chartered limited liability trust company, Gemini Exchange < operates under the direct supervision and regulatory authority of the < NYSDFS. The Gemini Exchange does not receive any compensation from the < Trust or the Sponsor for providing the Gemini Exchange Spot Price to the < Administrator. > Exchange Auction Price. At 4:00 pm. Eastern Time every day, the Gemini > Exchange conducts a two-sided auction which is open to all exchange > customers, including Authorized Participants and affiliates of the > Sponsor. Similar to the closing auction on Bats and other U.S. equities > exchanges, the auction process incorporates both auction-only and > continuous trading book orders to find a single price at which the most > interest is eligible to trade (sometimes called “Walrasian > equilibrium”). Because indicative auction pricing is published publicly > throughout the ten (10) minutes prior to the auction, this mechanism > allows participants to engage in thorough price discovery while > concentrating liquidity and trading volume at a single moment each day. > Additionally, the daily two-sided auction on the Gemini Exchange was > specifically designed to maximize price discovery and liquidity, which > should (i) insulate the Gemini Exchange Auction Price from price swings > and volatility, (ii) minimize the effects of momentum pricing, (iii) > improve the effectiveness of the arbitrage mechanism for Authorized > Participants, and (iv) fairly reflect the value of the Trust’s bitcoin. > Authorized Participants are permitted to, but not obligated to, > participate in the 4:00 p.m. auction on the Gemini Exchange. > > The Gemini Exchange is owned and operated by the Custodian and is > affiliated with the Sponsor. As a facility of a New York State-chartered > limited liability trust company, Gemini Exchange operates under the > direct supervision and regulatory authority of the NYSDFS. The Gemini > Exchange does not receive any compensation from the Trust or the Sponsor > for providing the Gemini Exchange Auction Price to the Administrator. --- 679,700c669,671 ----------------------- < Sponsor, Administrator, Trust Agency Service Provider and Custodian are < further described in “Sponsor,” “Trustee,” “Administrator,” “Trust < Agency Service Provider” and “Custodian,” respectively. Detailed < descriptions of certain specific rights and duties of the Trustee, < Sponsor, Administrator, Trust Agency Service Provider and Custodian are < set forth in “Description of the Trust Documents-Description of the < Trust Agreement,” “Description of the Trust Documents-Description of the < Trust Servicing Agreement,” “Description of the Trust < Documents-Description of the Trust Agency Service Provider Agreement,” < and “Description of the Trust Documents-Description of the Trust Custody < Agreement,” respectively. The Trust Agreement, Trust Servicing < Agreement, Trust Agency Service Provider Agreement and Trust Custody < Agreement are collectively referred to herein as the “Trust Documents.” < < Trust Overview < < The investment objective of the Trust is for the Shares to track the < price of bitcoin, as measured at 4:00 p.m. Eastern time using the Gemini < Exchange Spot Price on each Business Day. The Shares are designed for < investors seeking a cost-effective and convenient means of gaining < investment exposure to bitcoin similar to a direct investment in < bitcoin. > Sponsor, Administrator, Transfer Agent and Custodian are further > described in “Sponsor,” “Trustee,” “Administrator,” “Transfer Agent” and > “Custodian,” --- 710a682,701 ----------------------- > respectively. Detailed descriptions of certain specific rights and > duties of the Trustee, Sponsor, Administrator, Transfer Agent and > Custodian are set forth in “Description of the Trust > Documents-Description of the Trust Agreement,” “Description of the Trust > Documents-Description of the Administration Agreement,” “Description of > the Trust Documents-Description of the Transfer Agency and Services > Agreement,” and “Description of the Trust Documents-Description of the > Trust Custody Agreement,” respectively. The Trust Agreement, > Administration Agreement, Transfer Agency and Services Agreement and > Trust Custody Agreement are collectively referred to herein as the > “Trust Documents.” > > Trust Overview > > The investment objective of the Trust is for the Shares to track the > price of bitcoin using the Gemini Exchange Auction Price on each > Business Day. The Shares are designed for investors seeking a > cost-effective and convenient means of gaining investment exposure to > bitcoin similar to a direct investment in bitcoin. > --- 717,765c708,739 ----------------------- < and the US Internal Revenue Service (“IRS”), most major U.S. regulators < such as the SEC have yet to make official pronouncements or adopt rules < providing guidance with respect to the classification and treatment of < bitcoin and other Digital Assets for purposes of commodities, tax and < securities laws. Although the SEC has not opined on the legal < characterization of bitcoin as a security, it has taken various actions < against persons or entities misusing bitcoin in connection with < fraudulent schemes (i.e., Ponzi scheme), inaccurate and inadequate < publicly disseminated information, and the offering of unregistered < securities.3 Commissioners of the CFTC initially expressed the belief < that bitcoin meets the definition of a commodity and that the CFTC has < regulatory authority over futures and other derivatives based on Digital < Assets, subject to facts and circumstances. The Sponsor also espoused < the view that, on balance, the important features of bitcoin and other < Digital Assets are those that are characteristics of commodities and < therefore has referred to and discussed these assets as such. Additional < clarity was obtained on September 17, 2015, when the CFTC instituted and < settled administrative proceedings that involved a bitcoin derivatives < trading platform and its chief executive officer (the “Coinflip case”). < The Coinflip order found that the respondents (i) conducted activity < related to commodity options transactions without complying with the < provisions of the Commodity Exchange Act of 1936, as amended (“CEA”) and < CFTC regulations, and (ii) operated a facility for the trading of swaps < without registering the facility as a swap execution facility (“SEF”) or < designated contract market (“DCM”). The Coinflip order was significant < as it is the first time the CFTC determined that bitcoin is properly < defined as a commodity under the CEA. Based on this determination, the < CFTC applied CEA provisions and CFTC regulations that apply to < transactions in commodity options and swaps to the conduct of the < bitcoin derivatives trading platform. Also of significance, is that the < CFTC appears to have taken the position that bitcoin is not encompassed < by the definition of currency under the CEA and CFTC regulations. The < CFTC defined bitcoin and other “virtual currencies” (also known as < Digital Assets) as “a digital representation of value that functions as < a medium of exchange, a unit of account, and/or a store of value, but < does not have legal tender status in any jurisdiction. Bitcoin and other < virtual currencies are distinct from ‘real’ currencies, which are the < coin and paper money of the United States or another country that are < designated as legal tender, circulate, and are customarily used and < accepted as a medium of exchange in the country of issuance.” < < It is not known whether all US or foreign regulators will share this < view, adopt a single, different view or espouse a variety of differing < views. To date, a U.S. magistrate judge in the U.S. District Court for < the Eastern District of Texas and the German Ministry of Finance have < ruled that bitcoin is a “form of money” and a “unit of account,” < respectively, and the IRS has classified bitcoin as property that is not < currency for U.S. federal income tax purposes, although the degree to < which such interpretations will become the norm is unknown. The > and the U.S. Internal Revenue Service (“IRS”), most major U.S. > regulators such as the SEC have yet to make official pronouncements or > adopt rules providing guidance with respect to the classification and > treatment of bitcoin and other Digital Assets for purposes of > commodities, tax and securities laws. Although the SEC has not opined on > the legal characterization of bitcoin as a security, it has taken > various actions against persons or entities misusing bitcoin in > connection with fraudulent schemes (i.e., Ponzi scheme), inaccurate and > inadequate publicly disseminated information, and the offering of > unregistered securities.3 Commissioners of the CFTC initially expressed > the belief that bitcoin meets the definition of a commodity and that the > CFTC has regulatory authority over futures and other derivatives based > on Digital Assets, subject to facts and circumstances. The Sponsor also > espoused the view that, on balance, the important features of bitcoin > and other Digital Assets are those that are characteristics of > commodities and therefore has referred to and discussed these assets as > such. Additional clarity was obtained on September 17, 2015, when, in > the Coinflip case, the CFTC instituted and settled administrative > proceedings that involved a bitcoin derivatives trading platform and its > chief executive officer. The Coinflip order found that the respondents > (i) conducted activity related to commodity options transactions without > complying with the provisions of the Commodity Exchange Act of 1936, as > amended (“CEA”) and CFTC regulations, and (ii) operated a facility for > the trading of swaps without registering the facility as a swap > execution facility (“SEF”) or designated contract market (“DCM”). The > Coinflip order was significant as it is the first time the CFTC > determined that bitcoin is properly defined as a commodity under the > CEA. Based on this determination, the CFTC applied CEA provisions and > CFTC regulations that apply to transactions in commodity options and > swaps to the conduct of the bitcoin derivatives trading platform. Also > of significance, is that the CFTC appears to have taken the position > that bitcoin is not encompassed by the definition of currency under the --- 768,771c742,743 ----------------------- < 3 < < See, e.g., Complaint and Demand for Jury Trial, SEC v. Homero Joshua < Garza, GAW Miners, LLC and ZenMiner, LLC, Case 3:15-cv-01760 (D. Conn. > 3 See, e.g., SEC v. Homero Joshua Garza, GAW Miners, LLC and ZenMiner, > LLC, Complaint and Demand for Jury Trial, Case 3:15-cv-01760 (D. Conn. --- 773,780c745,750 ----------------------- < bitcoin-related Ponzi scheme); SEC v. Erik T. Voorhees, SEC < Administrative Proceeding File No. 3-15902 (June 3, 2014), available at < https://www.sec.gov/litigation/admin/2014/33-9592.pdf (The Commission < brought an administrative action in connection with the offering of < unregistered securities of two bitcoin-related entities); BTC Trading, < Corp. and Ethan Burnside, Securities Act Release No. 9685 (Dec. 8, < 2014), available at http://www.sec.gov/litigation/admin/2014/33-9685.pdf < (The Commission brought an administrative action in connection with the > bitcoin-related Ponzi scheme); In re Erik T. Voorhees, Securities Act > Release No. 9592 (June 3, 2014) (The Commission brought an > administrative action in connection with the offering of unregistered > securities of two bitcoin-related entities); In re BTC Trading, Corp. > and Ethan Burnside, Securities Act Release No. 9685 (Dec. 8, 2014) (The > Commission brought an administrative action in connection with the --- 783,789c753,757 ----------------------- < bitcoin and primarily listed virtual currency-related companies.); SEC < v. Sand Hill Exchange, et al., Securities Act Release No. 9809 (June 17, < 2015), available at < https://www.sec.gov/litigation/admin/2015/33-9809.pdf (The Commission < took legal action against an online exchange that accepted payment in < bitcoin in connection with disseminating fraudulent information, among < other matters). > bitcoin and primarily listed virtual currency-related companies.); In re > Sand Hill Exchange, et al., Securities Act Release No. 9809 (June 17, > 2015) (The Commission took legal action against an online exchange that > accepted payment in bitcoin in connection with disseminating fraudulent > information, among other matters). --- 800c768,797 ----------------------- < New York State Department of Taxation and Finance, citing the IRS > CEA and CFTC regulations. In Coinflip, the CFTC defined bitcoin and > other “virtual currencies” (also known as Digital Assets) as “a digital > representation of value that functions as a medium of exchange, a unit > of account, and/or a store of value, but does not have legal tender > status in any jurisdiction. Bitcoin and other virtual currencies are > distinct from ‘real’ currencies, which are the coin and paper money of > the United States or another country that are designated as legal > tender, circulate, and are customarily used and accepted as a medium of > exchange in the country of issuance.” The CFTC affirmed its approach to > the regulation of bitcoin and bitcoin-related enterprises on June 2, > 2016, when the CFTC settled charges against Bitfinex, a Bitcoin Exchange > based in Hong Kong. In its Order, the CFTC found that Bitfinex engaged > in “illegal, off-exchange commodity transactions and failed to register > as a futures commission merchant” when it facilitated borrowing > transactions among its users to permit the trading of bitcoin on a > “leveraged, margined or financed basis” without first registering with > the CFTC.4 > > It is not known whether all U.S. or foreign regulators will share this > view, adopt a single, different view or espouse a variety of differing > views. To date, a U.S. magistrate judge in the U.S. District Court for > the Eastern District of Texas5 and the German Ministry of Finance have > ruled that bitcoin is a “form of money” and a “unit of account,” > respectively; a Florida circuit court judge determined that bitcoin did > not qualify as money or “tangible wealth”;6 and an opinion from the U.S. > District Court for the Northern District of Illinois identified Bitcoin > as a “unit of account.”7 Additionally, the IRS has classified bitcoin as > property that is not currency for U.S. federal income tax purposes.8 The > degree to which such interpretations will become the norm is unknown. > The New York State Department of Taxation and Finance, citing the IRS --- 802c799 ----------------------- < property,” and a number of other states have issued their own guidance > property,”9 and a number of other states have issued their own guidance --- 806,807c803,804 ----------------------- < In July 2014, the NYSDFS proposed the first US regulatory framework for < licensing participants in “virtual currency business activity.” The > In July 2014, the NYSDFS proposed the first U.S. regulatory framework > for licensing participants in “virtual currency business activity.” The --- 827a825,846 ----------------------- > > 4 See In re BFXNA Inc., Case No. 16-19 (CFTC June 2, 2016). 5 SEC v. > Shavers, Memorandum Opinion Regarding the Court’s Subject Matter > Jurisdiction, Case No. 4:13-CV-00416 (E.D. Texas, Aug. 6, 2013) 6 The > State of Florida v. Espinoza, Order Granting Defendant’s Motion to > Dismiss the Information, Case No. F14-2923 (Fla. 11th Cir. Ct. July 22, > 2016) (quoting § 896.101(2)(e), Fla. Stat. (2016)). 7 Greene v. Mt. Gox > Inc., et al., Memorandum Opinion and Order, Case No. 1:14-cv-01437 > (N.D.IL Aug. 26, 2016). 8 Internal Revenue Service, IRS Virtual Currency > Guidelines, Notice 2014-14 (Apr. 14, 2014). 9 New York State Department > of Taxation and Finance, Tax Department Policy on Transactions Using > Convertible Virtual Currency (Dec. 5, 2014). > > > > > > > 5 > > Table of Contents > --- 836,837c855,856 ----------------------- < in those countries. In May 2014, the Central Bank of Bolivia banned the < use as currency of digital assets including bitcoin, while the > in those countries.10 In May 2014, the Central Bank of Bolivia banned > the use as currency of digital assets including bitcoin, while the --- 839,840c858,859 ----------------------- < of the issuance of a proposed state-backed Digital Asset. In April 2015, < the Japanese Cabinet approved proposed legal changes that would > of the issuance of a proposed state-backed Digital Asset.11 In April > 2015, the Japanese Cabinet approved proposed legal changes that would --- 847,856c866,880 ----------------------- < in 2017. The regulatory uncertainty surrounding the treatment of Bitcoin < creates risks for the Trust and its Shares. See “Risk Factors—Risk < Factors Related to the Regulation of the Trust and the Shares.” Under < applicable BATS rules, the Trust’s Shares are considered < “Commodity-Based Trust Shares,” which means a security (i) that is < issued by the Trust that holds a specified commodity (bitcoin) deposited < with the Trust; (ii) that is issued by the Trust in a specified < aggregate minimum number (Basket) in return for the delivery of a < quantity of bitcoin (as described herein); and (iii) that, when < aggregated in the same specified minimum number (Basket), may be > in 2017. In July 2016, the European Commission released a draft > directive that proposed applying counter-terrorism and anti-money > laundering regulations to virtual currencies, and, in September 2016, > the European Banking authority advised the European Commission to > institute new regulation specific to virtual currencies, with amendments > to existing regulation as a stopgap measure.12 The regulatory > uncertainty surrounding the treatment of Bitcoin creates risks for the > Trust and its Shares. See “Risk Factors—Risk Factors Related to the > Regulation of the Trust and the Shares.” Under applicable Bats rules, > the Trust’s Shares are considered “Commodity-Based Trust Shares,” which > means a security (i) that is issued by the Trust that holds a specified > commodity (bitcoin) deposited with the Trust; (ii) that is issued by the > Trust in a specified aggregate minimum number (Basket) in return for the > delivery of a quantity of bitcoin (as described herein); and (iii) that, > when aggregated in the same specified minimum number (Basket), may be --- 858c882 ----------------------- < redeeming holder the quantity of bitcoin. Thus, for purposes of the BATS > redeeming holder the quantity of bitcoin. Thus, for purposes of the Bats --- 865,869c889,894 ----------------------- < state-of-the-art proprietary Cold Storage System, (ii) the Custodian’s < New York State limited liability trust company charter, (iii) < third-party inspection of the Custodian’s security and internal < controls, (iv) the Custodian’s ability to demonstrate “proof of control” < of the private keys associated with the Trust’s bitcoin, and (v) the > state-of-the-art proprietary Cold Storage System; (ii) the Custodian’s > New York State limited liability trust company charter; (iii) > third-party inspection of the Custodian’s protocols and internal > controls; (iv) the Custodian’s ability to demonstrate “proof of control” > of the private keys associated with the Trust’s bitcoin through monthly, > independent auditor examinations and attestations; and (v) the --- 876a902,916 ----------------------- > 10 See e.g., HM Revenue & Customs, Bitcoin and Other Cryptocurrencies, > Revenue and Customs Brief 9-2014 (Mar. 3, 2014); Federal Council of > Switzerland, Federal Council Report on Virtual Currencies in Response to > the Schwaab (13.3687) and Weibel (13.4070) Postulates (June 25, 2014); > Central Bank of Iceland, Significant Risk Attached to Use of Virtual > Currency, Release No. 9/2014 (Mar. 19, 2014); State Bank of Vietnam, > Press Release on Bitcoins and Other Virtual Currencies (Feb. 28, 2014). > 11 Central Bank of Bolivia, Resolution 044/2014 (June 5, 2014); National > Assembly of Ecuador, Monetary and Financial Code (July 24, 2014). 12 > European Commission, Proposal for Amending Directive 2015/849/EU on the > Prevention of the Use of the Financial System for the Purposes of Money > Laundering or Terrorist Financing and Amending Directive 2009/101/EC, > Directive 2016/0208 (July 5, 2016); European Banking Authority, Opinion > on the EU Commission’s Proposal to Bring Virtual Currencies into the > Scope of Directive 2015/849/EU, EBA Opin. 2016-07 (Aug. 11, 2016). --- 881c921,923 ----------------------- < 5 > > > 6 --- 903c945 ----------------------- < Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm > Accounting Oversight Board, or the PCAOB, requiring mandatory auditor --- 927c969 ----------------------- < earliest of (i) when it has $1.0 billion or more in annual revenues, > earliest of (i) when it has $1.0 billion or more in annual revenues; --- 929c971 ----------------------- < promulgated pursuant to the Securities Exchange Act of 1934, as amended, > promulgated pursuant to the Securities Exchange Act of 1934, as amended; --- 931c973 ----------------------- < a three-year period, or (iv) the last day of the fiscal year following > a three-year period; or (iv) the last day of the fiscal year following --- 950,955c992,998 ----------------------- < The Trustee’s principal office is located at 2711 Centerville Road, < Wilmington, DE 19808. The Sponsor’s and Custodian’s address is 1007 < Orange Street, Nemours Building, Suite 1463, Wilmington, DE 19801, and < the Sponsor’s and Custodian’s telephone number is +1 (646) 751-4444. The < Administrator’s and the Trust Agency Service Provider’s principal office < is located at [ ],[ ],[ ] > The Trustee’s principal office is located at Little Falls Centre One, > 2711 Centerville Road, Wilmington, DE 19808. The Sponsor’s address is > 301 N. Market Street, Suite 1463, Wilmington, DE 19801, and its > telephone number is +1 (646) 751-4444. The Administrator’s and the > Transfer Agent’s principal office is located at One Lincoln Street, > Boston, Massachusetts 02111. The Custodian’s address is 600 Third > Avenue, 2nd Floor, New York, NY 10016. --- 962c1005 ----------------------- < 6 > 7 --- 971c1014,1016 ----------------------- < interest in and ownership of the Trust. > interest in and ownership of the Trust. > > --- 974,984c1019,1035 ----------------------- < sale of Baskets, including the initial [ ] Baskets (the “Seed Baskets”) < issued to [INITIAL PURCHASER] in its capacity as the purchaser of the < Seed Baskets (the “Initial Purchaser”) in connection with the formation < of the Trust, will consist only of bitcoin. Pursuant to the Trust < Agreement, during the life of the Trust, such proceeds will only be (i) < held by the Trust, (ii) distributed to Authorized Participants in < connection with the redemption of Baskets; (iii) transferred to pay the < Sponsor’s Fee; (iv) transferred and sold as needed to pay the Trust’s < expenses not assumed by the Sponsor; or (v) sold in connection with the < termination and liquidation of the Trust or as otherwise required by law < or regulation. > sale of Baskets, including the initial [ten (10)] Baskets (the > “Seed Baskets”) issued to [INITIAL PURCHASER] in its capacity as > the purchaser of the Seed Baskets (the “Initial Purchaser”) in > connection with the formation of the Trust, will consist only of > bitcoin. During the life of the Trust, such proceeds will only > be (i) held by the Trust; (ii) distributed to Authorized > Participants in connection with the redemption of Baskets; (iii) > transferred to pay the Sponsor’s Fee; (iv) transferred and sold > as needed to pay the Trust’s expenses not assumed by the > Sponsor; or (v) sold in connection with the termination and > liquidation of the Trust or as otherwise required by law or > regulation. > > > > Listing Exchange Bats BZX Exchange, Inc. (“Bats”). > --- 986d1036 ----------------------- < Listing Exchange Bats BZX Exchange, Inc. (“BATS”). --- 990d1039 ----------------------- < CUSIP [CUSIP] --- 992d1040 ----------------------- < Overview of the Bitcoin Industry and Market --- 994,1003c1042,1058 ----------------------- < Bitcoin is a Digital Asset that is issued by, and transmitted through, < the decentralized, open source protocol of the peer-to-peer Bitcoin < Network. The Bitcoin Network hosts the decentralized public transaction < ledger, known as the Blockchain, on which all bitcoin is recorded. No < single entity owns or operates the Bitcoin Network, the infrastructure < of which is collectively maintained by a decentralized user base. < Bitcoin can be used to pay for goods and services or can be converted to < fiat currencies, such as the U.S. Dollar, at rates determined on bitcoin < exchanges (each a “Bitcoin Exchange”) or in individual < end-user-to-end-user transactions under a barter system. > CUSIP 97425P 107 > > > > Overview of the Bitcoin Industry and Market Bitcoin is a Digital Asset > that is issued by, and transmitted through, the decentralized, > open source protocol of the peer-to-peer Bitcoin Network. The > Bitcoin Network hosts the decentralized public transaction > ledger, known as the Blockchain, on which all bitcoin is > recorded. No single entity owns or operates the Bitcoin Network, > the infrastructure of which is collectively maintained by a > decentralized user base. Bitcoin can be used to pay for goods > and services or can be converted to fiat currencies, such as the > U.S. Dollar, at rates determined on bitcoin exchanges (each a > “Bitcoin Exchange”) or in individual end-user-to-end-user > transactions under a barter system. > --- 1008c1063 ----------------------- < file stored in a decentralized manner on the computers of each Bitcoin > record stored in a decentralized manner on the computers of each Bitcoin --- 1023c1078 ----------------------- < Blockchain is comprised of a digital file, downloaded and stored, in > Blockchain is comprised of a digital record, downloaded and stored, in --- 1031d1085 ----------------------- < validated through such recording. The --- 1035c1089 ----------------------- < 7 > 8 --- 1040,1099c1094,1133 ----------------------- < Blockchain represents a complete, transparent and < unbroken history of all transactions of the Bitcoin < Network. Each Bitcoin transaction is broadcast to the < Bitcoin Network and recorded in the Blockchain. < < Creation and Redemption of Shares The Trust is expected to issue and < redeem Shares from time to time only in one or more whole Baskets. The < Trust will issue and redeem the Shares in Baskets only to certain < Authorized Participants on an ongoing basis as described in the “Plan of < Distribution” section below. On a creation, Baskets will be distributed < to the Authorized Participants by the Trust in exchange for the delivery < to the Trust of the appropriate number of bitcoin (i.e., bitcoin equal < in value to the value of the Shares being purchased). On a redemption, < the Trust will distribute bitcoin equal in value to the value of the < Shares being redeemed to the redeeming Authorized Participant in < exchange for the delivery to the Trust of one or more Baskets. On each < Business Day, the value of each Basket accepted by the Administrator in < a creation or redemption transaction will be the same (i.e., each Basket < will consist of 50,000 Shares and the value of the Basket will be equal < to the value of 50,000 Shares at their net asset value per Share on that < day). The Trust will not issue or redeem fractions of a Basket. Baskets < may be created or redeemed only by Authorized Participants, who may be < required to pay a transaction fee (“Transaction Fee”) to the Trust < Agency Service Provider for each order to create or redeem Baskets. < Authorized Participants may sell to other investors all or part of the < Shares included in the Baskets they purchase from the Trust. The Initial < Purchaser will not be subject to a Transaction Fee for the purchase of < the Seed Baskets. The Trust will not issue fractional Baskets. See < “Creation and Redemption of Shares” for more details. < < NAV The net asset value per Share (“NAV”) of the Trust is the asset < value of the Trust less its liabilities (which include accrued but < unpaid fees and expenses) divided by the number of outstanding Shares as < of 4:00 p.m. Eastern time each day BATS is open for regular trading < (each a “Business Day”). The Administrator will calculate the NAV using < the spot price of the Gemini Exchange (the “Gemini Exchange Spot < Price”). In the event that the Sponsor determines that the Gemini < Exchange Spot Price is not an appropriate basis for evaluation of the < Trust’s bitcoin, the Sponsor will instruct the Administrator to use the < spot price of the itBit bitcoin exchange (the “itBit Exchange”) as an < alternative basis for calculating the Trust’s NAV. The itBit Exchange is < operated by the itBit Trust Company, LLC, a New York State-chartered < limited liability trust company that, like the Gemini Exchange, operates < under the direct supervision and regulatory oversight of the NYSDFS. Any < determination that the Gemini Exchange Spot Price is unavailable or < otherwise not an appropriate basis for calculating the Trust’s NAV would < be based upon extraordinary criteria in which the operation of Gemini < Exchange is disrupted or otherwise experiencing material calculation or < reporting irregularities. If the Sponsor determines in good faith that < neither the Gemini Exchange Spot Price nor the spot price on the itBit < Exchange is reliable for calculating the Trust’s NAV on a particular < Business Day, including but not limited to situations where it does not < reflect material events occurring between the time of calculation of < such Gemini Exchange Spot Price or the spot price on the itBit Exchange < and the time the Trust’s Shares are valued, bitcoin will be valued using < fair market value pricing as determined in good faith by the Sponsor and < calculated by the Administrator under procedures established in the < Trust Servicing Agreement. Determining < < > validated through such recording. The Blockchain represents a complete, > transparent and unbroken history of all transactions of the Bitcoin > Network. Each Bitcoin transaction is broadcast to the Bitcoin Network > and recorded in the Blockchain. > > Creation and Redemption of > > Shares The Trust is expected to issue and redeem Shares from time to > time only in one or more whole Baskets. The Trust will issue and > redeem the Shares in Baskets only to certain Authorized > Participants on an ongoing basis as described in the “Plan of > Distribution” section below. On a creation, Baskets will be > distributed to the creating Authorized Participant by the Trust > in exchange for the delivery to the Trust of the appropriate > number of bitcoin (i.e., bitcoin equal in value to the NAV > multiplied by the number of Shares in the Basket). On a > redemption, the Trust will distribute bitcoin equal in value to > the NAV multiplied by the number of Shares in the Basket to the > redeeming Authorized Participant in exchange for the delivery to > the Trust of one or more Baskets. On each Business Day, the > value of each Basket accepted by the Administrator in a creation > or redemption transaction will be the same (i.e., each Basket > will initially consist of 100,000 Shares and the value of the > Basket will be equal to the value of 100,000 Shares at their net > asset value per Share on that day). The quantity of bitcoin > required to create a Basket, or to be delivered upon the > redemption of a Basket, will gradually decrease over time, due > to the accrual of the Trust’s expenses, the transfer of the > Trust’s bitcoin to pay the Sponsor’s Fee, and the transfer of > the Trust’s bitcoin to pay any Trust expenses not assumed by the > Sponsor. The Trust will not issue or redeem fractions of a > Basket. Baskets may be created or redeemed only by Authorized > Participants, who may be required to pay a transaction fee > (“Transaction Fee”) to the Transfer Agent for each order to > create or redeem Baskets. Authorized Participants may sell to > other investors all or part of the Shares included in the > Baskets they purchase from the Trust. The Initial Purchaser will > not be subject to a Transaction Fee for the purchase of the Seed > Baskets. The Trust will not issue fractional Baskets. See > “Creation and Redemption of Shares” for more details. --- 1101d1134 ----------------------- < 8 --- 1103d1135 ----------------------- < Table of Contents --- 1104a1137 ----------------------- > NAV --- 1106,1121d1138 ----------------------- < the fair market value of bitcoin involves the < consideration of a number of subjective factors and thus < the prices for bitcoin may differ from the Gemini < Exchange Spot Price or the spot price on the itBit < Exchange. The Sponsor may consider the market price for < bitcoin on other Bitcoin Exchanges, or in other forums < for which bitcoin prices are published publicly. Neither < the Administrator nor the Sponsor shall be liable to any < person for the determination that the Gemini Exchange < Spot Price or an alternative basis for a fair market < value of bitcoin is not appropriate as a basis for < calculation of the Trust’s NAV provided that such < determination is made in good faith. The Sponsor will < publish the Trust’s NAV on the Trust’s website as soon < as practicable after their calculation by the < Administrator. --- 1123c1140,1160 ----------------------- < Trust Expenses > The NAV is the asset value of the Trust less its liabilities (which > include accrued but unpaid fees and expenses) divided by the number of > outstanding Shares as of 4:00 p.m. Eastern Time each day Bats is open > for regular trading (each a “Business Day”). The Administrator will > calculate the NAV using the daily two-sided 4:00 p.m. Eastern Time > auction price of the Gemini Exchange (the “Gemini Exchange Auction > Price”), which is publicly available and will be provided to the > Administrator by the Sponsor each Business Day. In the event that the > Sponsor determines that the Gemini Exchange Auction Price is not an > appropriate basis for evaluation of the Trust’s bitcoin on a given > Business Day, the Sponsor will instruct the Administrator to use the > 4:00 p.m. Eastern Time spot price on the Gemini Exchange or the itBit > bitcoin exchange (the “itBit Exchange”) as an alternative basis for > calculating the Trust’s NAV on that Business Day. The itBit Exchange is > operated by the itBit Trust Company, LLC, a New York State-chartered > limited liability trust company that, like the Gemini Exchange, operates > under the direct supervision and regulatory oversight of the NYSDFS. Any > determination that the Gemini Exchange Auction Price is unavailable or > otherwise not an appropriate basis for calculating the Trust’s NAV on a > given Business Day would be based upon extraordinary criteria in which > the operation of the Gemini Exchange is --- 1125,1131d1161 ----------------------- < The Trust’s only ordinary recurring charge is expected to be the < remuneration due to the Sponsor (“Sponsor’s Fee”). In exchange for the < Sponsor’s Fee, the Sponsor has agreed to assume the ordinary < administrative and marketing expenses that the Trust is expected to < incur. The Sponsor will also pay the costs of the Trust’s organization < and the initial sale of the Shares, including the applicable SEC < registration fees. --- 1133a1164 ----------------------- > 9 --- 1135,1150c1166 ----------------------- < The Sponsor’s Fee is [ ] percent per annum of the daily net assets of < the Trust and will accrue daily in bitcoin and will be payable “in kind” < (in bitcoin) monthly in arrears. To pay the Sponsor’s Fee, as soon as < practicable after the completion of any calendar month, the < Administrator will calculate, using the Gemini Exchange Spot Price on < such calculation day, the number of bitcoin required to pay the < outstanding Sponsor’s Fee and transfer such bitcoin from the Trust < Custody Account to an account maintained by the Custodian for the < Sponsor (“Sponsor Custody Account”). The Sponsor, from time to time, may < waive all or a portion of the Sponsor’s Fee at its discretion for stated < periods of time. The Sponsor is under no obligation to continue a waiver < after the end of such stated period, and, if such waiver is not < continued, the Sponsor’s Fee will thereafter be paid in full. The < Administrator will from time to time instruct the Custodian to deliver < to the Sponsor Custody Account bitcoin in such quantity as may be < necessary to permit payment of the Sponsor’s Fee. > Table of Contents --- 1152a1169,1233 ----------------------- > disrupted or otherwise experiencing material calculation or reporting > irregularities. If the Sponsor determines in good faith that none of the > Gemini Exchange Auction Price, the spot price on the Gemini Exchange, or > the spot price on the itBit Exchange are reliable for calculating the > Trust’s NAV on a particular Business Day, including but not limited to > situations where it does not reflect material information or events > occurring between the time of calculation of such prices and the time > the Trust’s Shares are valued, bitcoin will be valued by the Sponsor > using fair market value pricing as determined in good faith by the > Sponsor and calculated by the Administrator. Determining the fair market > value of bitcoin involves the consideration of a number of subjective > factors and thus the prices for bitcoin may differ from the Gemini > Exchange Auction Price or the spot price on the Gemini Exchange or itBit > Exchange. The Sponsor may consider the market price for bitcoin on other > Bitcoin Exchanges, or in other forums for which bitcoin prices are > published publicly. The Sponsor shall not be liable to any person for > the determination that the Gemini Exchange Auction Price or an > alternative basis for a fair market value of bitcoin is not appropriate > as a basis for calculation of the Trust’s NAV provided that such > determination is made in good faith. The Sponsor will publish the > Trust’s NAV on the Trust’s website as soon as practicable after its > calculation by the Administrator. See “Valuation of Bitcoin and > Definition of NAV.” > > > > Trust Expenses The Trust’s only ordinary recurring charge is expected to > be the remuneration due to the Sponsor (“Sponsor’s Fee”). In > exchange for the Sponsor’s Fee, the Sponsor has agreed to assume > the ordinary administrative and marketing expenses that the > Trust is expected to incur. The Sponsor will also pay the costs > of the Trust’s organization and the initial sale of the Shares, > including the applicable SEC registration fees, as well as > certain other Trust expenses as detailed herein. > > > The Sponsor’s Fee is [ ] percent per annum of the daily net > assets of the Trust and will accrue daily in bitcoin and will be > payable “in kind” (in bitcoin) monthly in arrears. To pay the > Sponsor’s Fee, as soon as practicable after the completion of > any calendar month, the Administrator will calculate, using the > Gemini Exchange Auction Price on such calculation day (which > will be provided to it by the Sponsor in the same manner as it > is provided in connection with the daily calculation of the > Trust’s NAV), the number of bitcoin required to pay the > outstanding Sponsor’s Fee and instruct the Custodian to transfer > such bitcoin from the Trust Custody Account to an account > maintained by the Custodian for the Sponsor (“Sponsor Custody > Account”). The Sponsor, from time to time, may waive all or a > portion of the Sponsor’s Fee at its discretion for stated > periods of time. The Sponsor is under no obligation to continue > a waiver after the end of such stated period, and, if such > waiver is not continued, the Sponsor’s Fee will thereafter be > paid in full. > > > The Sponsor is not required to assume extraordinary, > nonrecurring expenses (except certain indemnifications amounts > that may become owed to the Trustee under the Trust Agreement), > therefore the Trust may incur certain extraordinary, > nonrecurring expenses (e.g., expenses relating to litigation) > that are not contractually assumed by the Sponsor. The Sponsor > is also authorized to pay or cause to be paid out of Trust > assets other expenses and charges as the Sponsor may, in its > sole discretion, deem necessary or proper to incur. --- 1154,1166d1234 ----------------------- < The Sponsor is not required to assume extraordinary, nonrecurring < expenses (except certain indemnifications amounts that may become owed < to the Trustee under the Trust Agreement), therefore the Trust may incur < certain extraordinary, nonrecurring expenses (e.g., expenses relating to < litigation) that are not contractually assumed by the Sponsor. In such < circumstances, the Administrator may from time to time, cause the < Custodian to transfer from the Trust Custody Account and deliver to a < segregated account of the Trust (“Trust Expense Account”) bitcoin for < sale or other conversion to US Dollars or other fiat currencies in such < quantity as may be necessary to permit payment of Trust expenses not < assumed by the Sponsor. Under such circumstances, the sale or conversion < to fiat currency of bitcoin will occur after such bitcoin has been < delivered from the Trust to the Trust Expense Account. --- 1172,1175c1240 ----------------------- < Trust Custody Account or the Trust Expense Account, the Trust may < determine that the payment of a transaction fee to Bitcoin Network < miners is prudent. See “Overview of the Bitcoin Industry and < Market—Bitcoin Mining & Creation > Trust --- 1179c1244 ----------------------- < 9 > 10 --- 1183a1249,1255 ----------------------- > Custody Account or the Trust Expense Account, the Trust may determine > that the payment of a transaction fee to Bitcoin Network miners is > prudent. See “Overview of the Bitcoin Industry and Market—Bitcoin Mining > & Creation of New Bitcoin.” To the extent that such transaction fees > payments are made, the Custodian shall pay for or reimburse the Trust > for such transaction fees by the transfer of additional bitcoin in the > amount of such fees during the creation and redemption process. --- 1186,1196c1258,1268 ----------------------- < of New Bitcoin.” To the extent that such transaction fees payments are < made, the Custodian shall pay for or reimburse the Trust for such < transaction fees by the transfer of additional bitcoin in the amount of < such fees during the creation and redemption process. It is anticipated < that the reimbursement of transaction fees paid to miners shall be more < than accounted for by the payment of creation and redemption Transaction < Fees by Authorized Participants. The Trust Agency Service Provider will < reimburse the Custodian’s payment of miner fees from and up to the < amount of such creation and redemption Transaction Fees on a monthly < basis. < > The number of bitcoin to be transferred and sold will vary from > time to time depending on the level of the Trust’s expenses and > the relevant Gemini Exchange Auction Price (for the payment of > the Sponsor’s Fee) or the proceeds of the sales of bitcoin to > pay other expenses (for the payment of Trust expenses other than > the Sponsor’s Fee, e.g., extraordinary expenses). See “Business > of the Trust—Trust Expenses.” Each delivery, transfer or sale of > bitcoin by the Trust to pay the Sponsor’s Fee or other expenses > will be a taxable event for the owners of beneficial interests > in the Shares (“Shareholders”). See “United States Federal > Income Tax Consequences—Taxation of U.S. Shareholders.” --- 1199,1207d1270 ----------------------- < The number of bitcoin to be transferred and sold will vary from time to < time depending on the level of the Trust’s expenses and the relevant < Gemini Exchange Spot Price (for the payment of the Sponsor’s Fee) or the < proceeds of the sales of bitcoin to pay other expenses (for the payment < of Trust expenses other than the Sponsor’s Fee, e.g., extraordinary < expenses). See “Business of the Trust—Trust Expenses.” Each delivery, < transfer or sale of bitcoin by the Trust to pay the Sponsor’s Fee or < other expenses will be a taxable event for Shareholders. See “United < States Federal Income Tax Consequences—Taxation of U.S. Shareholders.” --- 1209,1210c1272,1275 ----------------------- < Termination Events The Trust will dissolve and liquidate if one of the < following events occurs: > Termination Events The Trust may be dissolved at the written direction > of the Sponsor. At its discretion, the Sponsor may elect to > terminate the Trust in certain circumstances, which include, > without limitation: --- 1215c1280 ----------------------- < the Trust is notified that the Shares are delisted from BATS and are not > the Trust is notified that the Shares are delisted from Bats and are not --- 1217c1282 ----------------------- < business days of their delisting; > (5) business days of their delisting; --- 1223,1224c1288,1289 ----------------------- < the outstanding Shares notify the Administrator that they elect to < terminate the Trust; > the outstanding Shares notify the Sponsor that they elect to terminate > the Trust; --- 1229,1230c1294,1295 ----------------------- < [ ] days have elapsed since the Trustee notified the Sponsor of the < Trustee’s election to resign and a successor trustee has not been > thirty (30) days have elapsed since the Trustee notified the Sponsor of > the Trustee’s election to resign and a successor trustee has not been --- 1238,1239c1303,1304 ----------------------- < and the Administrator receives notice from the Sponsor that, because of < such determination, termination of the Trust is advisable; > and the Sponsor determines that, because of such determination, > termination of the Trust is advisable; --- 1245,1246c1310,1311 ----------------------- < and the Administrator receives notice from the Sponsor that, because of < such determination, termination of the Trust is advisable; > and the Sponsor determines that, because of such determination, > termination of the Trust is advisable; --- 1263d1327 ----------------------- < 10 --- 1265c1329 ----------------------- < Table of Contents • > • --- 1268,1270c1332,1333 ----------------------- < grantor trust for U.S. federal income tax purposes, and the < Administrator receives notice from the Sponsor that the Sponsor < determines that, because of that tax treatment or change in tax > grantor trust for U.S. federal income tax purposes, and the Sponsor > determines that, because of such tax treatment or change in tax --- 1274c1337,1340 ----------------------- < • > > 11 > > Table of Contents • --- 1283c1349 ----------------------- < price of the Shares, was less than $[ ] million (as adjusted for > price of the Shares, was less than $10 million (as adjusted for --- 1285,1289c1351,1354 ----------------------- < after the first anniversary of the Trust’s formation and the < Administrator receives, within six months after the last trading date on < which the aggregate market capitalization of the Trust was less than $[ < ] million, notice from the Sponsor of its decision to terminate the < Trust; > after the first anniversary of the Trust’s formation and the Sponsor > determines, within six (6) months after the last trading date on which > the aggregate market capitalization of the Trust was less than $10 > million, to terminate the Trust; --- 1294c1359 ----------------------- < Sixty (60) days have elapsed since DTC ceases to act as depository with > sixty (60) days have elapsed since DTC ceases to act as depository with --- 1301c1366 ----------------------- < the Administrator elects to terminate the Trust after the Sponsor is > the Trustee elects to terminate the Trust after the Sponsor is --- 1320,1327c1385,1391 ----------------------- < Upon the termination of the Trust, the Administrator < will cause the Trust’s bitcoin to be sold and, after < paying or making provision for the Trust’s remaining < liabilities, distribute the cash proceeds to < Shareholders upon the surrender of their Shares. See < “Description of the Trust Agreement—Termination of the < Trust.” < > The Sponsor may make any such determination in its sole > discretion. Upon the termination of the Trust, the Sponsor will > cause the Trust’s bitcoin to be sold and, after paying or making > provision for the Trust’s remaining liabilities, distribute the > cash proceeds to Shareholders upon the surrender of their > Shares. See “Description of the Trust Agreement—Termination of > the Trust.” --- 1329,1346d1392 ----------------------- < Authorized Participants Baskets may be created or redeemed only by < Authorized Participants. Each Authorized Participant < must (i) be a registered broker-dealer or other < securities market participant such as a bank or other < financial institution which is not required to register < as a broker-dealer to engage in securities transactions, < (ii) be a direct participant in DTC, and (iii) have < entered into an agreement with the Sponsor (an < “Authorized Participant Agreement”). To facilitate < creation and redemption transactions, Authorized < Participants may, but are not required to, establish a < bitcoin custody account with the Custodian. Authorized < Participant Agreements provide the procedures for the < creation and redemption of Baskets and for the delivery < of bitcoin required for such creations or redemptions. A < list of the current Authorized Participants can be < obtained from the Administrator or the Sponsor. See < “Creation and Redemption of Shares” for more details. --- 1348a1395,1413 ----------------------- > Authorized Participants Baskets may be created or redeemed only by > Authorized Participants. Each Authorized Participant must (i) be > a registered broker-dealer or other securities market > participant such as a bank or other financial institution which > is not required to register as a broker-dealer to engage in > securities transactions; (ii) be a direct participant in DTC; > and (iii) have entered into an agreement with the Sponsor, > subject to acceptance by the Transfer Agent (an “Authorized > Participant Agreement”). To facilitate creation and redemption > transactions, Authorized Participants may, but are not required > to, establish a bitcoin custody account with the Custodian. In > addition, Authorized Participants may, but are not required to, > participate in the daily 4:00 p.m. auction on the Gemini > Exchange. Authorized Participant Agreements provide the > procedures for the creation and redemption of Baskets and for > the delivery of bitcoin required for such creations or > redemptions. A list of the current Authorized Participants can > be obtained from the Administrator or the Sponsor. See “Creation > and Redemption of Shares” for more details. --- 1350,1352d1414 ----------------------- < 11 < < Table of Contents --- 1354a1417,1423 ----------------------- > Clearance and Settlement The Shares will be evidenced by one or more > global certificates that the Transfer Agent will issue to DTC. > The Shares will be available only in book-entry form. > Shareholders may hold their Shares through DTC, if they are > direct participants in DTC (“DTC Participants”), or indirectly > through broker-dealers, banks or other entities that are DTC > Participants. --- 1356d1424 ----------------------- < Clearance and Settlement --- 1359,1364c1427 ----------------------- < The Shares will be evidenced by one or more global certificates that the < Trust Agency Service Provider will issue to DTC. The Shares will be < available only in book-entry form. Shareholders may hold their Shares < through DTC, if they are direct participants in DTC (“DTC < Participants”), or indirectly through broker-dealers, banks or other < entities that are DTC Participants. > 12 --- 1365a1429 ----------------------- > Table of Contents --- 1367c1431 ----------------------- < Exchange Listing The Trust’s Shares will be listed on BATS. Under > Exchange Listing The Trust’s Shares will be listed on Bats. Under --- 1369,1378c1433,1441 ----------------------- < “Commodity-Based Trust Shares,” which means a security < (i) that is issued by the Trust that holds a specified < commodity (bitcoin) deposited with the Trust; (ii) that < is issued by the Trust in a specified aggregate minimum < number (Basket) in return for the delivery of a quantity < of bitcoin (as described herein); and (iii) that, when < aggregated in the same specified minimum number < (Basket), may be redeemed at a holder’s request by the < Trust which will distribute to the redeeming holder the < quantity of bitcoin. > “Commodity-Based Trust Shares,” which means a security (i) that > is issued by the Trust that holds a specified commodity > (bitcoin) deposited with the Trust; (ii) that is issued by the > Trust in a specified aggregate minimum number (Basket) in return > for the delivery of a quantity of bitcoin (as described herein); > and (iii) that, when aggregated in the same specified minimum > number (Basket), may be redeemed at an Authorized Participant’s > request by the Trust which will distribute to the redeeming > Authorized Participant the quantity of bitcoin. --- 1382c1445 ----------------------- < As of the close of business on [ ], 2016, the net asset value of the > As of the close of business on [ ], 2017, the net asset value of the --- 1386c1449 ----------------------- < the NAV was $[ ]. See “Statement of Financial Condition” elsewhere in > the NAV was $[ ]. See “Statement of Assets and Liabilities” elsewhere in --- 1391c1454 ----------------------- < 12 > 13 --- 1405c1468 ----------------------- < through, the decentralized,open source protocol of the peer-to-peer > through, the decentralized, open source protocol of the peer-to-peer --- 1408,1414c1471,1476 ----------------------- < recorded. No single entity owns or operates the Bitcoin Network, the < infrastructure of which is collectively maintained by a decentralized < user base. Bitcoin can be used to pay for goods and services or can be < converted to fiat currencies, such as the U.S. Dollar, at rates < determined on Bitcoin Exchanges or in individual end-user-to-end-user < transactions under a barter system. See “Uses of Bitcoin—Bitcoin < Exchange Market,” below. > recorded. No single entity owns or operates the Bitcoin Network; the > infrastructure is collectively maintained by a decentralized user base. > Bitcoin can be used to pay for goods and services or can be converted to > fiat currencies, such as the U.S. Dollar, at rates determined on Bitcoin > Exchanges or in individual end-user-to-end-user transactions under a > barter system. See “Uses of Bitcoin—Bitcoin Exchange Market,” below. --- 1417c1479 ----------------------- < file stored in a decentralized manner on the computers of each Bitcoin > record stored in a decentralized manner on the computers of each Bitcoin --- 1430,1444c1492,1507 ----------------------- < its associated public Bitcoin address. A Bitcoin“wallet” is a collection < of private keys and their associated public Bitcoin addresses. < < The Blockchain is comprised of a digital file, downloaded and stored, in < whole or in part, on all Bitcoin Network users’ software programs. The < file includes all blocks that have been solved by miners and is updated < to include new blocks as they are solved. See “Overview of the Bitcoin < Industry and Market—Bitcoin Mining & Creation of New Bitcoin.” As each < newly solved block refers back to and “connects” with the immediately < prior solved block, the addition of a new block adds to the Blockchain < in a manner similar to a new link being added to a chain. Each new block < records outstanding Bitcoin transactions, and outstanding transactions < are settled and validated through such recording. The Blockchain < represents a complete, transparent and unbroken history of all < transactions on the Bitcoin Network. Each Bitcoin transaction is > its associated public Bitcoin address. A Bitcoin “wallet” is a > collection of private keys and their associated public Bitcoin > addresses. > > The Blockchain is comprised of a digital record, downloaded and stored, > in whole or in part, on all Bitcoin Network users’ software programs. > The file includes all blocks that have been solved by miners and is > updated to include new blocks as they are solved. See “Overview of the > Bitcoin Industry and Market—Bitcoin Mining & Creation of New Bitcoin.” > As each newly solved block refers back to and “connects” with the > immediately prior solved block, the addition of a new block adds to the > Blockchain in a manner similar to a new link being added to a chain. > Each new block records outstanding Bitcoin transactions, and outstanding > transactions are settled and validated through such recording. The > Blockchain represents a complete, transparent and unbroken history of > all transactions on the Bitcoin Network. Each Bitcoin transaction is --- 1473c1536 ----------------------- < 13 > 14 --- 1517,1522c1580,1586 ----------------------- < and sell goods and services are a new and rapidly evolving industry of < which the Bitcoin Network is a prominent, but not unique, part. The < growth of the Digital Asset industry in general, and the Bitcoin Network < in particular, is subject to a high degree of uncertainty. The factors < affecting the further development of the Digital Asset industry, as well < as the Bitcoin Network, include: > and sell goods and services. The Bitcoin Network and other Digital Asset > networks are a new and rapidly evolving industry of which the Bitcoin > Network is a prominent, but not unique, part. The growth of the Digital > Asset industry in general, and the Bitcoin Network in particular, is > subject to a high degree of uncertainty. The factors affecting the > further development of the Digital Asset industry, as well as the > Bitcoin Network, include: --- 1575c1639 ----------------------- < 14 > 15 --- 1585,1603c1649,1668 ----------------------- < Network have only recently become widely accepted as a means of payment < for goods and services by many major retail and commercial outlets, and < use of bitcoin by consumers to pay such retail and commercial outlets < remains limited. Banks and other established financial institutions may < refuse to process funds for Bitcoin transactions, process wire transfers < to or from bitcoin exchanges, Bitcoin-related companies or service < providers, or maintain accounts for persons or entities transacting in < bitcoin. Conversely, a significant portion of bitcoin demand is < generated by speculators and investors seeking to profit from the short- < or long-term holding of bitcoin. Price volatility undermines bitcoin’s < role as a medium of exchange as retailers are much less likely to accept < it as a form of payment. Market capitalization for bitcoin as a medium < of exchange and payment method may always be low. A lack of expansion by < bitcoin into retail and commercial markets, or a contraction of such < use, may result in increased volatility or a reduction in the Gemini < Exchange Spot Price, either of which could adversely impact an < investment in the Shares. The Sponsor believes that, like any commodity, < bitcoin will fluctuate in value, but over time will gain a level of < acceptance as a store of value, similar to certain precious metals. > Network have only recently become selectively accepted as a means of > payment for goods and services by many major retail and commercial > outlets, and use of bitcoin by consumers to pay such retail and > commercial outlets remains limited. Banks and other established > financial institutions may refuse to process funds for Bitcoin > transactions; process wire transfers to or from bitcoin exchanges, > Bitcoin-related companies or service providers; or maintain accounts for > persons or entities transacting in bitcoin. Conversely, a significant > portion of bitcoin demand is generated by speculators and investors > seeking to profit from the short- or long-term holding of bitcoin. Price > volatility undermines bitcoin’s role as a medium of exchange as > retailers are much less likely to accept it as a form of payment. Market > capitalization for bitcoin as a medium of exchange and payment method > may always be low. A lack of expansion by bitcoin into retail and > commercial markets, or a contraction of such use, may result in > increased volatility or a reduction in the Gemini Exchange Auction > Price, either of which could adversely impact an investment in the > Shares. The Sponsor believes that, like any commodity, bitcoin will > fluctuate in value, but over time will gain a level of acceptance as a > store of value, similar to certain precious metals. --- 1611,1637c1676,1707 ----------------------- < Github.com. This group of contributors is currently headed by Wladimir < J. van der Laan, the current lead maintainer. These individuals can < propose refinements or improvements to the Bitcoin Network’s source code < through one or more software upgrades that alter the protocols and < software that govern the Bitcoin Network and the properties of bitcoin, < including the irreversibility of transactions and limitations on the < mining of new bitcoin. Proposals for upgrades and discussions relating < thereto take place on online forums including GitHub.com and < Bitcointalk.org. For example, there is an ongoing debate regarding < altering the Blockchain by increasing the size of blocks to accommodate < a larger volume of transactions. Although some proponents support an < increase, other market participants oppose an increase to the block size < as it may deter miners from confirming transactions and concentrate < power into a smaller group of miners. To the extent that a significant < majority of the users and miners on the Bitcoin Network install such < software upgrade(s), the Bitcoin Network would be subject to new < protocols and software that may adversely affect an investment in the < Shares. If less than a significant majority of the users and miners on < the Bitcoin Network install such software upgrade(s), the Bitcoin < Network could “fork.” See “Risk Factors—The acceptance of Bitcoin < Network software patches or upgrades by a significant, but not < overwhelming, percentage of the users and miners in the Bitcoin Network < could result in a ‘fork’ in the Blockchain….” The Sponsor believes that < there will be ongoing and continual revisions and improvements in the < various aspects of the Bitcoin Network. The Sponsor will monitor < developments in the Bitcoin Network and the potential impact of such < developments on the Trust. > Github. This group of contributors is currently headed by Wladimir J. > van der Laan, the current lead maintainer. These individuals can propose > refinements or improvements to the Bitcoin Network’s source code through > one or more software upgrades that alter the protocols and software that > govern the Bitcoin Network and the properties of bitcoin, including the > irreversibility of transactions and limitations on the mining of new > bitcoin. Proposals for upgrades and discussions relating thereto take > place on online forums. For example, there is an ongoing debate > regarding altering the Blockchain by increasing the size of blocks to > accommodate a larger volume of transactions. Although some proponents > support an increase, other market participants oppose an increase to the > block size as it may deter miners from confirming transactions and > concentrate power into a smaller group of miners. To the extent that a > significant majority of the users and miners on the Bitcoin Network > install such software upgrade(s), the Bitcoin Network would be subject > to new protocols and software that may adversely affect an investment in > the Shares. In the event a developer or group of developers proposes a > modification to the Bitcoin Network that is not accepted by a majority > of miners and users, but that is nonetheless accepted by a substantial > plurality of miners and users, two or more competing and incompatible > Blockchain implementations could result. This is known as a “hard fork.” > In such a case, the “hard fork” in the Blockchain could materially and > adversely affect the perceived value of bitcoin as reflected on one or > both incompatible Blockchains, and thus the value of the Trust’s > bitcoin. See “Risk Factors—The acceptance of Bitcoin Network software > patches or upgrades by a significant, but not overwhelming, percentage > of the users and miners in the Bitcoin Network could result in a ‘hard > fork’ in the Blockchain….” The Sponsor believes that there will be > ongoing and continual revisions and improvements in the various aspects > of the Bitcoin Network. The Sponsor will monitor developments in the > Bitcoin Network and the potential impact of such developments on the > Trust. --- 1646,1647c1716,1717 ----------------------- < by contributors, largely on the Bitcoin Core project on GitHub.com. As < an open source project, Bitcoin is not represented by an official > by contributors, largely on the Bitcoin Core project on GitHub. As an > open source project, Bitcoin is not represented by an official --- 1649,1654c1719 ----------------------- < and its use does not generate revenues for contributors, contributors < are generally not compensated for maintaining and updating the Bitcoin < Network protocol. Although the MIT Media Lab’s Digital Currency < Initiative funds the current maintainer Wladimir J. van der Laan, among < others, this type of financial incentive is not typical. The lack of < guaranteed financial > and its use does not generate revenues for contributors, --- 1658c1723 ----------------------- < 15 > 16 --- 1662,1666c1727,1735 ----------------------- < incentive for contributors to maintain or develop the Bitcoin Network < and the lack of guaranteed resources to adequately address emerging < issues with the Bitcoin Network may reduce incentives to address the < issues adequately or in a timely manner. This may adversely affect an < investment in the Shares. > contributors are generally not compensated for maintaining and updating > the Bitcoin Network protocol. Although the MIT Media Lab’s Digital > Currency Initiative funds the current maintainer Wladimir J. van der > Laan, among others, this type of financial incentive is not typical. The > lack of guaranteed financial incentive for contributors to maintain or > develop the Bitcoin Network and the lack of guaranteed resources to > adequately address emerging issues with the Bitcoin Network may reduce > incentives to address the issues adequately or in a timely manner. This > may adversely affect an investment in the Shares. --- 1679,1682c1748,1751 ----------------------- < (i.e., spend the same bitcoin in more than one transaction) as well as < prevent the confirmation of other Bitcoin transactions. If such a < scenario were to materialize, it could adversely affect an investment in < the Shares or the ability of the Trust to operate. > (i.e., spend the same bitcoin in two or more conflicting transactions) > as well as prevent the confirmation of other Bitcoin transactions. If > such a scenario were to materialize, it could adversely affect an > investment in the Shares or the ability of the Trust to operate. --- 1702c1771 ----------------------- < there are some academics and market participants that believe the > there are some academics and market participants who believe the --- 1722,1743c1791,1805 ----------------------- < operations. The current fixed reward for solving a new block is < twenty-five (25) bitcoin per block, and, consistent with Bitcoin < protocol, the reward will decrease by half to become twelve and a half < (12.5) bitcoin on or around the start of July 2016 (based on estimates < of the rate of block solution calculated by BitcoinClock.com). This < reduction may result in a reduction in the aggregate hashrate of the < Bitcoin Network as the incentive for miners will decrease. Moreover, < miners ceasing operations would reduce the aggregate hashrate on the < Bitcoin Network, which would adversely affect the confirmation process < for transactions (i.e., temporarily decreasing the speed at which blocks < are added to the Blockchain until the next scheduled adjustment in < difficulty for block solutions) and make the Bitcoin Network more < vulnerable to a malicious actor obtaining control in excess of fifty < (50) percent of the aggregate hashrate on the Bitcoin Network. < Periodically, the Bitcoin Network has adjusted the difficulty for block < solutions so that solution speeds remain in the vicinity of the expected < ten (10) minute confirmation time targeted by the Bitcoin Network < protocol. The Sponsor believes that from time to time there will be < further considerations and adjustments to the Bitcoin Network regarding < the difficulty for block solutions. More significant reductions in < aggregate hashrate on the Bitcoin Network could result in material, < though temporary, > operations. The current fixed reward for solving a new block is twelve > and a half (12.5) bitcoin per block; the reward decreased from > twenty-five (25) bitcoin in July 2016. It is estimated that it will > halve again in about four (4) years. This reduction may result in a > reduction in the aggregate hashrate of the Bitcoin Network as the > incentive for miners will decrease. Moreover, miners ceasing operations > would reduce the aggregate hashrate on the Bitcoin Network, which would > adversely affect the confirmation process for transactions (i.e., > temporarily decreasing the speed at which blocks are added to the > Blockchain until the next scheduled adjustment in difficulty for block > solutions) and make the Bitcoin Network more vulnerable to a malicious > actor obtaining control in excess of fifty (50) percent of the aggregate > hashrate on the Bitcoin Network. Periodically, the Bitcoin Network has > adjusted the difficulty for block solutions so that solution speeds > remain in the vicinity of the expected ten (10) minute --- 1747c1809 ----------------------- < 16 > 17 --- 1751,1754c1813,1821 ----------------------- < delays in block solution confirmation time. Any reduction in confidence < in the confirmation process or aggregate hashrate of the Bitcoin Network < may negatively impact the value of bitcoin, which will adversely impact < an investment in the Shares. > confirmation time targeted by the Bitcoin Network protocol. The Sponsor > believes that from time to time there will be further considerations and > adjustments to the Bitcoin Network regarding the difficulty for block > solutions. More significant reductions in aggregate hashrate on the > Bitcoin Network could result in material, though temporary, delays in > block solution confirmation time. Any reduction in confidence in the > confirmation process or aggregate hashrate of the Bitcoin Network may > negatively impact the value of bitcoin, which will adversely impact an > investment in the Shares. --- 1777,1778c1844,1845 ----------------------- < their value and result in a reduction in the Gemini Exchange Spot Price < and the price of the Shares. > their value and result in a reduction in the Gemini Exchange Auction > Price and the price of the Shares. --- 1781c1848 ----------------------- < not high, operators of Bitcoin mining operations are more likely to > low, operators of Bitcoin mining operations are more likely to --- 1788,1790c1855,1857 ----------------------- < processing units and first generation ASIC (application-specific < integrated circuit) machines (“ASICs”). Currently, new hashrate brought < onto the Bitcoin Network is predominantly added by incorporated and > processing units and first-generation application-specific integrated > circuit processors (“ASICs”). Currently, new hashrate brought onto the > Bitcoin Network is predominantly added by incorporated and --- 1792,1807c1859,1874 ----------------------- < mining operations may use proprietary hardware or sophisticated ASICs < acquired from ASIC manufacturers. They require the investment of < significant capital for the acquisition of this hardware, the leasing of < operating space (often in data centers or warehousing facilities), < incurring of electricity costs and the employment of technicians to < operate the mining farms. As a result, professionalized mining < operations are of a greater scale than prior Bitcoin Network miners and < have more defined, regular expenses and liabilities. These regular < expenses and liabilities require professionalized mining operations to < more immediately sell bitcoin earned from mining operations on one of < the various bitcoin exchanges (each a “Bitcoin Exchange” and < collectively, the “Bitcoin Exchange Market”), whereas it is believed < that individual miners in past years were more likely to hold newly < mined bitcoin for more extended periods. The immediate selling of newly < mined bitcoin greatly increases the supply of bitcoin on the Bitcoin < Exchange Market, creating downward pressure on the price of bitcoin. > mining operations may use proprietary hardware or sophisticated and > customized ASICs. They require the investment of significant capital for > the acquisition of this hardware, the leasing of operating space (often > in data centers or warehousing facilities), incurring of electricity > costs and the employment of technicians to operate the mining farms. As > a result, professionalized mining operations are of a greater scale than > prior Bitcoin Network miners and have more defined, regular expenses and > liabilities. These regular expenses and liabilities require > professionalized mining operations to more immediately sell bitcoin > earned from mining operations on one of the various bitcoin exchanges > (each a “Bitcoin Exchange” and collectively, the “Bitcoin Exchange > Market”), whereas it is believed that individual miners in past years > were more likely to hold newly mined bitcoin for more extended periods. > The immediate selling of newly mined bitcoin greatly increases the > supply of bitcoin on the Bitcoin Exchange Market, creating downward > pressure on the price of bitcoin. --- 1816,1827c1883,1888 ----------------------- < percentage of the three thousand six hundred (3,600) to four thousand < two hundred (4,200) new bitcoin mined each day will be sold into the < Bitcoin Exchange Market more rapidly, thereby reducing bitcoin prices. < Lower bitcoin prices will result in further tightening of profit < margins, particularly for professionalized mining operations with higher < costs and more limited capital reserves, creating a network effect that < may further reduce the price of bitcoin until mining operations with < higher operating costs become unprofitable and remove mining power from < the Bitcoin Network. The network effect of reduced profit margins < resulting in greater sales of newly mined bitcoin could result in a < reduction in the price of bitcoin that could adversely impact an < investment in the Shares. > percentage could be sold into the Bitcoin Exchange Market more rapidly, > thereby potentially reducing bitcoin prices. Lower bitcoin prices could > result in further tightening of profit margins, particularly for > professionalized mining operations with higher costs and more limited > capital reserves, creating a network effect that may further reduce the > price of bitcoin until mining operations with higher operating costs --- 1831c1892 ----------------------- < 17 > 18 --- 1834a1896,1900 ----------------------- > become unprofitable and remove mining power from the Bitcoin Network. > The network effect of reduced profit margins resulting in greater sales > of newly mined bitcoin could result in a reduction in the price of > bitcoin that could adversely impact an investment in the Shares. > --- 1859,1863c1925,1929 ----------------------- < the Bitcoin Network could result in a “fork” in the Blockchain, < resulting in the operation of two separate networks until such time as < the forked Blockchains are merged. The temporary or permanent existence < of forked Blockchains could adversely impact an investment in the < Shares. > the Bitcoin Network could result in a “hard fork” in the Blockchain, > resulting in the operation of two separate and incompatible networks > until such time as the forked Blockchains are merged, if ever. The > temporary or permanent existence of forked Blockchains could adversely > impact an investment in the Shares. --- 1866,1867c1932,1933 ----------------------- < group of contributors in the Bitcoin community, there is no official < developer or group of developers that formally controls the Bitcoin > group of contributors in the Bitcoin community, there is no designated > developer or group of developers who formally control the Bitcoin --- 1870,1892c1936,2005 ----------------------- < on the Bitcoin Network through software downloads and upgrades, < typically posted to the Bitcoin development forum on GitHub.com. A < substantial majority of miners and Bitcoin users must consent to those < software modifications by downloading the altered software or upgrade < that implements the changes; otherwise, the changes do not become a part < of the Bitcoin Network. Since the Bitcoin Network’s inception, changes < to the Bitcoin Network have been accepted by the vast majority of users < and miners, ensuring that the Bitcoin Network remains a coherent < economic system; however, a developer or group of developers could < potentially propose a modification to the Bitcoin Network that is not < accepted by a vast majority of miners and users, but that is nonetheless < accepted by a substantial population of participants in the Bitcoin < Network. In such a case, and if the modification is material and/or not < backwards compatible with the prior version of Bitcoin Network software, < a fork in the Blockchain could develop and two (2) separate Bitcoin < Networks could result, one running the pre-modification software program < and the other running the modified version (i.e., a second “Bitcoin” < network). Such a fork in the Blockchain typically would be addressed by < community-led efforts to merge the forked Blockchains, and several prior < forks have been so merged. This kind of split in the Bitcoin Network < could materially and adversely affect the Gemini Exchange Spot Price < (and thus the value of the Shares) and, in the worst case scenario, harm < the sustainability of the Bitcoin Network’s economy. > on the Bitcoin Network through modifications typically posted to the > Bitcoin development forum on GitHub. A substantial majority of miners > and Bitcoin users must affect those software modifications; otherwise, > such miners and Bitcoin users would become substantially less relevant > to the overall Bitcoin Network. Since the Bitcoin Network’s inception, > modifications to the Bitcoin Network have been accepted by the vast > majority of users and miners, ensuring that the Bitcoin Network remains > a coherent economic system; however, a developer or group of developers > could potentially propose a modification to the Bitcoin Network that is > not accepted by a vast majority of miners and users, but that is > nonetheless accepted by a substantial plurality of miners and users. In > such a case, and if the modification is not compatible with the dominant > implementation of Bitcoin Network software, a deviation or “hard fork” > in the Blockchain could develop, and two separate Bitcoin Networks could > result, one running the pre-modification software program and the other > running the modified version (i.e., a second “Bitcoin network”). Such a > hard fork in the Blockchain typically would be addressed by > community-led efforts to reunite the forked Blockchains, and several > prior forks have been resolved successfully. However, a Digital Asset > network fork of this kind could materially and adversely affect the > perceived value of bitcoin as reflected on one or both incompatible > Blockchains. The Sponsor and the Custodian will work with members of the > Bitcoin Network, including the core developers, to attempt to resolve > any Digital Asset network fork promptly and in a manner that is > protective of the Trust’s assets. This kind of split in the Bitcoin > Network also could materially and adversely affect the Gemini Exchange > Auction Price (and thus the value of the Shares) and, in the worst case > scenario, harm the sustainability of the Bitcoin Network’s economy. > Additionally, a Digital Asset hard fork will decrease the number of > users and miners available to each fork of the Blockchain as the users > and miners on each fork Blockchain will not be assessable to the other > Blockchain. > > Because proposed modifications are affected at a particular Blockchain > block number, it is possible to forecast the approximate date and time > of its implementation. In the event of an upcoming modification to the > > > > 19 > > Table of Contents > > Bitcoin Network that could potentially result in a hard fork with two > separate and incompatible Bitcoin Networks, the Custodian, in > consultation with the Sponsor, will elect to support the Bitcoin Network > that has the greatest cumulative computational difficulty for the > forty-eight (48) hour period following a given hard fork, in order to > engage in bitcoin transactions and the valuation of bitcoin. During this > forty-eight (48) hour period and for the twenty-four (24) hour period > prior to the anticipated fork, creation and redemption of baskets will > be halted. The greatest cumulative computational difficulty is defined > as the total threshold number of hash attempts required to mine all > existing blocks in the respective Blockchain, accounting for potential > differences in relative hash difficulty. If the Custodian, in > consultation with the Sponsor, is unable to make a conclusive > determination about which Bitcoin Network has the greatest cumulative > computational difficulty after forty-eight (48) hours, or determines in > good faith that this is not a reasonable criterion upon which to make a > determination, the Custodian will support the Bitcoin Network which it > deems in good faith is most likely to be supported by a greater number > of users and miners. Under the terms of the Trust Custody Agreement, the > Trust may be required to indemnify the Custodian for any losses arising > in connection with its determination to elect the Bitcoin Network with > the greatest computational difficulty in the event of a hard fork. > > If, at or after the time of such election, users’ and miners’ support of > the selected Bitcoin Network diminishes, this could adversely affect the > value of the Trust’s bitcoin and the value of an investment in the > Shares. --- 1911,1916d2023 ----------------------- < < < 18 < < Table of Contents < --- 1924,1925c2031,2032 ----------------------- < bitcoin, as measured at 4:00 p.m. Eastern Time using Gemini Exchange < Spot Price on each Business Day, less the Trust’s liabilities (which > bitcoin, as measured at 4:00 p.m. Eastern Time using the Gemini Exchange > Auction Price on each Business Day, less the Trust’s liabilities (which --- 1927,1930c2034,2037 ----------------------- < are directly related to the value of bitcoin held by the Trust. The < price of bitcoin has fluctuated widely over the past three (3) years. < Several factors may affect the Gemini Exchange Spot Price, including, < but not limited to: > is directly related to the value of bitcoin held by the Trust. The price > of bitcoin has fluctuated widely over the past three (3) years. Several > factors may affect the Gemini Exchange Auction Price, including, but not > limited to: --- 1935c2042 ----------------------- < Global bitcoin supply; > Total bitcoin in existence; --- 1944,1945c2051,2060 ----------------------- < and holding of bitcoin is safe and secure, and the lack of regulatory < restrictions on their use; > and holding of bitcoin is safe and secure, the lack of regulatory > restrictions on their use, and the reputation regarding the use of > bitcoin for illicit purposes; > > > • > > Global bitcoin supply, which is influenced by similar factors as global > bitcoin demand, in addition to fiat currency needs by miners and > taxpayers who may liquidate bitcoin holdings to meet tax obligations; --- 1950c2065,2074 ----------------------- < Investors’ expectations with respect to the rate of inflation; > Investors’ expectations with respect to the rate of inflation of fiat > currencies; > > > > 20 > > Table of Contents • > > Investors’ expectations with respect to bitcoin’s rate of deflation; --- 1972c2096,2105 ----------------------- < Interruptions in service from or failures of the Gemini Exchange; > Interruptions in service from or failures of the Gemini Exchange > (interruptions or failures at other Bitcoin Exchanges may also have an > indirect affect); > > > • > > Theft, or news of such theft, of bitcoin from individuals or bitcoin > retail and service providers, including companies that buy, sell, > process payments or store bitcoin; --- 1994a2128,2132 ----------------------- > The availability of companies providing bitcoin-related services; > > > • > --- 2000a2139,2144 ----------------------- > Increased competition from other forms of Digital Assets or means of > payments; > > > • > --- 2002c2146 ----------------------- < situations; and > situations; --- 2008c2152,2158 ----------------------- < bitcoin will soon change. > bitcoin will soon change; and > > > • > > Fees, including miners’ fees, associated with processing bitcoin > transactions. --- 2011c2161 ----------------------- < bitcoin will maintain their long-term value in terms of purchasing power > bitcoin will maintain its long-term value in terms of purchasing power --- 2018,2020c2168,2170 ----------------------- < The Gemini Exchange Spot Price may be subject to momentum pricing, which < may lead to greater volatility and adversely affect an investment in the < Shares. > The Gemini Exchange Auction Price may be subject to momentum pricing, > which may lead to greater volatility and adversely affect an investment > in the Shares. --- 2027c2177 ----------------------- < inflating and making more volatile the value of a bitcoin. As a result, > inflating the price of bitcoin and making it more volatile. As a result, --- 2029,2030c2179,2180 ----------------------- < investor confidence in future appreciation in the Gemini Exchange Spot < Price, which could adversely affect an investment in the Shares. > investor confidence in future appreciation in the Gemini Exchange > Auction Price, which could adversely affect an investment in the Shares. --- 2036,2038c2186,2194 ----------------------- < October 8, 2015. The data inputs include trade time, price and volume. < The calculation of the Gemini Exchange Spot Price as of 4:00 p.m. < Eastern > October 8, 2015. The calculation of the Gemini Exchange Auction Price as > of 4:00 p.m. Eastern Time on each Business Day will be used for the > calculation of the Trust’s NAV. See “Overview of the Bitcoin Industry > and Market—Bitcoin Value.” > > The price of bitcoin on public Bitcoin Exchanges has a limited, six-year > history. During such history, bitcoin prices on the Bitcoin Exchange > Market as a whole, and on Bitcoin Exchanges individually, have been > volatile --- 2042c2198 ----------------------- < 19 > 21 --- 2046,2060c2202,2212 ----------------------- < time on each Business Day will be used for the calculation of the < Trust’s NAV. See “Overview of the Bitcoin Industry and Market—Bitcoin < Value.” < < The price of bitcoin on public Bitcoin Exchanges has a limited, six-year < history. During such history, bitcoin prices on the Bitcoin Exchange < Market as a whole, and on Bitcoin Exchanges individually, have been < volatile and subject to influence by many factors including the levels < of liquidity on Bitcoin Exchanges. Even the largest Bitcoin Exchanges < have been subject to operational interruption (e.g., the temporary < shutdown of Mt. Gox due to distributed denial of service attacks < (“DDoS”) attacks by hackers and/or malware, and its permanent closure in < February 2014), limiting the liquidity of bitcoin on the Bitcoin < Exchange Market and resulting in volatile prices and a reduction in < confidence in the Bitcoin Network and the Bitcoin Exchange Market. > and subject to influence by many factors including the levels of > liquidity on Bitcoin Exchanges. Even the largest Bitcoin Exchanges have > been subject to operational interruption (e.g., the temporary shutdown > of Mt. Gox due to distributed denial of service attacks (“DDoS”) attacks > by hackers and/or malware, and its permanent closure in February 2014). > In addition, in August 2016, a security breach at Bitfinex, a large, > Hong Kong based Bitcoin Exchange, resulted in the loss of one hundred > twenty thousand (120,000) bitcoin. Events such as these may limit the > liquidity of bitcoin on the Bitcoin Exchange Market and result in > volatile prices and a reduction in confidence in the Bitcoin Network and > the Bitcoin Exchange Market. --- 2117c2269 ----------------------- < Exchange Spot Price and can adversely affect an investment in the > Exchange Auction Price and can adversely affect an investment in the --- 2124c2276,2281 ----------------------- < regarding their ownership structure, > regarding their ownership structure, management teams, corporate > practices or regulatory compliance. As a result, the marketplace may > lose confidence in or may experience problems relating to Bitcoin > Exchanges, including prominent exchanges handling a significant portion > of the volume of bitcoin trading. Bitcoin Exchanges may impose daily, > weekly, --- 2128c2285 ----------------------- < 20 > 22 --- 2132,2157c2289,2310 ----------------------- < management teams, corporate practices or regulatory compliance. As a < result, the marketplace may lose confidence in, or may experience < problems relating to, Bitcoin Exchanges, including prominent exchanges < handling a significant portion of the volume of bitcoin trading. Bitcoin < Exchanges may impose daily, weekly, monthly or customer-specific < transaction or distribution limits or suspend withdrawals entirely, < rendering the exchange of virtual currency for fiat currency difficult < or impossible. Bitcoin Exchanges generally operate outside of the United < States. An investor may have difficulty in successfully pursuing claims < in the courts of such countries or enforcing in the courts of such < countries a judgment obtained in another country. In general, certain < less developed countries lack fully developed legal systems and bodies < of commercial law and practices normally found in countries with more < developed market economies. The participation in Bitcoin Exchanges < requires users to take on credit risk by transferring bitcoin from a < personal account to a third party’s account. < < The Gemini Exchange Spot Price is used to determine the NAV as measured < at 4:00 p.m., Eastern time on each Business Day. The Gemini Exchange, an < affiliate of the Sponsor, is owned and operated by Gemini Trust Company, < LLC, the Trust’s Custodian. The Custodian is a fiduciary and must meet < the capitalization, compliance, anti-money laundering, consumer < protection and cyber security requirements as set forth by the NYSDFS. < As a facility of a New York State-chartered limited liability trust < company, the Gemini Exchange operates under the direct supervision and < regulatory authority of the NYSDFS. > monthly or customer-specific transaction or distribution limits, or the > Bitcoin Exchanges may suspend withdrawals entirely, rendering the > exchange of virtual currency for fiat currency difficult or impossible. > Bitcoin Exchanges generally operate outside of the United States. An > investor may have difficulty in successfully pursuing claims in the > courts of such countries or enforcing in the courts of such countries a > judgment obtained in another country. In general, certain less developed > countries lack fully developed legal systems and bodies of commercial > law and practices normally found in countries with more developed market > economies. The participation in Bitcoin Exchanges requires users to take > on credit risk by transferring bitcoin from a personal account to a > third party’s account. > > The Gemini Exchange Auction Price is used to determine the NAV as > measured at 4:00 p.m. Eastern Time on each Business Day. The Gemini > Exchange, an affiliate of the Sponsor, is owned and operated by Gemini > Trust Company, LLC, the Trust’s Custodian. The Custodian is a fiduciary > and must meet the capitalization, compliance, anti-money laundering, > consumer protection and cyber security requirements as set forth by the > NYSDFS. As a facility of a New York State-chartered limited liability > trust company, the Gemini Exchange operates under the direct supervision > and regulatory authority of the NYSDFS. --- 2178,2182c2331,2335 ----------------------- < the Gemini Exchange Spot Price. Furthermore, the closure or temporary < shutdown of the Gemini Exchange may result in a loss of confidence in < the Administrator’s ability to determine the NAV on a Business Day. < These potential consequences of a Bitcoin Exchange’s failure could < adversely affect an investment in the Shares. > the pricing on the Gemini Exchange. Furthermore, the closure or > temporary shutdown of the Gemini Exchange may result in a loss of > confidence in the Administrator’s ability to calculate the NAV on a > Business Day. These potential consequences of a Bitcoin Exchange’s > failure could adversely affect an investment in the Shares. --- 2201,2203c2354,2355 ----------------------- < the protocol’s schedule. As of April 28, 2016, approximately fifteen < million, four hundred eighty-two thousand three hundred (15,482,300) < bitcoin had been created. > the protocol’s schedule. As of February 1, 2017, approximately sixteen > million, one hundred thousand (16,100,000) bitcoin had been created. --- 2209c2361,2364 ----------------------- < market for bitcoin. Such an impact could affect > market for bitcoin. Such an impact could affect the Gemini Exchange > Auction Price, which would directly affect the price at which the Shares > are traded or the price of future Baskets created or redeemed by the > Trust. --- 2213c2368 ----------------------- < 21 > 23 --- 2217,2223c2372,2374 ----------------------- < the Gemini Exchange Spot Price, which would directly affect the price at < which the Shares are traded on BATS or the price of future Baskets < created or redeemed by the Trust. < < As of [ ], 2016, the Trust held approximately [10,000] bitcoin that it < acquired in the sale of the Seed Baskets on [ ], 2016, representing < approximately 0.[06] percent of the [ ], 2016 world bitcoin supply. The > As of [ ], 2017, the Trust held approximately [10,000] bitcoin that it > acquired in the sale of the Seed Baskets on [ ], 2017, representing > approximately 0.[06] percent of the [ ], 2017 world bitcoin supply. The --- 2226c2377 ----------------------- < impact on the Gemini Exchange Spot Price, thereby affecting Share > impact on the Gemini Exchange Auction Price, thereby affecting Share --- 2231c2382 ----------------------- < BATS and the Bitcoin Exchange Market. > Bats and the Bitcoin Exchange Market. --- 2234,2235c2385,2387 ----------------------- < between BATS and various Bitcoin Exchanges, including the Gemini < Exchange. While BATS is open for trading in the Shares for a limited > between Bats and various Bitcoin Exchanges, including the Gemini > Exchange. Additionally, Shares may be traded at other times and in other > venues. While Bats is open for trading in the Shares for a limited --- 2242c2394 ----------------------- < BATS is open but large Bitcoin Exchanges (or a substantial number of > Bats is open but large Bitcoin Exchanges (or a substantial number of --- 2262,2264c2414,2416 ----------------------- < Exchange Spot Price and the most recent Share price. To the extent that < the price of bitcoin in the Bitcoin Exchange Market, and the value of < bitcoin as measured by the Gemini Exchange Spot Price, moves > Exchange Auction Price and the most recent Share price. To the extent > that the price of bitcoin in the Bitcoin Exchange Market, and the value > of bitcoin as measured by pricing on the Gemini Exchange, moves --- 2294c2446 ----------------------- < 22 > 24 --- 2300c2452 ----------------------- < affect the Gemini Exchange Spot Price and Share trading prices. These > affect the Gemini Exchange Auction Price and Share trading prices. These --- 2312,2313c2464,2465 ----------------------- < decline immediately after Baskets are created. If the Gemini Exchange < Spot Price declines, the trading price of the Shares will generally also > decline immediately after Baskets are created. If pricing on the Gemini > Exchange declines, the trading price of the Shares will generally also --- 2321,2328c2473,2474 ----------------------- < market participants. If the Gemini Exchange Spot Price declines, the < trading price of the Shares will generally also decline. To monitor this < issue, under applicable BATS rules, the Sponsor has created an < independent committee to consider, at least quarterly, whether the < holdings of the Trust, and the buying and selling activities of < Authorized Participants in connection with creating and redeeming < Shares, have had a material impact on the market price of the Shares or < bitcoin. > market participants. If the Gemini Exchange Auction Price declines, the > trading price of the Shares will generally also decline. --- 2343c2489 ----------------------- < The Gemini Exchange Spot Price may be affected by the sale of other > The Gemini Exchange Auction Price may be affected by the sale of other --- 2352c2498 ----------------------- < negatively affect the Gemini Exchange Spot Price and the NAV. > negatively affect the Gemini Exchange Auction Price and the NAV. --- 2355,2356c2501,2502 ----------------------- < which could result in a reduction in the Gemini Exchange Spot Price and < adversely affect an investment in the Shares. > which could result in a reduction in the Gemini Exchange Auction Price > and adversely affect an investment in the Shares. --- 2366c2512 ----------------------- < Gemini Exchange Spot Price and adversely affect an investment in the > Gemini Exchange Auction Price and adversely affect an investment in the --- 2369,2374d2514 ----------------------- < < < 23 < < Table of Contents < --- 2386,2415c2526,2557 ----------------------- < the largest number of miners and, consequently, the largest aggregate < hashrate securing the Blockchain and verifying its transactions. See < “Overview of the Bitcoin Industry and Market—Cryptographic Security Used < in the Bitcoin Network.” Having a large mining network results in < greater user confidence regarding the security and long-term stability < of a Digital Asset’s network and its block chain; as a result, the < advantage of more users and miners makes a Digital Asset more secure, < which makes it more attractive to new users and miners, resulting in a < network effect that strengthens the first-to-market advantage. < < As of May 2016, there were approximately seven hundred (700) alternate < Digital Assets (or altcoins) tracked by CoinMarketCap.com, having a < total market capitalization (including the market capitalization of < bitcoin) of approximately $8.41 billion, using market prices and total < available supply of each Digital Asset. This included altcoins using a < “proof of work” mining structure similar to Bitcoin, and those using a < “proof of stake” transaction verification system that is different than < Bitcoin’s mining system (e.g., Peercoin, Bitshares and NXT). As of May < 2, 2016, bitcoin’s $6.87 billion market capitalization was nearly eight < (8) times larger than the $790 million market cap of Ether (the second < largest proof of work Digital Asset). As of May 13, 2016, it can be < estimated that the amount of computing resources devoted to Bitcoin is < approximately thirty (30) times larger than the amount of resources < devoted to Litecoin based on the U.S. Dollar value of all mining rewards < in the previous twenty-four hours. As of May 10, 2016, Litecoin had a < market cap of approximately $177 million according to CoinMarketCap.com. < < Despite the marked first-mover advantage of the Bitcoin Network over < other Digital Assets, it is possible that another Digital Asset could < become materially popular due to either a perceived or exposed > the largest > > > > 25 > > Table of Contents > > number of miners and, consequently, the largest aggregate hashrate > securing the Blockchain and verifying its transactions. See “Overview of > the Bitcoin Industry and Market—Cryptographic Security Used in the > Bitcoin Network.” Having a large mining network results in greater user > confidence regarding the security and long-term stability of a Digital > Asset’s network and its block chain; as a result, the advantage of more > users and miners makes a Digital Asset more secure, which makes it more > attractive to new users and miners, resulting in a network effect that > strengthens the first-to-market advantage. > > As of February 1, 2017, there were approximately six hundred and fifty > (650) alternate Digital Assets (or altcoins) tracked by CoinMarketCap, > having a total market capitalization (including the market > capitalization of bitcoin) of approximately $17 billion, using market > prices and total available supply of each Digital Asset. This included > altcoins using a “proof of work” mining structure similar to Bitcoin, > and those using a “proof of stake” transaction verification system that > is different than Bitcoin’s mining system (e.g., Peercoin, Bitshares and > NXT). As of February 1, 2017, bitcoin’s $15.4 billion market > capitalization was more than sixteen (16) times the size of the $900 > million market cap of Ether, the second largest proof-of-work Digital > Asset. Despite the marked first-mover advantage of the Bitcoin Network > over other Digital Assets, it is possible that another Digital Asset > could become materially popular due to either a perceived or exposed --- 2441c2583 ----------------------- < The Trust Invests Solely in Bitcoin. > The Trust invests solely in bitcoin. --- 2443,2462c2585,2598 ----------------------- < Other than cash held for working capital purposes, the Trust will invest < solely in bitcoin, which is a new and highly speculative asset. The < bitcoin held by the Trust is commingled and investors have no specific < rights to any specific bitcoin. In the event of the Trust’s insolvency, < its assets may be inadequate to satisfy a claim by an < < < < 24 < < Table of Contents < < investor. The Trust is not actively “managed” by traditional methods and < it will not take any steps to minimize volatility or manage risk. No < guarantee or representation is made that this investment program will be < successful. Bitcoin is volatile and investment results may vary < substantially over time. The Sponsor will not wind down the Trust based < solely on a drop in the trading price of bitcoin, regardless of how < significant. No assurance can be made that profits will be achieved or < that substantial or complete losses will not be incurred. > Other than cash temporarily held to pay the Trust’s expenses or for > similar purposes, the Trust will invest solely in bitcoin, which is a > new and highly speculative asset. The bitcoin held by the Trust is > commingled and investors have no specific rights to any specific > bitcoin. In the event of the Trust’s insolvency, its assets may be > inadequate to satisfy a claim by an investor. The Trust is not actively > “managed” by traditional methods and it will not take any steps to > minimize volatility or manage risk. No guarantee or representation is > made that this investment program will be successful. Bitcoin is > volatile and investment results may vary substantially over time. The > Sponsor will not wind down the Trust based solely on a drop in the > trading price of bitcoin, regardless of how significant. No assurance > can be made that profits will be achieved or that substantial or > complete losses will not be incurred. --- 2470,2473c2606,2617 ----------------------- < issues with respect to the mechanics of the Trust’s operations and the < trading of the Shares that could have an adverse effect on an investment < in the Shares. In addition, although the Trust is not actively “managed” < by traditional methods, to the extent that unanticipated operational or > issues with > > > > 26 > > Table of Contents > > respect to the mechanics of the Trust’s operations and the trading of > the Shares that could have an adverse effect on an investment in the > Shares. In addition, although the Trust is not actively “managed” by > traditional methods, to the extent that unanticipated operational or --- 2481,2491c2625,2635 ----------------------- < The Shares may trade on BATS at, above or below the NAV. The NAV will < fluctuate with changes in the market value of the Trust’s assets. The < trading price of the Shares will fluctuate in accordance with changes in < the NAV as well as market supply and demand, which will be driven in < large part by the price of bitcoin. The price difference may be due, in < large part, to the fact that supply and demand forces at work in the < secondary trading market for the Shares are closely related, but not < identical, to the same forces influencing the Gemini Exchange Spot < Price. Consequently, an Authorized Participant may be able to create or < redeem a Basket of Shares at a discount or a premium to the public < trading price per Share. > The Shares may trade at, above or below the NAV. The NAV will fluctuate > with changes in the market value of the Trust’s assets. The trading > price of the Shares will fluctuate in accordance with changes in the NAV > as well as market supply and demand, which will be driven in large part > by the price of bitcoin. The price difference may be due, in large part, > to the fact that supply and demand forces at work in the secondary > trading market for the Shares are closely related, but not identical, to > the same forces influencing pricing on the Gemini Exchange. > Consequently, an Authorized Participant may be able to create or redeem > a Basket of Shares at a discount or a premium to the public trading > price per Share. --- 2503,2508c2647,2652 ----------------------- < If Authorized Participants are able to purchase or sell large amounts of < bitcoin in the open market at prices that are different than the Gemini < Exchange Spot Price, the arbitrage mechanism intended to keep the price < of the Shares closely linked to the Gemini Exchange Spot Price may not < function properly and the Shares may trade at a discount or premium to < the NAV. > If Authorized Participants are able to purchase or sell large quantities > of bitcoin in the open market at prices that are different than the > Gemini Exchange Auction Price, the arbitrage mechanism intended to keep > the price of the Shares closely linked to the Gemini Exchange Auction > Price may not function properly and the Shares may trade at a discount > or premium to the NAV. --- 2511c2655 ----------------------- < the Shares closely linked to the Gemini Exchange Spot Price may not > the Shares closely linked to the Gemini Exchange Auction Price may not --- 2513,2515c2657,2661 ----------------------- < sell large amounts of bitcoin in the open market at prices that are < materially higher or lower than the Gemini Exchange Spot Price. Although < the Gemini Exchange Spot Price is designed to accurately capture the > sell large quantities of bitcoin in the open market at prices that are > materially higher or lower than the Gemini Exchange Auction Price. > Authorized Participants are permitted to, but not obligated to, > participate in the 4:00 p.m. auction on the Gemini Exchange. Although > the Gemini Exchange Auction Price is designed to accurately capture the --- 2520,2531c2666,2694 ----------------------- < the Gemini Exchange Spot Price. Furthermore, while the Gemini Exchange < provides data about the price of a bitcoin at any given time, the prices < on other Bitcoin Exchanges may not be equal to the value of a bitcoin as < represented by the Gemini Exchange Spot Price. It is possible that the < price of bitcoin on other Bitcoin Exchanges used by an Authorized < Participant could be materially higher or lower than the Gemini Exchange < Spot Price. Under either such circumstance, the arbitrage mechanism will < function to link the price of the Shares to the prices at which < Authorized Participants are able to purchase or sell large amounts of < bitcoin. To the extent such prices differ materially from the Gemini < Exchange Spot Price, the price of the Shares may no longer track, < whether temporarily or over time, the Gemini Exchange Spot Price, > the Gemini Exchange Auction Price. Furthermore, while the Gemini > Exchange provides data about the price of bitcoin at any given time, the > prices on other Bitcoin Exchanges may not be equal to the value of a > bitcoin as represented by the Gemini Exchange Auction Price. It is > possible that the price of bitcoin on other Bitcoin Exchanges used by an > Authorized Participant could be materially higher or lower than the > Gemini Exchange Auction Price. Under either such circumstance, the > arbitrage mechanism will function to link the price of the Shares to the > prices at which Authorized Participants are able to purchase or sell > large quantities of bitcoin. To the extent such prices differ materially > from the Gemini Exchange Auction Price, the price of the Shares may no > longer track, whether temporarily or over time, the Gemini Exchange > Auction Price, which could adversely impact an investment in the Trust > by reducing investors’ confidence in the Shares’ ability to track the > market price of bitcoin and the Gemini Exchange Auction Price. Since the > auction on the Gemini Exchange was first implemented on September 21, > 2016 through February 1, 2017, the Gemini Exchange Auction Price has > deviated from the median worldwide U.S. dollar-denominated Bitcoin > Exchange price at 4:00 p.m. Eastern Time by 0.27% on average and 0.91% > at most (0.16% on average and 0.74% at most in the U.S.) on Business > Days. The price of bitcoin achieved by the Trust may be affected > generally by a wide variety of complex and difficult to predict factors > such as bitcoin supply and demand; rewards and transaction fees for the > recording of transactions on the block chain; availability and access to > virtual currency service providers (such as payment processors), > exchanges, miners or other Bitcoin users and market participants; > perceived or actual Bitcoin network or Bitcoin security vulnerability; > inflation levels; fiscal policy; interest rates; and political, natural > and economic events. --- 2535c2698 ----------------------- < 25 > 27 --- 2539,2555d2701 ----------------------- < which could adversely impact an investment in the Trust by reducing < investors’ confidence in the Shares’ ability to track the market price < of bitcoin and the Gemini Exchange Spot Price. If the Trust accepts cash < from Authorized Participants for creations, or agrees to provide cash to < redeeming Authorized Participants, there is no guarantee that the Trust < will be able to achieve a better than average market price for bitcoin < or will purchase bitcoin at the most favorable price available. The < price of bitcoin achieved by the Trust may be affected generally by a < wide variety of complex and difficult to predict factors such as bitcoin < supply and demand; rewards and transaction fees for the recording of < transactions on the block chain; availability and access to virtual < currency service providers (such as payment processors), exchanges, < miners or other Bitcoin users and market participants; perceived or < actual Bitcoin network or Bitcoin security vulnerability; inflation < levels; fiscal policy; interest rates; and political, natural and < economic events. < --- 2559c2705 ----------------------- < Exchange Spot Price may not exist and, as a result, the price of the > Exchange Auction Price may not exist and, as a result, the price of the --- 2563,2574c2709,2720 ----------------------- < on timely transfers of bitcoin to and from the custody accounts < maintained by the Custodian) encounter any unanticipated difficulties, < including, but not limited to, the Trust’s inability in the future to < obtain regulatory approvals for the offer and sale of additional Shares < after the present offering is completed, potential market participants < who would otherwise be willing to purchase or redeem Baskets to take < advantage of any arbitrage opportunity arising from discrepancies < between the price of the Shares and the price of the underlying bitcoin < may not take the risk that, as a result of those difficulties, they may < not be able to realize the profit they expect. If this is the case, the < liquidity of the Shares may decline and the price of the Shares may < fluctuate independently of the Gemini Exchange Spot Price and may fall. > on timely transfers of bitcoin to and from the accounts maintained by > the Custodian) encounter any unanticipated difficulties, including, but > not limited to, the Trust’s inability in the future to obtain regulatory > approvals for the offer and sale of additional Shares after the present > offering is completed, potential market participants who would otherwise > be willing to purchase or redeem Baskets to take advantage of any > arbitrage opportunity arising from discrepancies between the price of > the Shares and the price of the underlying bitcoin may not take the risk > that, as a result of those difficulties, they may not be able to realize > the profit they expect. If this is the case, the liquidity of the Shares > may decline and the price of the Shares may fluctuate independently of > the Gemini Exchange Auction Price and may fall. --- 2578,2579c2724,2725 ----------------------- < the Trust Servicing Agreement, may adversely affect an investment in the < Shares. > the Transfer Agency and Services Agreement, may adversely affect an > investment in the Shares. --- 2581,2591c2727,2737 ----------------------- < Under the Trust Servicing Agreement, the Administrator or Sponsor may < postpone, suspend or reject Creation Basket orders or Redemption Basket < orders, as applicable, for a variety of permitted reasons under certain < circumstances. To the extent such orders are postponed, suspended or < rejected, the arbitrage mechanism resulting from the process through < which Authorized Participants create and redeem Shares directly with the < Trust may fail to closely link the price of the Shares to the value of < the underlying bitcoin, as measured using the Gemini Exchange Spot < Price. If this is the case, the liquidity of the Shares may decline and < the price of the Shares may fluctuate independently of the Gemini < Exchange Spot Price and may fall. > The Administrator or Sponsor may postpone, suspend or reject Creation > Basket orders or Redemption Basket orders, as applicable, for a variety > of permitted reasons under certain circumstances. To the extent such > orders are postponed, suspended or rejected, the arbitrage mechanism > resulting from the process through which Authorized Participants create > and redeem Shares directly with the Trust may fail to closely link the > price of the Shares to the value of the underlying bitcoin, as measured > using the Gemini Exchange Auction Price. If this is the case, the > liquidity of the Shares may decline and the price of the Shares may > fluctuate independently of the Gemini Exchange Auction Price and may > fall. --- 2596,2598c2742,2744 ----------------------- < The Cold Storage System has been designed specifically to provide < security for the Trust’s assets, and may be expanded, updated and < altered from time to time. Any effort to expand, update or alter the > The Custodian’s Cold Storage System has been designed specifically to > provide security for the Trust’s assets, and may be expanded, updated > and altered from time to time. Any effort to expand, update or alter the --- 2617c2763,2773 ----------------------- < and the ability of > and the ability of the Cold Storage System to store, accept and > distribute data relating to bitcoin and the public Bitcoin addresses > that the Trust transfers such bitcoin. The Cold Storage System may now > or in the future contain undetected errors, software flaws (i.e., bugs) > or vulnerabilities. Some errors in the Cold Storage System may only be > discovered after a failure in the system’s safekeeping and storage of > the Trust’s bitcoin, which could result in the theft, loss or damage of > the Trust’s assets. Any such theft, loss or damage of the Trust’s > bitcoin would have a negative impact on the value of the Shares for > which the Trust may have no recourse or means of recovery. See “Custody > of the Trust’s Bitcoin” below. --- 2621c2777 ----------------------- < 26 > 28 --- 2625,2636d2780 ----------------------- < the Cold Storage System to store, accept and distribute data relating to < bitcoin and the public Bitcoin addresses that the Trust transfers such < bitcoin. The Cold Storage System may now or in the future contain < undetected errors, software flaws (i.e., bugs) or vulnerabilities. Some < errors in the Cold Storage System may only be discovered after a failure < in the system’s safekeeping and storage of the Trust’s bitcoin, which < could result in the theft, loss or damage of the Trust’s assets. Any < such theft, loss or damage of the Trust’s bitcoin would have a negative < impact on the value of the Shares for which the Trust may have no < recourse or means of recovery. See “Custody of the Trust’s Bitcoin” < below. < --- 2680c2824 ----------------------- < internet-connected) protocols reasonably designed to safeguard the > internet-connected) protocols is reasonably designed to safeguard the --- 2685,2687c2829 ----------------------- < act of God will be borne by the Trust, absent gross negligence, willful < misconduct or bad faith on the part of the Sponsor, the Custodian or < their agents. > act of God generally will be borne by the Trust. --- 2701,2715c2843,2849 ----------------------- < or degrade service, < < < < 27 < < Table of Contents < < or sabotage systems change frequently, or may be designed to remain < dormant until a predetermined event and often are not recognized until < launched against a target, the Sponsor may be unable to anticipate these < techniques or implement adequate preventative measures. If an actual or < perceived breach of the Cold Storage System occurs, the market < perception of the effectiveness of the Cold Storage System could be < harmed, which could result in a reduction in the price of the Shares. > or degrade service, or sabotage systems change frequently, or may be > designed to remain dormant until a predetermined event and often are not > recognized until launched against a target, the Sponsor may be unable to > anticipate these techniques or implement adequate preventative measures. > If an actual or perceived breach of the Cold Storage System occurs, the > market perception of the effectiveness of the Cold Storage System could > be harmed, which could result in a reduction in the price of the Shares. --- 2721a2856,2861 ----------------------- > > > 29 > > Table of Contents > --- 2755c2895 ----------------------- < transferred from the Trust Custody Account in incorrect amounts or to > transferred from the Trust Custody Account in incorrect quantities or to --- 2783a2924,2940 ----------------------- > Shareholders’ limited rights of legal recourse against the Trust, > Trustee, Sponsor, Administrator, Transfer Agent and Custodian and the > Trust’s lack of insurance protection expose the Trust and its > Shareholders to the risk of loss of the Trust’s bitcoin for which no > person is liable. > > The Trust does not currently intend to insure its bitcoin. The Custodian > does, however, maintain insurance in the form of a fidelity bond with > regard to its custodial business on such terms and conditions as it > considers appropriate in connection with its custodial obligations and > will be responsible for all costs, fees and expenses arising from the > insurance policy or policies. The Custodian’s statutorily required > fidelity bond coverage includes, among other things, insurance against > employee theft, computer fraud, and funds transfer fraud; this coverage > is subject to certain terms, conditions, and exclusions. This fidelity > bond has been in effect since > --- 2786c2943 ----------------------- < 28 > 30 --- 2790,2813c2947,2958 ----------------------- < Shareholders’ limited rights of legal recourse against the Trust, < Trustee, Sponsor, Administrator, Trust Agency Service Provider and < Custodian and the Trust’s lack of insurance protection expose the Trust < and its Shareholders to the risk of loss of the Trust’s bitcoin for < which no person is liable. < < The Trust will not insure its bitcoin. The Custodian will maintain < insurance with regard to its custodial business on such terms and < conditions as it considers appropriate in connection with its custodial < obligations and will be responsible for all costs, fees and expenses < arising from the insurance policy or policies. The Trust will not be a < beneficiary of any such insurance and does not have the ability to < dictate the existence, nature or amount of coverage. Therefore, < Shareholders cannot be assured that the Custodian will maintain adequate < insurance or any insurance with respect to the bitcoin held by the < Custodian on behalf of the Trust. Furthermore, Shareholders’ recourse < against the Trust, Custodian and Sponsor under [New York] law governing < their custody operations is limited. Similarly, Shareholders’ recourse < against the Administrator and Trust Agency Service Provider for the < services they provide to the Trust, including those relating to the < provision of instructions relating to the movement of bitcoin, is < limited. Consequently, a loss may be suffered with respect to the < Trust’s bitcoin which is not covered by insurance and for which no < person is liable in damages. > October 1, 2015. The Trust will not be a beneficiary of any such > insurance and does not have the ability to dictate the existence, nature > or amount of coverage. Therefore, Shareholders cannot be assured that > the Custodian will maintain adequate insurance or any insurance with > respect to the bitcoin held by the Custodian on behalf of the Trust. > Furthermore, Shareholders’ recourse against the Trust, Custodian and > Sponsor under New York law governing their custody operations is > limited. Similarly, Shareholders’ recourse against the Administrator and > Transfer Agent for the services they provide to the Trust is limited. > Consequently, a loss may be suffered with respect to the Trust’s bitcoin > which is not covered by insurance and for which no person is > contractually liable in damages. --- 2825c2970 ----------------------- < Risks of Uninsured Losses. > No Insurance. --- 2827,2833c2972,2980 ----------------------- < It may not be possible, either because of a lack of available policies < or because of prohibitive cost, for the Trust to obtain insurance of any < type that would cover losses associated with bitcoin. In general, the < Trust anticipates that any losses related to its activities and < operations will be uninsurable, or the cost of insuring against these < losses may not be economically justifiable. If an uninsured loss occurs < or a loss exceeds policy limits, the Trust could lose all of its assets. > The Trust does not currently intend to attempt to insure its bitcoin, > but it may elect to do so upon the establishment of a viable insurance > market for bitcoin. Because of a lack of available coverage and the > prohibitive cost of coverage, it is not practicable for the Trust to > obtain insurance of any type that would cover losses associated with > bitcoin at this time. The Sponsor will endeavor to stay apprised of > developments in the insurance market and will evaluate any such > insurance plans which may insure the assets of the Trust with > economically practicable terms and rates. --- 2838c2985,2986 ----------------------- < the market value of the bitcoin at the time the fraud is discovered. > the market value of the bitcoin lost or damaged at the time the fraud is > discovered. --- 2842,2847c2990,2994 ----------------------- < the direct result of its own gross negligence, willful misconduct or bad < faith in the performance of its administrative custodial duties. Any < such liability is further limited to the market value of the bitcoin < held in the Trust Custody Account at the time such gross negligence, bad < faith or willful misconduct is discovered by the Administrator or < Sponsor on behalf of the Trust. > the direct result of its own fraud, gross negligence, willful misconduct > or bad faith in the performance of its administrative custodial duties. > Any such liability is further limited to the market value of the bitcoin > lost or damaged at the time such fraud, gross negligence, bad faith or > willful misconduct is discovered by the Sponsor on behalf of the Trust. --- 2851,2857c2998,3005 ----------------------- < under the Trust Agreement by reason of any cause beyond its reasonable < control, including acts of God, war or terrorism. The Custodian will < also not be liable for any system failure or third-party penetration of < the Cold Storage System, unless such system failure or third-party < penetration is the result of gross negligence, bad faith or willful < misconduct on the part of the Custodian. As a result, the recourse of < the Trust or the investor, under [New York] law, is limited. > under the Trust Custody Agreement by reason of any cause beyond its > reasonable control, including acts of God, war or terrorism. The > Custodian will also not be liable for any system failure or third-party > penetration of the Cold Storage System, unless such system failure or > third-party penetration is the result of fraud, gross negligence, bad > faith or willful misconduct on the part of the Custodian. As a result, > the recourse of the Trust or any investor in the Trust, under New York > law, is limited. --- 2859c3007 ----------------------- < Risks Relating to Reliance on Third Party Service Providers. > Risks relating to reliance on third party service providers. --- 2867,2872d3014 ----------------------- < < < 29 < < Table of Contents < --- 2880a3023,3029 ----------------------- > > > > 31 > > Table of Contents > --- 2898,2899c3047,3048 ----------------------- < of the Shares’ daily trading volume on BATS withdraw from participation, < the liquidity of the Shares will likely decrease, which could adversely > of the Shares’ daily trading volume withdraw from participation, the > liquidity of the Shares will likely decrease, which could adversely --- 2905,2907c3054,3056 ----------------------- < develops on BATS and the assets of the Trust do not reach a viable size, < the liquidity of the Shares may be limited or the Trust may be < terminated at the option of the Sponsor. > develops and the assets of the Trust do not reach a viable size, the > liquidity of the Shares may be limited or the Trust may be terminated at > the option of the Sponsor. --- 2914,2923c3063,3064 ----------------------- < market will develop and that the Shares will be liquid on BATS. A < reduction in the liquidity of the Shares on BATS could adversely affect < an investment in the Shares. < < The lack of a market for the Shares may limit the ability of < Shareholders to sell the Shares. < < There has been no market for the Shares, and there can be no assurance < that an active trading market for the Shares will be developed or < maintained. If an active trading market for the Shares does not exist or > market will be developed or maintained and that the Shares will be > liquid. If an active trading market for the Shares does not exist or --- 2925c3066,3067 ----------------------- < adversely affected. > adversely affected. A reduction in the liquidity of the Shares could > adversely affect an investment in the Shares. --- 2927c3069 ----------------------- < BATS may halt trading in the Shares, which would adversely impact > Bats may halt trading in the Shares, which would adversely impact --- 2930c3072 ----------------------- < To the extent that BATS halts trading in the Shares, whether on a > To the extent that Bats halts trading in the Shares, whether on a --- 2939,2941c3081,3083 ----------------------- < Shareholders, such as when the Gemini Exchange Spot Price is lower than < it was at the time when Shareholders purchased their Shares. In such a < case, when the Trust’s bitcoin is sold as part of the Trust’s > Shareholders, such as when the Gemini Exchange Auction Price is lower > than it was at the time when Shareholders purchased their Shares. In > such a case, when the Trust’s bitcoin is sold as part of the Trust’s --- 2943,2953c3085,3089 ----------------------- < less than if the Gemini Exchange Spot Price were higher at the time of < sale. See “Description of the Trust Agreement—Termination of the Trust” < for more information about the termination of the Trust, including when < the termination of the Trust may be triggered by events outside the < direct control of the Sponsor, the Trustee or Shareholders. < < < < 30 < < Table of Contents > less than if the Gemini Exchange Auction Price were higher at the time > of sale. See “Description of the Trust Agreement—Termination of the > Trust” for more information about the termination of the Trust, > including when the termination of the Trust may be triggered by events > outside the direct control of the Sponsor, the Trustee or Shareholders. --- 2958,2964c3094,3097 ----------------------- < As interests in an investment trust, the Shares have none of the < statutory rights normally associated with the ownership of shares of a < corporation (including, for example, the right to bring “oppression” or < “derivative” actions). In addition, the Shares have limited voting and < distribution rights (for example, Shareholders do not have the right to < elect directors and will not receive dividends). See “Description of the < Shares” for a description of the limited rights of Shareholders. > The Shares have limited voting and distribution rights (for example, > Shareholders do not have the right to elect directors and will not > receive dividends). See “Description of the Shares” for a description of > the limited rights of Shareholders. --- 2975c3108 ----------------------- < bitcoin.See “Custody of the Trust’s Bitcoin.” > bitcoin. See “Custody of the Trust’s Bitcoin.” --- 2977,2990d3109 ----------------------- < Each of the Sponsor and the Custodian are responsible for taking such < steps as it determines, in its sole judgment, to be required to maintain < and upgrade the Cold Storage System to protect against failure, hacking, < malware and general security threats. Neither the Sponsor nor the < Custodian is liable to the Trust or to Shareholders for the failure or < penetration of the Cold Storage System absent gross negligence, willful < misconduct or bad faith on the part of such party. To the extent that < the Cold Storage System fails or is penetrated, any loss of the Trust’s < bitcoin or loss of confidence in the Trust’s ability to safeguard its < bitcoin may adversely affect an investment in the Shares. < < The Administrator is solely responsible for determining the price of < bitcoin, and any errors, discontinuance or changes in such valuation < calculations may have an adverse effect on the value of the Shares. --- 2992,2996c3111,3124 ----------------------- < The Administrator will calculate the NAV using the price of bitcoin as < measured at 4:00 p.m. Eastern time using the Gemini Exchange Spot Price < on each Business Day. To the extent that such price of bitcoin and the < resulting NAV is incorrectly calculated, the Administrator will not be < liable for any error and such misreporting of valuation data could > > 32 > > Table of Contents > > The Custodian is responsible for taking such steps as it determines, in > its sole judgment, to be required to establish, maintain and > periodically upgrade the Cold Storage System to ensure the security of > the Trust’s bitcoin. Neither the Sponsor nor the Custodian is liable to > the Trust or to Shareholders for the failure or penetration of the Cold > Storage System absent fraud, gross negligence, willful misconduct or bad > faith on the part of such party. To the extent that the Cold Storage > System fails or is penetrated, any loss of the Trust’s bitcoin or loss > of confidence in the Trust’s ability to safeguard its bitcoin may --- 2998a3127,3138 ----------------------- > The Sponsor is solely responsible for selecting the method of > determining the price of the Trust’s bitcoin, and any errors, > discontinuance or changes in such valuation calculations by the > Administrator may have an adverse effect on the value of the Shares. > > The Administrator will calculate the NAV using the price of bitcoin as > measured using the Gemini Exchange Auction Price on each Business Day, > as provided to the Administrator by the Sponsor. To the extent that such > price of bitcoin and the resulting NAV is incorrectly calculated, the > Administrator will not be liable for any error and such misreporting of > valuation data could adversely affect an investment in the Shares. > --- 3006,3009c3146,3149 ----------------------- < that are not assumed by the Sponsor under the terms of the Trust < Agreement are borne by the Trust and paid through the sale of the < Trust’s bitcoin. Any incurring of extraordinary expenses by the Trust < could adversely affect an investment in the Shares. > that are not assumed by the Sponsor are borne by the Trust and paid > through the sale of the Trust’s bitcoin. Any incurring of extraordinary > expenses by the Trust could adversely affect an investment in the > Shares. --- 3024,3029d3163 ----------------------- < < < 31 < < Table of Contents < --- 3034,3042c3168,3176 ----------------------- < The Administrator will transfer bitcoin held by the Trust to the Trust < Expense Account to pay Trust expenses not assumed by the Sponsor on an < as-needed basis, irrespective of then-current bitcoin prices on the < Bitcoin Exchange Market. The Trust is not actively managed and no < attempt will be made to buy or sell bitcoin to protect against or to < take advantage of fluctuations in the price of bitcoin. Consequently, < the Trust’s bitcoin may be sold at a time when the prices of bitcoin on < the Bitcoin Exchange Market are low, resulting in a negative impact on < the value of the Shares. > The Administrator will instruct the Custodian to transfer bitcoin held > by the Trust to the Trust Expense Account to pay Trust expenses not > assumed by the Sponsor on an as-needed basis, irrespective of > then-current bitcoin prices on the Bitcoin Exchange Market. The Trust is > not actively managed and no attempt will be made to buy or sell bitcoin > to protect against or to take advantage of fluctuations in the price of > bitcoin. Consequently, the Trust’s bitcoin may be sold at a time when > the prices of bitcoin on the Bitcoin Exchange Market are low, resulting > in a negative impact on the value of the Shares. --- 3045,3056c3179,3194 ----------------------- < required to indemnify the Sponsor, the Trustee, the Administrator, the < Trust Agency Service Provider or the Custodian under the Trust < Documents. < < Under the Trust Documents, each of the Sponsor, the Trustee, the < Administrator, the Trust Agency Service Provider and the Custodian has a < right to be indemnified by the Trust for any liability or expense it < incurs without gross negligence, bad faith or willful misconduct on its < part. Therefore, the Sponsor, Trustee, Administrator, Trust Agency < Service Provider or Custodian may require that the assets of the Trust < be sold in order to cover losses or liability suffered by it. Any sale < of that kind would reduce the net asset value of the Trust and the NAV. > required to indemnify the Trustee, the Administrator, the Transfer Agent > or the Custodian under the Trust Documents. > > Under the Trust Documents, each of the Trustee, the Administrator, the > Transfer Agent and the Custodian has a right to be indemnified by the > Trust for any liability or expense it incurs, subject to certain > exceptions. Therefore, the Trustee, Administrator, Transfer Agent, or > Custodian may require that the assets of the Trust be sold in order to > cover losses or liability suffered by it. Any sale of that kind would > reduce the net assets of the Trust and the NAV. > > > > 33 > > Table of Contents --- 3070,3073c3208,3211 ----------------------- < the Trust from operating and force the Administrator to terminate the < Trust and liquidate the Trust’s bitcoin. As a result, an intellectual < property claim against the Trust could adversely affect an investment in < the Shares. > the Trust from operating and force the Sponsor to terminate the Trust > and liquidate the Trust’s bitcoin. As a result, an intellectual property > claim against the Trust could adversely affect an investment in the > Shares. --- 3104,3115c3242,3246 ----------------------- < bitcoin have grown in < < < < 32 < < Table of Contents < < popularity and in market size, the Federal Reserve Board, U.S. Congress < and certain U.S. agencies (e.g., the CFTC, FinCEN and the Federal Bureau < of Investigation) have begun to examine the operations of the Bitcoin < Network, Bitcoin users and the Bitcoin Exchange Market. > bitcoin have grown in popularity and in market size, the Federal Reserve > Board, U.S. Congress and certain U.S. agencies (e.g., the CFTC, FinCEN > and the Federal Bureau of Investigation) have begun to examine the > operations of the Bitcoin Network, Bitcoin users and the Bitcoin > Exchange Market. --- 3123,3153c3254,3288 ----------------------- < and the offering of unregistered securities.4 Commissioners of the CFTC < initially expressed the belief that bitcoin meet the definition of a < commodity and that the CFTC has regulatory authority over futures and < other derivatives based on Digital Assets, subject to facts and < circumstances. The Sponsor also espoused the view that, on balance, the < important features of bitcoin and other Digital Assets are those that < are characteristics of commodities and therefore has referred to and < discussed these assets as such. Additional clarity was obtained on < September 17, 2015, when the CFTC instituted and settled the Coinflip < case. The Coinflip order found that the respondents (i) conducted < activity related to commodity options transactions without complying < with the provisions of the CEA and CFTC regulations, and (ii) operated a < facility for the trading of swaps without registering the facility as a < SEF or DCM. The Coinflip order was significant as it is the first time < the CFTC determined that bitcoin and other virtual currencies are < properly defined as commodities under the CEA. Based on this < determination, the CFTC applied CEA provisions and CFTC regulations that < apply to transactions in commodity options and swaps to the conduct of < the bitcoin derivatives trading platform. Also of significance, is that < the CFTC appears to have taken the position that bitcoin is not < encompassed by the definition of currency under the CEA and CFTC < regulations. The CFTC defined bitcoin and other “virtual currencies” as < “a digital representation of value that functions as a medium of < exchange, a unit of account, and/or a store of value, but does not have < legal tender status in any jurisdiction. Bitcoin and other virtual < currencies are distinct from ‘real’ currencies, which are the coin and < paper money of the United States or another country that are designated < as legal tender, circulate, and are customarily used and accepted as a < medium of exchange in the country of issuance.” To the extent that < bitcoin itself is determined to be a security, commodity future or other < regulated asset, or to the extent that a US or foreign government or > and the offering of unregistered securities.13 As noted above, the CFTC > in the Coinflip order found that the respondents (i) conducted activity > related to commodity options transactions without complying with the > provisions of the CEA and CFTC regulations, and (ii) operated a facility > for the trading of swaps without registering the facility as a SEF or > DCM. The Coinflip order was significant as it is the first time the CFTC > determined that bitcoin and other virtual currencies are properly > defined as commodities under the CEA. Based on this determination, the > CFTC applied CEA provisions and CFTC regulations that apply to > transactions in commodity options and swaps to the conduct of the > bitcoin derivatives trading platform. Also of significance, is that the > CFTC appears to have taken the position that bitcoin is not encompassed > by the definition of currency under the CEA and CFTC regulations. The > CFTC defined bitcoin and other “virtual currencies” as “a digital > representation of value that functions as a medium of exchange, a unit > of account, and/or a store of value, but does not have legal tender > > > 13 > > See supra note 3. > > > > 34 > > Table of Contents > > status in any jurisdiction. Bitcoin and other virtual currencies are > distinct from ‘real’ currencies, which are the coin and paper money of > the United States or another country that are designated as legal > tender, circulate, and are customarily used and accepted as a medium of > exchange in the country of issuance.” To the extent that bitcoin itself > is determined to be a security, commodity future or other regulated > asset, or to the extent that a US or foreign government or --- 3165c3300 ----------------------- < basis” without first registering with the CFTC.5 > basis” without first registering with the CFTC.14 --- 3184,3201c3319,3324 ----------------------- < company, the Custodian operates under the < < < 4 See, supra note 3. 5 See In re BFXNA Inc., No. 16-19 (CFTC June 2, < 2016), available at: < http://www.cftc.gov/idc/groups/public/@lrenforcementactions/documents/legalpleading/enfbfxnaorder060216.pdf. < < < < 33 < < Table of Contents < < direct supervision and regulatory authority of the NYSDFS. The Custodian < is a fiduciary and is required to meet the capitalization, compliance, < anti-money laundering, consumer protection and cyber security < requirements as set forth by the NYSDFS. Additionally, the Custodian is < subject to ongoing supervision by the NYSDFS. > company, the Custodian operates under the direct supervision and > regulatory authority of the NYSDFS. The Custodian is a fiduciary and is > required to meet the capitalization, compliance, anti-money laundering, > consumer protection and cyber security requirements as set forth by the > NYSDFS. Additionally, the Custodian is subject to ongoing supervision by > the NYSDFS. --- 3205,3222c3328,3350 ----------------------- < or form of money,” two CFTC commissioners publicly expressed a belief < that derivatives based on bitcoin are subject to the same regulation as < those based on commodities, and the IRS released guidance treating < bitcoin as property that is not currency for U.S. federal income tax < purposes. Taxing authorities of a number of U.S. states have also issued < their own guidance regarding the tax treatment of bitcoin for state < income or sales tax purposes. On June 28, 2014, the Governor of the < State of California signed into law a bill that removed state-level < prohibitions on the use of alternative forms of currency or value < (including bitcoin). The bill indirectly authorizes bitcoin’s use as an < alternative form of money in the state. In February 2015, a bill was < introduced in the California State Assembly to establish a licensing < regime for businesses engaging in “virtual currencies”. In September < 2015, the bill was ordered to become an inactive file and as of the date < of this registration statement there hasn’t been further consideration < by the California State Assembly. There is a possibility of future < regulatory change altering, perhaps to a material extent, the nature of < an investment in the Shares or the ability of the Trust to continue to > or form of money,” a Florida circuit court judge determined that bitcoin > did not qualify as money or “tangible wealth,” and an opinion from the > U.S. District Court for the Northern District of Illinois identified > Bitcoin as “virtual currency.” Additionally, two CFTC commissioners > publicly expressed a belief that derivatives based on bitcoin are > subject to the same regulation as those based on commodities, and the > IRS released guidance treating bitcoin as property that is not currency > for U.S. federal income tax purposes. Taxing authorities of a number of > U.S. states have also issued their own guidance regarding the tax > treatment of bitcoin for state income or sales tax purposes. On June 28, > 2014, the Governor of the State of California signed into law a bill > that removed state-level prohibitions on the use of alternative forms of > currency or value (including bitcoin). The bill indirectly authorizes > bitcoin’s use as an alternative form of money in the state. In February > 2015, a bill was introduced in the California State Assembly to > establish a licensing regime for businesses engaging in “virtual > currencies.” In September 2015, the bill was ordered to become an > inactive file and as of the date of this registration statement there > hasn’t been further consideration by the California State Assembly. As > of August 2016, the bill was withdrawn from consideration for vote for > the remainder of the year.15 There is a possibility of future regulatory > change altering, perhaps to a material extent, the nature of an > investment in the Shares or the ability of the Trust to continue to --- 3229,3233c3357,3374 ----------------------- < Furthermore, regulatory actions may limit the ability of end-users to < convert bitcoin into fiat currency (e.g., U.S. Dollars) or use bitcoin < to pay for goods and services. Such regulatory actions or policies would < result in a reduction of the Gemini Exchange Spot Price and the price of < the Shares. > Furthermore, regulatory actions may limit the ability of > > > 14 See In re BFXNA Inc., Case No. 16-19 (CFTC June 2, 2016). 15 > > California Assemblymember Matt Dababneh, Statement on the Regulation of > Virtual Currency (Aug. 15, 2016). > > > > 35 > > Table of Contents > > end-users to convert bitcoin into fiat currency (e.g., U.S. Dollars) or > use bitcoin to pay for goods and services. Such regulatory actions or > policies would result in a reduction of the Gemini Exchange Auction > Price and the price of the Shares. --- 3238c3379 ----------------------- < Germany—where the Ministry of Finance has declared bitcoin to be > Germany, where the Ministry of Finance has declared bitcoin to be --- 3241c3382 ----------------------- < currency)—have issued guidance as to how to treat bitcoin, most > currency), have issued guidance as to how to treat bitcoin, most --- 3244,3252c3385,3413 ----------------------- < Bitcoin Network and Bitcoin users. Among those for which preliminary < guidance has been issued in some form, Canada and Taiwan have labeled < bitcoin as a digital or virtual currency, distinct from fiat currency, < while Sweden and Norway are among those to categorize bitcoin as a form < of virtual asset or commodity. In China, a recent government notice < classified bitcoin as legal and “virtual commodities;” however, the same < notice restricted the banking and payment industries from using bitcoin, < creating uncertainty and limiting the ability of Bitcoin Exchanges to < operate in the then-second largest bitcoin market. Since December 2013, > Bitcoin Network and Bitcoin users. > > Among those for which preliminary guidance has been issued in some form, > Canada and Taiwan have labeled bitcoin as a digital or virtual currency, > distinct from fiat currency, while Sweden and Norway are among those to > categorize bitcoin as a form of virtual asset or commodity. In > Australia, a GST (similar to the European value added tax (“VAT”)) is > currently applied to Bitcoin, forcing a ten (10) percent markup on top > of market price, essentially preventing the operation of any Bitcoin > exchange. This may be undergoing a change, however, since the Senate > Economics References Committee and the Productivity Commission > recommended that digital currency be treated as money for GST purposes > to remove the double taxation. The United Kingdom determined that the > VAT will not apply to Bitcoin sales. In China, a recent government > notice classified bitcoin as legal and “virtual commodities;” however, > the same notice restricted the banking and payment industries from using > bitcoin, creating uncertainty and limiting the ability of Bitcoin > Exchanges to operate in the then-second largest bitcoin market. In > January 2016, the People’s Bank of China, China’s central bank, > disclosed that it has been studying a state-backed electronic monetary > system and potentially had plans for its own state-backed electronic > money. In January 2017, the People’s Bank of China announced that it had > found several violations, including margin financing and a failure to > impose anti-money laundering controls, after on-site inspections of two > China-based Bitcoin Exchanges. In response to the Chinese regulator’s > oversight, the three largest China-based Bitcoin Exchanges, OKCoin, > Huobi, and BTC China, started charging trading commission fees to > suppress speculative trading and prevent price swings which resulted in > a significant drop in volume on these exchanges. Since December 2013, --- 3259,3275c3420,3445 ----------------------- < Digital Assets such as bitcoin. In January 2016, the People’s Bank of < China, China’s central bank, disclosed that it has been studying a < state-backed electronic monetary system and potentially had plans for < its own state-backed electronic money. In April 2016, it was reported < that the Russian Finance Ministry is considering proposing regulations < that would prohibit the issuance of all Digital Assets or their use in < exchange for goods or services in Russia. Conversely, regulatory bodies < in some countries such as India and Switzerland have declined to < exercise regulatory authority when afforded the opportunity. In April < 2015, the Japanese Cabinet approved proposed legal changes that would < reportedly treat bitcoin and other Digital Assets as included in the < definition of currency. These regulations would, among other things, < require market participants, including exchanges, to meet certain < compliance requirements and be subject to oversight by the Financial < Services Agency, a Japanese regulator. These changes were approved by < the Japanese Diet in May 2016 and are expected to be effective beginning < in 2017. Various foreign jurisdictions may, in the near future, adopt > Digital Assets such as bitcoin. In July 2016, economists at the Bank of > England advocated that central banks issue their own digital currency, > and the House of Lords and Bank of England started discussing the > feasibility of creating a national virtual currency, the BritCoin. As of > July 2016, Iceland was studying how to create a system in which all > money is created by a central bank, and Canada was beginning to > experiment with a digital version of its currency called CAD-COIN, > intended to be used exclusively for interbank payments. In July 2016, > the Russian Ministry of Finance indicated it supports a proposed law > that bans bitcoin domestically but allows for its use as a foreign > currency. Conversely, regulatory bodies in some countries such as India > and Switzerland have declined to exercise regulatory authority when > afforded the opportunity. In April 2015, the Japanese Cabinet approved > proposed legal changes that would reportedly treat bitcoin and other > Digital Assets as included in the definition of currency. These > regulations would, among other things, require market participants, > including exchanges, to meet certain compliance requirements and be > subject to oversight by the Financial Services Agency, a Japanese > regulator. These changes were approved by the Japanese Diet in May 2016 > and are expected to be effective beginning in 2017. In July 2016, the > European Commission released a draft directive that proposed applying > counter-terrorism and anti-money laundering regulations to virtual > currencies, and, in September 2016, the European Banking authority > advised the European Commission to institute new regulation specific to > virtual currencies, with amendments to existing regulation as a stopgap > measure. Various foreign jurisdictions may, in the near future, adopt --- 3277c3447,3452 ----------------------- < users, particularly Bitcoin Exchanges > users, particularly Bitcoin Exchanges and service providers that fall > within such jurisdictions’ regulatory scope. Such laws, regulations or > directives may conflict with those of the United States and may > negatively impact the acceptance of bitcoin by users, merchants and > service providers outside of the United States and may therefore impede > the growth of the Bitcoin economy. --- 3281c3456 ----------------------- < 34 > 36 --- 3285,3290d3459 ----------------------- < and service providers that fall within such jurisdictions’ regulatory < scope. Such laws, regulations or directives may conflict with those of < the United States and may negatively impact the acceptance of bitcoin by < users, merchants and service providers outside of the United States and < may therefore impede the growth of the Bitcoin economy. < --- 3300c3469 ----------------------- < Although currently bitcoin is not regulated or are lightly regulated in > Although currently bitcoin is not regulated or is lightly regulated in --- 3345,3348c3514,3526 ----------------------- < Virginia and Washington have made public statements indicating that < virtual currency businesses may be required to seek licenses as money < transmitters. In numerous other states, including Connecticut, North < Carolina, New Hampshire and New Jersey, legislation is being proposed or > Virginia, Kansas, Texas, South Dakota and Washington have made public > statements indicating that virtual currency businesses may be required > to seek licenses as money transmitters. In July 2016, North Carolina > updated the law to define “virtual currency” and the activities that > trigger licensure in a business friendly approach that encourages > companies to use virtual currency and blockchain technology. > Specifically, the North Carolina law does not require miners or software > providers to obtain a license for multi-signature software, smart > contract platforms, smart property, colored coins and non-hosted, > non-custodial wallets. Starting January 1, 2016, New Hampshire requires > anyone exchanges a digital currency for another currency must become a > licensed and bonded money transmitter. In numerous other states, > including Connecticut and New Jersey, legislation is being proposed or --- 3360c3538,3540 ----------------------- < will act to dissolve and liquidate the Trust. Any such > will act to dissolve and liquidate the Trust. Any such termination could > result in the liquidation of the Trust’s bitcoin at a time that is > disadvantageous to an investor in the Shares. --- 3364c3544 ----------------------- < 35 > 37 --- 3368,3370d3547 ----------------------- < termination could result in the liquidation of the Trust’s bitcoin at a < time that is disadvantageous to an investor in the Shares. < --- 3442,3444c3619,3625 ----------------------- < treatment of bitcoin for state income or sales tax purposes. The NYSDTF, < for example, has issued guidance regarding the application of state tax < law to > treatment of bitcoin for state income or sales tax purposes. The New > York State Department of Taxation and Finance (“NYSDTF”), for example, > has issued guidance regarding the application of state tax law to > Digital Assets such as bitcoin. The agency determined that New York > State would follow IRS guidance with respect to the treatment of Digital > Assets such as bitcoin for state income tax purposes. Furthermore, the > NYSDTF concluded that Digital Assets such as bitcoin --- 3448c3629 ----------------------- < 36 > 38 --- 3452,3464c3633,3641 ----------------------- < Digital Assets such as bitcoin. The agency determined that New York < State would follow IRS guidance with respect to the treatment of Digital < Assets such as bitcoin for state income tax purposes. Furthermore, the < NYSDTF concluded that Digital Assets such as bitcoin are a form of < “intangible property,” meaning that transactions using bitcoin to < purchase goods or services may be subject to state sales tax under < barter transaction treatment. If a state adopts a different treatment, < such treatment may have negative consequences for investors in bitcoin, < including the potential imposition of a greater tax burden on investors < in bitcoin or the potential imposition of greater costs on the < acquisition and disposition of bitcoin. In either case, such different < tax treatment may potentially have a negative effect on prices in the < Bitcoin Exchange Market and a negative impact on the value of the > are a form of “intangible property,” meaning that transactions using > bitcoin to purchase goods or services may be subject to state sales tax > under barter transaction treatment. If a state adopts a different > treatment, such treatment may have negative consequences for investors > in bitcoin, including the potential imposition of a greater tax burden > on investors in bitcoin or the potential imposition of greater costs on > the acquisition and disposition of bitcoin. In either case, such > different tax treatment may potentially have a negative effect on prices > in the Bitcoin Exchange Market and a negative impact on the value of the --- 3506,3507c3683,3697 ----------------------- < The Trust has agreed to indemnify the Sponsor and its affiliates < pursuant to the terms of the Trust Agreement; > The Trust’s bitcoin is valued, and the Trust’s NAV is calculated, using > the Gemini Exchange Auction Price, and the Gemini Exchange Auction > Price, as provided by the Sponsor in the same manner as it is provided > in connection with the daily calculation of the Trust’s NAV, will be > used by the Administrator to calculate the amount of the Sponsor’s Fee > due to the Sponsor; > > > • > > The Sponsor’s relationship with the Gemini Exchange creates an incentive > for the Sponsor to sell the bitcoin it collects as its Sponsor’s Fee for > U.S. dollars on the Gemini Exchange, which benefits the Sponsor’s > affiliates through increased volume on the Gemini Exchange and which may > negatively impact the value of the Trust’s remaining bitcoin; --- 3512,3514c3702,3705 ----------------------- < The Trust’s bitcoin is valued using Gemini Exchange Spot Price, and the < Gemini Exchange Spot Price will be used to calculate the amount of the < Sponsor Fee due to the Sponsor; > The Sponsor’s employees may also service affiliates of the Sponsor, > including the Custodian and the Gemini Exchange, and their respective > clients and cannot devote all of its, or their, respective time or > resources to the management of the business and affairs of the Trust; --- 3519,3521c3710,3714 ----------------------- < The Sponsor, its affiliates and their officers and employees are not < prohibited from engaging in other businesses or activities, including < those that might be in direct competition with the Trust; and > The Sponsor, its affiliates and their officers and employees may own and > trade bitcoin and are not prohibited from engaging in other businesses > or activities, including those that might be in direct competition with > the Trust, and such records of holdings, trading, and other businesses > or activities will not be available for inspection by Shareholders; and --- 3531,3534c3724,3726 ----------------------- < and determine the amount of the Sponsor’s Fee, it may not be possible to < entirely eliminate these conflicts of interest. By investing in the < Shares, investors agree and consent to the provisions set forth in the < Trust Agreement. See “Description of the Trust Agreement.” > and determine the amount of the Sponsor’s Fee (based on the > publicly-available Gemini Exchange Auction Price, which will be provided > to the Administrator by the Sponsor in the same manner --- 3536,3537d3727 ----------------------- < Affiliates of the Sponsor may invest in or trade bitcoin without regard < to the interests of the Trust or its Shareholders. --- 3539,3542d3728 ----------------------- < Affiliates of the Sponsor have substantial direct investments in < bitcoin. Such affiliates of the Sponsor are permitted to manage such < investments taking into account their own interests, without regard to < the interests of --- 3543a3730 ----------------------- > 39 --- 3544a3732 ----------------------- > Table of Contents --- 3546c3734,3738 ----------------------- < 37 > as it is provided in connection with the daily calculation of the > Trust’s NAV), it may not be possible to entirely eliminate these > conflicts of interest. By investing in the Shares, investors agree and > consent to the provisions set forth in the Trust Agreement. See > “Description of the Trust Agreement.” --- 3548c3740,3741 ----------------------- < Table of Contents > Affiliates of the Sponsor may invest in or trade bitcoin without regard > to the interests of the Trust or its Shareholders. --- 3550,3554c3743,3751 ----------------------- < the Trust or its Shareholders. Affiliates of the Sponsor may, but are < not required to, obtain investment exposure to bitcoin through < investment in the Shares. It is expected that, if such investments are < made, the size and nature of these investments will change over time < without notice to Shareholders. > Affiliates of the Sponsor have substantial direct investments in > bitcoin. Such affiliates of the Sponsor are permitted to manage such > investments taking into account their own interests, without regard to > the interests of the Trust or its Shareholders. Affiliates of the > Sponsor may, but are not required to, obtain investment exposure to > bitcoin through investment in the Shares; however, no affiliate of the > Sponsor will act as an Authorized Participant. It is expected that, if > such investments are made, the size and nature of these investments will > change over time without notice to Shareholders. --- 3558,3562c3755,3787 ----------------------- < impact on the Gemini Exchange Spot Price. The initiation of, or material < increases in, a substantial investment in bitcoin may result in an < increase in the Gemini Exchange Spot Price. A material reduction in a < substantial investment may result in a decrease in the Gemini Exchange < Spot Price, having a negative impact on the value of the Shares. > impact on the Gemini Exchange Auction Price. The initiation of, or > material increases in, a substantial investment in bitcoin may result in > an increase in the Gemini Exchange Auction Price. Affiliates of the > Sponsor may participate in the daily 4:00 p.m. auction on the Gemini > Exchange. In addition, the Sponsor will periodically liquidate its > bitcoin in the daily 4:00 p.m. auction on the Gemini Exchange in order > to obtain U.S. dollars necessary to pay expenses related to the Trust. > To the extent the participation by the Sponsor or its affiliates impacts > the Gemini Exchange Auction Price, the NAV determined using the Gemini > Exchange Auction Price will be similarly impacted. If the Sponsor or its > affiliates liquidate bitcoin holdings during the 4:00 p.m. auction on > the Gemini Exchange, the Gemini Exchange Auction Price for that day may > be lower and the NAV of the Shares may decline. Conversely, if the > Sponsor or its affiliates purchase bitcoin during the 4:00 p.m. auction > on the Gemini Exchange, the Gemini Exchange Auction Price for that day > may be higher and the NAV of the Shares may increase. Any increase in > the Gemini Exchange Auction Price would affect the NAV of the Trust and > increase the Sponsor’s Fee, potentially causing a conflict of interest > between the Sponsor and its affiliates and the Trust’s shareholders. Any > decrease in the Gemini Exchange Auction Price would affect the NAV of > the Trust by decreasing the value of the Shares, potentially causing a > conflict of interest between the Sponsor and its affiliates and the > Trust’s shareholders to the extent that the Sponsor or its affiliates > purchase Shares of the Trust at a lower NAV. > > A material reduction in a substantial investment in bitcoin may result > in a decrease in the Gemini Exchange Auction Price, having a negative > impact on the value of the Shares. While no affiliate of the Sponsor is > an Authorized Participant, it is possible that an affiliate of the > Sponsor could enter into transactions to purchase from or sell or lend > bitcoin to an Authorized Participant. Any such transactions would occur > at the current market price of bitcoin in the Bitcoin Exchange Market > and may result in realization of significant gains to the affiliate. --- 3569,3584c3794,3796 ----------------------- < the Sponsor discontinues its activities on behalf of the Trust and a < substitute sponsor has not been appointed, the Administrator would < terminate the Trust and liquidate the bitcoin held by the Trust. < < Appointment of a substitute sponsor will not guarantee the Trust’s < continued operation, successful or otherwise. Because a substitute < sponsor may have no experience managing a Digital Asset ETP, a < substitute sponsor may not have the experience, knowledge or expertise < required to ensure that the Trust will operate successfully or to < continue to operate at all. A substitute sponsor may not be capable of < receiving an assignment of the lease and license of the Custodian’s Cold < Storage System for reasons including its lack of expertise regarding the < necessary maintenance or upgrading of such system. Therefore, the < appointment of a substitute sponsor may not necessarily be beneficial to < the Trust or an investment in the Shares and the Administrator may < determine to terminate the Trust. > the Sponsor discontinues its activities on behalf of the Trust, the > Trustee will terminate the Trust and instruct the Custodian or other > party to liquidate the bitcoin held by the Trust. --- 3592,3596c3804,3813 ----------------------- < the Shares. Accordingly, an investor should consult his, her, or its own < legal, tax and financial advisers regarding the desirability of an < investment in the Shares. Lack of such consultation may lead to an < undesirable investment decision with respect to investment in the < Shares. > the Shares. Accordingly, investors should consult their own legal, tax > and financial advisers regarding the desirability of an investment in > the Shares. Lack of such consultation may lead to an undesirable > investment decision with respect to investment in the Shares. > > > > 40 > > Table of Contents --- 3601,3606c3818,3822 ----------------------- < Under the Trust Agreement, Shareholders have no voting rights and the < Trust will not have regular Shareholder meetings. Shareholders only vote < on such matters and at such times as determined by the Sponsor. < Accordingly, Shareholders do not have the right to authorize actions, < appoint service providers or take other actions as may be taken by < shareholders of other trusts or companies where shares carry such > Under the Trust Agreement, Shareholders have no voting rights except in > limited circumstances and the Trust will not have regular Shareholder > meetings. Accordingly, Shareholders do not have the right to authorize > actions, appoint service providers or take other actions as may be taken > by shareholders of other trusts or companies where shares carry such --- 3615c3831 ----------------------- < 38 > 41 --- 3623,3627c3839,3845 ----------------------- < Pursuant to the Trust Agreement, during the life of the Trust such < delivery of bitcoin will only be (i) held by the Trust, (ii) distributed < to Authorized Participants in connection with the redemption of Baskets, < or (iii) disbursed to pay the Sponsor’s Fee or sold as needed to pay the < Trust’s expenses not assumed by the Sponsor. > During the life of the Trust such delivery of bitcoin will only be (i) > held by the Trust; (ii) distributed to Authorized Participants in > connection with the redemption of Baskets; (iii) transferred to pay the > Sponsor’s Fee; (iv) transferred and sold as needed to pay the Trust’s > expenses not assumed by the Sponsor; or (v) sold in connection with the > termination and liquidation of the Trust or as otherwise required by law > or regulation. --- 3645c3863 ----------------------- < as the “Blockchain,” which is a digital file stored in a decentralized > as the “Blockchain,” which is a digital record stored in a decentralized --- 3662,3673c3880,3891 ----------------------- < The Blockchain is comprised of a digital file, downloaded and stored, in < whole or in part, on all Bitcoin Network users’ software programs. The < file includes all blocks that have been solved by miners and is updated < to include new blocks as they are solved. See “Overview of the Bitcoin < Industry and Market—Bitcoin Mining & Creation of New Bitcoin.” As each < newly solved block refers back to and “connects” with the immediately < prior solved block, the addition of a new block adds to the Blockchain < in a manner similar to a new link being added to a chain. Each new block < records outstanding Bitcoin transactions, and outstanding transactions < are settled and validated through such recording, the Blockchain < represents a complete, transparent and unbroken history of all < transactions of the Bitcoin Network. Each Bitcoin transaction is > The Blockchain is comprised of a digital record, downloaded and stored, > in whole or in part, on all Bitcoin Network users’ software programs. > The file includes all blocks that have been solved by miners and is > updated to include new blocks as they are solved. See “Overview of the > Bitcoin Industry and Market—Bitcoin Mining & Creation of New Bitcoin.” > As each newly solved block refers back to and “connects” with the > immediately prior solved block, the addition of a new block adds to the > Blockchain in a manner similar to a new link being added to a chain. > Each new block records outstanding Bitcoin transactions, and outstanding > transactions are settled and validated through such recording, the > Blockchain represents a complete, transparent and unbroken history of > all transactions of the Bitcoin Network. Each Bitcoin transaction is --- 3693c3911 ----------------------- < 39 > 42 --- 3776c3994 ----------------------- < 40 > 43 --- 3831c4049 ----------------------- < amount of bitcoin being sent in the transaction. Transaction fees, if > quantity of bitcoin being sent in the transaction. Transaction fees, if --- 3842,3843c4060,4061 ----------------------- < data showing (i) the destination public Bitcoin address, (ii) the number < of bitcoin being sent, (iii) the transaction fees, if any, and (iv) the > data showing (i) the destination public Bitcoin address; (ii) the number > of bitcoin being sent; (iii) the transaction fees, if any; and (iv) the --- 3858c4076 ----------------------- < 41 > 44 --- 3872,3873c4090,4091 ----------------------- < the block, (ii) a reference to the prior block in the Blockchain to < which the new block is being added and (iii) transactions that have > the block; (ii) a reference to the prior block in the Blockchain to > which the new block is being added; and (iii) transactions that have --- 3944c4162 ----------------------- < 42 > 45 --- 3955,3959c4173,4185 ----------------------- < foreseeable future. The Bitcoin Network uses the Elliptic Curve Digital < Signature Algorithm (“ECDSA”) with the Secp256k1 parameters for digital < signatures. ECDSA has been accredited by the Federal Information < Processing Standards (“FIPS”). The Secp256k1 parameters were chosen by < the Standards for Efficient Cryptography Group, an international > foreseeable future. Specifically, Bitcoin’s choice of various > cryptographic primitives is intended to maintain a 128-bit level of > security across the board for all relevant operations and transaction. > This security level equates to the National Institute for Standards and > Technology (“NIST”) recommendation for “Secret.” > > The Bitcoin Network uses the Elliptic Curve Digital Signature Algorithm > (“ECDSA”) to authorize the transfer of funds from one bitcoin address to > another. ECDSA is part of the Digital Signature Standard published by > the NIST as a Federal Information Processing Standards Publication > (“FIPS”), number 186.16 The ECDSA domain parameters used by Bitcoin have > the codename “SECP256k1,” which is published in the SEC 2 version 2.0 > standard by the Standards for Efficient Cryptography Group (SECG), an --- 3961,3966c4187,4199 ----------------------- < elliptic curve cryptography. The Bitcoin Network uses both iterated < SHA-256 and SHA-256 combined with RIPEMD-160 as cryptographic hash < functions. SHA-256 was designed by the NSA and is a FIPS-accredited < algorithm. RIPEMD-160 was designed by an academic consortium, and, while < not FIPS-accredited, has withstood twenty (20) years of attacks, and it < is also a widely-used algorithm in the PGP encryption scheme. > cryptography.17 > > The Bitcoin Network also uses two cryptographic hash functions: SHA-256 > and RIPEMD-160. The SHA-256 function is part of the Secure Hash Standard > published by NIST as FIPS 180.18 The RIPEMD-160 function was developed > in the framework of the European Union Project RIPE;19 while it is not > part of a NIST recommendation, it has withstood twenty (20) years of > attacks, and it is also a widely-used in the PGP encryption scheme. Hash > functions, as a cryptographic primitive, provide a “one-way function,” > and are used for assuring the integrity of transmitted data. Bitcoin > also uses SHA-256 in its proof-of-work system, which ensures that > validating transactions on the Blockchain is computationally expensive > but checking that validity is computationally trivial. --- 3973c4206 ----------------------- < the Blockchain through the “mining” process, which time-stamps the > the Blockchain through the “mining” process, which timestamps the --- 3992,3999c4225,4251 ----------------------- < constitute additional confirmations of the transactions in such prior < blocks, and a transaction included in a block for the first time is < confirmed once against double-spending. The layered confirmation process < makes changing historical blocks (and reversing transactions) < exponentially more difficult the further back one goes in the < Blockchain. Bitcoin Exchanges and users can set their own threshold as < to how many confirmations they require until funds from the transferor < are considered valid. > constitute additional > > > 16 National Institute for Standards and Technology, Digital Signature > Standard (DSS), Federal Information Processing Standards Publication > 186-4 (July 2013). 17 Certicom Research, SEC 2: Recommended Elliptic > Curve Domain Parameters, STANDARDS FOR EFFICIENT CRYPTOGRAPHY, Version > 2.0 (Jan. 27, 2010). 18 National Institute for Standards and Technology, > Secure Hash Standard (SHS), Federal Information Processing Standards > Publication 180-4 (Aug. 2015). 19 H. Dobbertin, A. Bosselaers, B. > Preneel, RIPEMD-160, A Strengthened Version of RIPEMD, FAST SOFTWARE > ENCRYPTION, Lecture Notes in Computer Science, Vol. 1039 at 71-82 > (1996). > > > > 46 > > Table of Contents > > confirmations of the transactions in such prior blocks, and a > transaction included in a block for the first time is confirmed once > against double-spending. The layered confirmation process makes changing > historical blocks (and reversing transactions) exponentially more > difficult the further back one goes in the Blockchain. Bitcoin Exchanges > and users can set their own threshold as to how many confirmations they > require until funds from the transferor are considered valid. --- 4015,4017c4267,4270 ----------------------- < or attempting to fabricate prior blocks. As of May 5, 2016, the Bitcoin < Network’s estimated aggregate hashrate exceeded 1,420,991,980 gigahashes < per second, according to Blockchain.info. BitcoinCharts.com estimated > or attempting to fabricate prior blocks. As of February 1, 2017, the > Bitcoin Network’s estimated aggregate hashrate was approximately > 2,000,000,000 gigahashes per second, according to publicly-available > information from Blockchain Luxembourg S.A. BitcoinCharts has estimated --- 4019,4040c4272,4279 ----------------------- < approximately 16,649,640 petaFLOPS (petaFLOPS are a standard measure of < computer performance); to provide context, the world’s fastest < supercomputer reaches a maximum of 33.86 petaFLOPS (or less than a < hundredth of a percent of the Bitcoin < < < < 43 < < Table of Contents < < Network’s aggregate hashrate). In terms of electricity consumption, one < can estimate the Bitcoin Network’s electricity consumption by < multiplying the estimated aggregate hashrate by the most efficient < publicly known ASIC. As of May 2016, the Bitcoin Network electricity < consumption is estimated to be 85 megawatts, which is approximately < equal to the total power consumption of the top 20 supercomputers with < published power statistics according to Top500.org. Additionally, it can < be estimated that the scale of total computing resources devoted to < mining on the Bitcoin Network is commensurate with the total rewards, < which was approximately $1.6 million U.S. dollars per day as of May 1, < 2016. > approximately 26,000,000 petaflops (petaflops are a standard measure of > computer performance); to provide context, according to Prometeus GmbH, > the world’s fastest supercomputer reaches a maximum of 93 petaflops (or > about 0.0004% of the Bitcoin Network’s aggregate hashrate). > Additionally, it can be estimated that the scale of total computing > resources devoted to mining on the Bitcoin Network is commensurate with > the total rewards, which was approximately $1.8 million U.S. dollars per > day as of February 1, 2017. --- 4082,4088c4321,4334 ----------------------- < notation of the new bitcoin creation and their allocation to the < successful miner’s public Bitcoin address. To begin mining, a user can < download and run Bitcoin Network mining software, which, like regular < Bitcoin Network software programs, turns the user’s computer into a < “node” on the Bitcoin Network that validates blocks. See “Introduction < to Bitcoin and the Bitcoin Network—Overview of the Bitcoin Network’s < Operations,” above. > notation of the new bitcoin creation and their > > > > 47 > > Table of Contents > > allocation to the successful miner’s public Bitcoin address. To begin > mining, a user can download and run Bitcoin Network mining software, > which, like regular Bitcoin Network software programs, turns the user’s > computer into a “node” on the Bitcoin Network that validates blocks. See > “Introduction to Bitcoin and the Bitcoin Network—Overview of the Bitcoin > Network’s Operations,” above. --- 4092,4093c4338,4339 ----------------------- < transactions that are not memorialized in prior blocks, (ii) a reference < to the most recent prior block, and (iii) a record of the award of > transactions that are not memorialized in prior blocks; (ii) a reference > to the most recent prior block; and (iii) a record of the award of --- 4109,4114d4354 ----------------------- < < < 44 < < Table of Contents < --- 4142,4149c4382 ----------------------- < and marginally declined during December 2014. The following chart, < sourced from Bitcoin.sipa.be, shows the estimated growth of the Bitcoin < Network’s computational power from the first calendar quarter in 2009 to < the first calendar quarter in 2016. < < < < LOGO > and marginally declined during December 2014. --- 4157,4164c4390,4391 ----------------------- < 9.3 minutes for the one hundred and eighty (180) days prior to and < including May 1, 2016. < < < < 45 < < Table of Contents > 9 minutes for the one hundred and eighty (180) days prior to and > including February 1, 2017. --- 4176,4193c4403,4426 ----------------------- < while solving for a new block. In June 2013, blockchain.info estimated < that the aggregate electricity costs of mining across the Bitcoin < Network exceeded $300,000 every twenty-four (24) hours. Although < variables such as the rate and cost of electricity are estimated, as of < September 1, 2013, blockchain.info had revised upward the average < 24-hour electricity cost of all mining on the Bitcoin Network to more < than $1.5 million. In late 2013, blockchain.info ceased publishing < estimated electric consumption on the Bitcoin Network, in part due to < uncertainty in estimating electrical usage as newer, more energy < efficient mining hardware became prevalent. As of May 2016, over the < past year, two (2) years, and three (3) years, the aggregate hashrate of < the Bitcoin Network has increased more than 3.76-fold, 22.33-fold and < 17,730-fold, respectively, due in part to the development of more energy < efficient ASIC mining chips and, during the second half of 2013, the < substantial increase in the price of bitcoin. Additionally, it can be < estimated that the scale of total computing resources devoted to mining < on the Bitcoin Network is commensurate with the total rewards, which was < approximately $1.6 million U.S. dollars per day as of May 1, 2016. > while solving for a new block. Although variables such as the rate and > cost of electricity are estimated, as of September 1, 2013, Blockchain > Luxembourg S.A. estimated that the average > > > > 48 > > Table of Contents > > 24-hour electricity cost of all mining on the Bitcoin Network to be more > than $1.5 million. In late 2013, Blockchain Luxembourg S.A. ceased > publishing estimated electric consumption of the Bitcoin Network, in > part due to uncertainty in estimating electrical usage as newer, more > energy efficient mining hardware became prevalent. As of February 2017, > over the past year, two (2) years, and three (3) years, the aggregate > hashrate of the Bitcoin Network has increased approximately 3-fold, > 6-fold and 200-fold, respectively, due in part to the development of > more energy efficient ASIC mining chips and, during the second half of > 2013, the substantial increase in the price of bitcoin. Additionally, it > can be estimated that the scale of total computing resources devoted to > mining on the Bitcoin Network is commensurate with the total rewards, > which was approximately $1.8 million U.S. dollars per day as of February > 1, 2017. --- 4233,4239c4466,4472 ----------------------- < transaction fees. As of April 2016, transaction fees accounted for an < average of 1.44 percent of miners’ total revenue based upon information < available at www.blockchain.info, though the percentage of revenue < represented by transaction fees is not static and fluctuates based on < the number of transactions for which sending users include transaction < fees, the levels of those transaction fees and the number of < transactions a miner includes in its solved blocks. Typically, > transaction fees. As of February 2017, transaction fees accounted for an > average of approximately five (5) percent of miners’ total revenue based > upon information available from Blockchain Luxembourg S.A., though the > percentage of revenue represented by transaction fees is not static and > fluctuates based on the number of transactions for which sending users > include transaction fees, the levels of those transaction fees and the > number of transactions a miner includes in its solved blocks. Typically, --- 4243,4248d4475 ----------------------- < < < 46 < < Table of Contents < --- 4258,4268c4485,4503 ----------------------- < According to blockchain.info, as of April 28, 2016, the largest three < (3) known mining pools were AntPool, F2Pool and BTCC Pool, which, when < aggregated, represented approximately sixty-three (63) percent of the < aggregate hashrate of the Bitcoin Network (as calculated by determining < the percentage of blocks mined by each such pool over the prior four (4) < days). Also, according to blockchain.info, on such date, the nine (9) < largest pools (AntPool, F2Pool, BTCC Pool, BitFury, BW.COM, Slush, < BitClub Network, Kano CKPool and KnCMiner) accounted for approximately < ninety-seven (97) percent of the aggregate hashrate of the Bitcoin < Network. In late May and early June 2014, reports indicated that a < mining pool named GHash.io approached and, during a twenty four (24)- to > According to Blockchain Luxembourg S.A., as of February 1, 2017, the > largest four (4) known mining pools were AntPool, F2Pool, BitFury and > ViaBTC, which, when aggregated, represented approximately forty-seven > (47) percent of the aggregate hashrate of the Bitcoin Network (as > calculated by determining the percentage > > > > 49 > > Table of Contents > > of blocks mined by each such pool over the prior four (4) days). Also, > according to information made available by Blockchain Luxembourg S.A., > on such date, the eight (8) largest pools (viz. AntPool, F2Pool, > BitFury, ViaBTC, BTCC Pool, BTC.TOP, BW.COM, and SlushPool) accounted > for approximately seventy-nine (79) percent of the aggregate hashrate of > the Bitcoin Network. In late May and early June 2014, reports indicated > that a single mining pool approached and, during a twenty four (24)- to --- 4272,4276c4507,4510 ----------------------- < blocks mined by the pool. As of April 28, 2016, GHash.io’s percentage of < the aggregate hashrate of the Bitcoin Network has since fallen to < approximately two (2) percent. As of April 28, 2016, Antpool was < determined to be the largest mining pool, having solved for twenty-eight < (28) percent of the block discovered during the prior four (4) days. > blocks mined by the pool. As of February 1, 2017, that single mining > pool has ceased to exist, and Antpool was determined to be the largest > mining pool, having solved for 15.6 percent of the block discovered > during the prior four (4) days. --- 4285,4298c4519,4533 ----------------------- < is twenty-five (25) bitcoin per block and the reward will decrease by < half to become twelve and a half (12.5) bitcoin in or around the start < of July 2016 (based on estimates of the rate of block solution < calculated by BitcoinClock.com). This deliberately controlled rate of < bitcoin creation means that the number of bitcoin in existence will < never exceed twenty-one (21) million and that bitcoin cannot be devalued < through excessive production unless the Bitcoin Network’s source code < (and the underlying protocol for bitcoin issuance) is altered. See < “Modifications to the Bitcoin Protocol,” below. As of April 28, 2016, < fifteen million, four hundred and eighty-two thousand, three hundred < (15,482,300) bitcoin have been mined. It is estimated that more than < ninety (90) percent of the twenty-one (21) million bitcoin will have < been produced by 2022. < > is twelve and a half (12.5) bitcoin per block; the reward decreased from > twenty-five (25) bitcoin in July 2016. It is estimated to halve again in > about four years. This deliberately controlled rate of bitcoin creation > means that the number of bitcoin in existence will never exceed > twenty-one (21) million and that bitcoin cannot be devalued through > excessive production unless the Bitcoin Network’s source code (and the > underlying protocol for bitcoin issuance) is altered. See “Modifications > to the Bitcoin Protocol,” below. As of February 1, 2017, approximately > sixteen million, one hundred thousand (16,100,000) bitcoin have been > mined. It is estimated that more than ninety (90) percent of the > twenty-one (21) million bitcoin will have been produced by 2022. > > The following chart from Blockchain Luxembourg S.A. indicates the number > of bitcoin that have been mined since the Bitcoin Network began > operation in January 2009 through January 2017. --- 4301d4535 ----------------------- < 47 --- 4303c4537 ----------------------- < Table of Contents > LOGO --- 4305,4307d4538 ----------------------- < The following chart from blockchain.info indicates the number of bitcoin < that have been mined since the Bitcoin Network began operation in < January 2009 through April 2016. --- 4309a4541 ----------------------- > 50 --- 4311c4543 ----------------------- < LOGO > Table of Contents --- 4317,4322c4549,4554 ----------------------- < identify possible issues, problems and defects) and there is no official < developer or group of developers that controls the Bitcoin Network. The < Bitcoin Network’s development is furthered by a collection of active < contributors who can access and propose alterations to the Bitcoin < Network source code hosted on GitHub.com, an online service and forum < used to share and develop open source code. Other programmers have > identify possible issues, problems and defects) and there is no > designated developer or group of developers who control the Bitcoin > Network. The Bitcoin Network’s development is furthered by a collection > of active contributors who can access and propose alterations to the > Bitcoin Network source code hosted on GitHub, an online service and > forum used to share and develop open source code. Other programmers have --- 4324,4325c4556,4557 ----------------------- < GitHub.com, but some contributors have an elevated level of influence < over the process. As a result, these contributors are responsible for > GitHub, but some contributors have an elevated level of influence over > the process. As a result, these contributors are responsible for --- 4344,4354c4576,4583 ----------------------- < division is known as a “fork” in the Bitcoin Network. It should be noted < that, although their power to amend the source code is effectively < subject to the approval of users and miners, some contributors have < substantial influence over the development of the Bitcoin Network and < the direction of the Bitcoin community. < < < < 48 < < Table of Contents > division is known as a “hard fork” in the Bitcoin Network. See “Risk > Factors—The acceptance of Bitcoin Network software patches or upgrades > by a significant, but not overwhelming, percentage of the users and > miners in the Bitcoin Network could result in a ‘hard fork’ in the > Blockchain….” It should be noted that, although their power to amend the > source code is effectively subject to the approval of users and miners, > some contributors have substantial influence over the development of the > Bitcoin Network and the direction of the Bitcoin community. --- 4389,4398c4618,4634 ----------------------- < the Bitcoin Exchange Market average since market participants can choose < the Bitcoin Exchange on which to buy or sell bitcoin (i.e., exchange < shopping). Arbitrage between the prices on various Bitcoin Exchanges is < possible, but varying fees and fiat currency deposit/withdrawal policies < and other concerns appear to have, at times, prevented an active < arbitrage mechanism among users on some Bitcoin Exchanges. For example, < delayed fiat currency withdrawals imposed by Bitcoin Exchanges and the < perceived risks associated with such delayed withdrawals have, at times, < resulted in trading on such Bitcoin Exchange to be at a premium for < certain periods. > the Bitcoin Exchange Market average since market > > > > 51 > > Table of Contents > > participants can choose the Bitcoin Exchange on which to buy or sell > bitcoin (i.e., exchange shopping). Arbitrage between the prices on > various Bitcoin Exchanges is possible, but varying fees and fiat > currency deposit/withdrawal policies and other concerns appear to have, > at times, prevented an active arbitrage mechanism among users on some > Bitcoin Exchanges. For example, delayed fiat currency withdrawals > imposed by Bitcoin Exchanges and the perceived risks associated with > such delayed withdrawals have, at times, resulted in trading on such > Bitcoin Exchange to be at a premium for certain periods. --- 4403,4410c4639,4651 ----------------------- < differentials have been decreasing. For example, the daily opening price < data for the one hundred (100) days prior to May 9, 2016 shows that the < Bitifinex and BTC-e absolute price difference was less than 1% percent < according to data from BitcoinWisdom.com. Since 2015, prices on U.S. < Dollar-denominated Bitcoin Exchanges have generally been converging. In < January of 2015, the average range in prices across all Bitcoin < Exchanges was approximately 3.80%; as of May 2016, that figure has < dropped to less than 1.30%.6 This convergence serves to illustrate the > differentials have been decreasing. For example, the daily price data > for the 180 days prior to February 1, 2017 shows that the average > absolute price difference across the top eight worldwide U.S. > dollar-denominated Bitcoin Exchanges (viz., Bitfinex, Bitstamp, BTC-e, > GDAX, Gemini, itBit, LakeBTC, and OKCoin) was approximately 1.5%, > according to publicly available data. Over the same period, the > U.S-based exchanges (viz., GDAX, Gemini, and itBit) had an absolute > price difference of approximately 0.6% according to publicly available > data. Since 2015, prices on worldwide U.S. dollar-denominated Bitcoin > Exchanges have generally been converging. In the month of January of > 2015, the average range in prices across all Bitcoin Exchanges was > approximately 3.80%; as of the month of January 2017, that figure has > dropped to less than 1.6%. This convergence serves to illustrate the --- 4420,4423c4661,4698 ----------------------- < of 2013, Mt.Gox accounted for nearly < < < 6 See, e.g., https://data.bitcoinity.org/markets/price/2y/USD?c=e&t=l). > of 2013, Mt. Gox accounted for nearly three-quarters of all Bitcoin > Exchange Market trading.20 Any disruption to Mt. Gox trading, such as a > DDoS Attack, had a dramatic impact on the bitcoin price and subsequently > the Bitcoin Exchange Market as a whole. Since then, the number of > constituents in the Bitcoin Exchange Market has considerably increased > and no single Bitcoin Exchange represents a systemically critical part > or single point of failure of the Bitcoin ecosystem, though breaches of > larger Bitcoin Exchanges, such as the August 2016 hack of the Bitfinex > security system, may still disrupt the Bitcoin ecosystem and have a > significant short-term impact on bitcoin prices. In addition, the advent > of market participants who are chiefly arbitrageurs results in Bitcoin > Exchange prices generally converging after dislodgement. Arbitrageurs > must have funds distributed across multiple Bitcoin Exchanges in order > to take advantage of temporary price dislocations, thereby discouraging > the strong concentration of funds on any particular Bitcoin Exchange. As > a result, the potential for manipulation on a particular Bitcoin > Exchange would require overcoming the liquidity supply of such > arbitrageurs who are actively eliminating any cross-market pricing > differences. > > > 20 For most of 2013, Mt. Gox (a Japanese exchange operated by Tibanne > Co. Ltd.) was the largest online Bitcoin Exchange in the world. > Supporting trading of bitcoin using sixteen (16) different fiat > currencies, Mt. Gox accounted for nearly three-quarters of all Bitcoin > Exchange Market trading during the first half of 2013. On February 25, > 2014, Mt. Gox suspended trading on its platform and, three (3) days > later, filed for bankruptcy protection in Japanese courts, stating that > it had lost approximately 850,000 bitcoin, including approximately > 750,000 bitcoin belonging to its customers. Mt. Gox subsequently > recovered access to approximately 200,000 of the lost bitcoin. As no > full, reliable accounting has been publicly provided, it is difficult to > assess whether Mt. Gox’s collapse was due to cyber-attacks (including > denial of service and hacking incidents reported in 2011 and 2013), > mismanagement or fraud, although many market participants believe Mt. > Gox’s collapse was due to the latter. Following the cessation of trading > activity on its platform, Mt. Gox has been in bankruptcy proceedings in > Japan and the United States and is in the process of liquidation. --- 4427c4702 ----------------------- < 49 > 52 --- 4431,4447d4705 ----------------------- < three-quarters of all Bitcoin Exchange Market trading.7 Any disruption < to Mt.Gox trading, such as a distributed denial of service (“DDOS”) < attack had a dramatic impact on the bitcoin price and subsequently the < Bitcoin Exchange Market as a whole. Since then, the number of < constituents in the Bitcoin Exchange Market has considerably increased < and no single Bitcoin Exchange represents a systemically critical part < or single point of failure of the Bitcoin ecosystem. In addition, the < advent of market participants who are chiefly arbitrageurs results in < Bitcoin Exchange prices generally converging after dislodgement. < Arbitrageurs must have funds distributed across multiple Bitcoin < Exchanges in order to take advantage of temporary price dislocations, < thereby discouraging the strong concentration of funds on any particular < Bitcoin Exchange. As a result, the potential for manipulation on a < particular Bitcoin Exchange would require overcoming the liquidity < supply of such arbitrageurs who are actively eliminating any < cross-market pricing differences. < --- 4477c4735 ----------------------- < attorney in fact or agent;8 and (ii) the power to accept appointment as > attorney in fact or agent21 and (ii) the power to accept appointment as --- 4485,4516c4743,4746 ----------------------- < trust, personal trust, corporate trust, transfer < < < 7 For most of 2013, Mt. Gox (a Japanese exchange operated at < www.mtgox.com by Tibanne Co. Ltd.) was the largest online Bitcoin < Exchange in the world. Supporting trading of bitcoin using sixteen (16) < different fiat currencies, Mt. Gox accounted for nearly three-quarters < of all Bitcoin Exchange Market trading during the first half of 2013. On < February 25, 2014, Mt. Gox suspended trading on its platform and, three < (3) days later, filed for bankruptcy protection in Japanese courts, < stating that it had lost approximately 850,000 bitcoin, including < approximately 750,000 bitcoin belonging to its customers. Mt. Gox < subsequently recovered access to approximately 200,000 of the lost < bitcoin. As no full, reliable accounting has been publicly provided, it < is difficult to assess whether Mt. Gox’s collapse was due to < cyber-attacks (including denial of service and hacking incidents < reported in 2011 and 2013), mismanagement or fraud, although many market < participants believe Mt. Gox’s collapse was due to the latter. Following < the cessation of trading activity on its platform, Mt. Gox has been in < bankruptcy proceedings in Japan and the United States and is in the < process of liquidation. 8 N.Y. Banking Law § 100 (McKinney) < < < < 50 < < Table of Contents < < agency, securities clearance, investment management, and custodial < services. A trust company, including a limited purpose trust company < like Gemini Trust Company, LLC, can serve as the custodian of customer < funds itself. > trust, personal trust, corporate trust, transfer agency, securities > clearance, investment management, and custodial services. A trust > company, including a limited purpose trust company like Gemini Trust > Company, LLC, can serve as the custodian of customer funds itself. --- 4529,4541c4759,4798 ----------------------- < requirements, (ii) implementation of an anti-money laundering program,9 < (iii) implementation of a cyber security program, and (iv) consumer < protection disclosures.10 Furthermore, as a limited purpose trust < company with fiduciary powers under the Banking Law, all activities of a < trust company, including all exchange functions, are subject to < examination and supervision by the NYSDFS. Gemini Trust Company, LLC < complies with the capital requirements under New York State banking law, < has implemented the required anti-money laundering program and < cybersecurity program and makes the required consumer protection < disclosures. As a facility of a regulated entity, the Gemini Exchange is < obliged to put the interests of its customers before its own, to provide < accurate public market data and pricing information and to monitor for < and prevent market manipulation. > requirements; (ii) implementation of an anti-money laundering program;22 > (iii) implementation of a cyber security program; and (iv) consumer > protection disclosures.23 Furthermore, as a limited purpose trust > company > > > 21 N.Y. Banking Law § 100 (McKinney). 22 In particular, a prospective > trust company must establish policies and procedures designed to ensure > and monitor compliance with the Bank Secrecy Act (“BSA”) as amended by > the USA PATRIOT Act and the anti-money laundering programs of Part 115 > of the General Regulations of the Banking Board. A compliance program > must include, at a minimum, a system of internal controls to assure > ongoing compliance, independent testing for compliance to be conducted > by bank personnel or by an outside party, the designation of an > individual or individuals responsible for coordinating and monitoring > day-to-day compliance, and training for appropriate personnel. 23 > Limited purpose trust companies operating virtual currency exchanges are > required to provide disclosures to current and prospective customers (in > a form approved by NYSDFS) regarding the risks of its services and > products and are also required to disclose to current and prospective > customers the terms and conditions for using the trust company’s > products and services prior to any customer using the product or > service. > > > > 53 > > Table of Contents > > with fiduciary powers under the Banking Law, all activities of a trust > company, including all exchange functions, are subject to examination > and supervision by the NYSDFS. Gemini Trust Company, LLC complies with > the capital requirements under New York State banking law, has > implemented the required anti-money laundering program and cybersecurity > program and makes the required consumer protection disclosures. As a > facility of a regulated entity, the Gemini Exchange is obliged to put > the interests of its customers before its own, to provide accurate > public market data and pricing information and to monitor for and > prevent market manipulation. --- 4544,4546c4801,4803 ----------------------- < Gemini Trust Company, LLC must (i) undergo semiannual bank exams, (ii) < submit quarterly financial updates to NYSDFS, (iii) submit independent < third-party year-end audited financial statements to NYSDFS,11 (iv) > Gemini Trust Company, LLC must (i) undergo semiannual bank exams; (ii) > submit quarterly financial updates to NYSDFS; (iii) submit independent > third-party year-end audited financial statements to NYSDFS;24 (iv) --- 4548c4805 ----------------------- < (“FFIEC”) Call Reports12 to the NYSDFS, and (v) undergo an annual > (“FFIEC”) Call Reports25 to the NYSDFS; and (v) undergo an annual --- 4553,4582c4810 ----------------------- < The Gemini Exchange is not the only venue on which Authorized < Participants can purchase bitcoin for delivery to the Trust, but it may < provide a convenient and stable venue given its regulatory oversight and < superior liquidity characteristics. While Authorized Participants are < not obliged to use the Gemini Exchange to trade their bitcoin, it may < prove to be an efficient way to do so. < < < 9 In particular, a prospective trust company must establish policies and < procedures designed to ensure and monitor compliance with the Bank < Secrecy Act (“BSA”) as amended by the USA PATRIOT Act and the anti-money < laundering programs of Part 115 of the General Regulations of the < Banking Board. A compliance program must include, at a minimum, a system < of internal controls to assure ongoing compliance, independent testing < for compliance to be conducted by bank personnel or by an outside party, < the designation of an individual or individuals responsible for < coordinating and monitoring day-to-day compliance, and training for < appropriate personnel. 10 Limited purpose trust companies operating < virtual currency exchanges are required to provide disclosures to < current and prospective customers (in a form approved by NYSDFS) < regarding the risks of its services and products and are also required < to disclose to current and prospective customers the terms and < conditions for using the trust company’s products and services prior to < any customer using the product or service. 11 Gemini Trust Company, LLC, < successfully completed an independent third-party opening day Balance < Sheet audit for October 2, 2015 as well as an independent third-party < year-end Financial Statements audit for December 31, 2015. No material < issues, weaknesses or concerns were raised. 12 Gemini Trust Company, < LLC, successfully completed and filed its first FFIEC Call Report with < the NYSDFS on February 1, 2016. > Gemini Exchange Auction Price --- 4583a4812,4848 ----------------------- > The Trust values its bitcoin using the Gemini Exchange Auction Price on > each Business Day. The Gemini Exchange Auction Price is the clearing > price of the daily two-sided auction which occurs at 4:00 p.m. Eastern > Time on the Gemini Exchange. The Gemini Exchange has been conducting > these auctions since September 21, 2016. These auctions provide an > opportunity for both buyers and sellers to trade in an instant of > elevated liquidity and price discovery. The Gemini Exchange Auction > Price is determined by finding the price which fulfills the greatest > aggregate buy demand and sell demand from all participating, eligible > orders (both auction-only and continuous trading book orders) at the > time of the auction. All participating, eligible orders are filled at > the auction price. This mechanism is similar to the ones used by NYSE > Arca, the Nasdaq Stock Market, Bats, and other large global stock > exchanges; it finds what is called “Walrasian equilibrium.” Beginning at > 3:50 p.m., indications of the upcoming auction price are broadcast > publicly in order to give market makers, liquidity providers, and other > participants an opportunity to interact with and to affect the Gemini > Exchange Auction Price; these indicative auction prices are updated > every 60 seconds leading into the auction. Because indicative auction > pricing is published publicly throughout the ten (10) minutes prior to > the auction, this mechanism allows participants to engage in thorough > price discovery while concentrating liquidity and trading volume at a > single moment each day. Information regarding the auction, including the > Gemini Exchange Auction Price and its volume as well as all indicative > auction events, will be publicly available after each auction. However, > the Gemini Exchange does not publicly disclose the attributes of > individual auction-only orders at any time. In some circumstances, an > auction may be canceled and a Gemini Exchange Auction Price may not be > published, including a situation wherein the Gemini Exchange Auction > Price were to deviate from the midpoint of the Gemini Exchange’s > continuous trading order book by more than 5%. The Gemini Exchange has > no discretion in determining the Gemini Exchange Auction Price. The > Gemini Exchange has mechanisms to detect price manipulative conduct in > connection with the auction, including, but not limited to, monitoring > for the following: participant self-trading, excessive order placement > and cancelation, and other activity which may be interpreted as > “painting the tape.” --- 4584a4850,4866 ----------------------- > The Sponsor believes that the Gemini Exchange Auction Price is > representative of the accurate price of bitcoin because of the positive > price discovery attributes of the Gemini Exchange marketplace, and > because the two-sided auction process was specifically designed to > maximize price discovery and liquidity, which should (i) insulate the > Gemini Exchange Auction Price from price swings and volatility, (ii) > minimize the effects of momentum pricing, (iii) improve the > effectiveness of the arbitrage mechanism for Authorized Participants, > and > > > 24 Gemini Trust Company, LLC, successfully completed an independent > third-party opening day Balance Sheet audit for October 2, 2015 as well > as an independent third-party year-end Financial Statements audit for > December 31, 2015. No material issues, weaknesses or concerns were > raised. 25 Gemini Trust Company, LLC, successfully completed and filed > its first FFIEC Call Report with the NYSDFS on February 1, 2016. --- 4586c4868,4870 ----------------------- < 51 > > > 54 --- 4590c4874,4876 ----------------------- < Gemini Exchange Spot Price > (iv) fairly reflect the value of the Trust’s bitcoin. Authorized > Participants are permitted to, but not obligated to, participate in the > 4:00 p.m. auction on the Gemini Exchange. --- 4592,4595c4878,4899 ----------------------- < The Trust values its bitcoin as measured at 4:00 p.m. Eastern time using < the Gemini Exchange Spot Price on each Business Day. The Gemini Exchange < Spot Price is the price of bitcoin on the Gemini Exchange as of 4:00 < p.m. Eastern time on each Business Day. > According to publicly available market data for worldwide U.S. > dollar-denominated Bitcoin Exchanges as of February 1, 2017 for the > prior six months: > > > • > > The Gemini Exchange was the eighth-biggest by volume (third-biggest in > the U.S.). > > > • > > The Gemini Exchange had the fourth-tightest bid/ask spread as a > percentage of price (second-tightest in the U.S.). > > > • > > The Gemini Exchange had the third-tightest spread measured ten (10) > bitcoin deep (tightest in the U.S.), and the sixth-tightest spread > measured one hundred (100) bitcoin deep (third-tightest in the U.S.). --- 4597,4612c4901,4928 ----------------------- < The Sponsor believes that the Gemini Exchange Spot Price is < representative of the accurate price of bitcoin because of the positive < price discovery attributes of the Gemini Exchange marketplace. According < to market data on bitcoinity.org, as of May 23, 2016, the Gemini < Exchange is a top three (3) U.S.-based Bitcoin Exchange by volume for < the seven (7) days prior and had the tightest spread as a percentage of < price, the tightest spread ten (10) bitcoin wide on the bid and ask, the < tightest spread one hundred (100) bitcoin wide on the bid and ask and < the lowest volatility (i.e., smallest standard deviation) of any U.S. < dollar-denominated bitcoin order book on any Bitcoin Exchange in the < world. In addition, since opening in October 2015, the Gemini Exchange < Spot Price differed from the median price of all U.S. Dollar-denominated < Bitcoin Exchanges by 0.35% on average; that difference dropped to 0.15% < on average in May 2016.13 These facts, taken together, suggest that the < Gemini Exchange Spot Price is representative and indicative of the < larger Bitcoin marketplace. > > • > > The Gemini Exchange had the second-lowest volatility (i.e., smallest > standard deviation of daily prices; both worldwide and in the U.S.). > > Since launching on September 21, 2016 and through February 1, 2017, on > Business Days, the Gemini Exchange Auction Price has deviated from the > Gemini Exchange midpoint price (the midrange of the highest bid and > lowest offer prices) by 0.19% on average and 1.45% at most, and it has > deviated from the median worldwide U.S. dollar-denominated Bitcoin > Exchange price at 4:00 p.m. Eastern Time by 0.27% on average and 0.91% > at most (0.16% on average and 0.74% at most in the U.S.). On business > days between September 21 and February 1, 2017, the volume has averaged > more than 1,200 bitcoin (worth almost $900,000 notional), representing > approximately 4% of all worldwide U.S. dollar-denominated daily Bitcoin > Exchange volume and approximately 15% of all U.S-based Bitcoin Exchange > volume during that period. Additionally, the Gemini Exchange’s auction > bolstered its share of the worldwide U.S. dollar-denominated Bitcoin > Exchange Market to almost 7% (almost 20% in the U.S.) over the same > period. Furthermore, the volume transacted in the Gemini Exchange’s > auction is twice the size of the largest single daily transaction (viz., > almost 800 bitcoin or approximately $650,000 on average) on other > worldwide U.S. dollar-denominated Bitcoin Exchanges. These facts, taken > together, suggest that the Gemini Exchange Auction Price is > representative and indicative of the larger Bitcoin marketplace, and > that it can support the liquidity and volume necessary to maintain an > efficient arbitrage mechanism. --- 4620,4631c4936,4962 ----------------------- < a number of potential Authorized Participants as well as market makers, < each of which is an experienced participant in the ETP marketplace and < is actively engaged in trading ETPs. A number of these potential < Authorized Participants, currently trade bitcoin and are already < registered participants that trade on the Gemini Exchange. Authorized < Participants will not be required to use the Gemini Exchange to trade < their bitcoin, and the Gemini Exchange is not the only venue on which < Authorized Participants can purchase bitcoin for delivery to the Trust. < However, the Gemini Exchange may provide a convenient and stable venue < in which to purchase bitcoin, as well as an efficient way to trade < bitcoin, given its regulatory oversight and superior liquidity < characteristics.14 See “Bitcoin Value—The Gemini Exchange” above. > a number of potential market makers, and has signed agreements with > several Authorized Participants, each of which is an experienced > participant in the ETP marketplace and is actively engaged in trading > ETPs. These Authorized Participants, as well as a number of market > makers, currently trade bitcoin and are already registered participants > that trade on the Gemini Exchange. Authorized Participants will not be > required to use the Gemini Exchange to trade their bitcoin, and the > Gemini Exchange is not the only venue on which Authorized Participants > can purchase bitcoin for delivery to the Trust. However, the Gemini > Exchange may provide a convenient and stable venue in which to purchase > bitcoin, as well as an efficient way to trade bitcoin, given its > regulatory oversight and superior liquidity characteristics. See > “Bitcoin Value—The Gemini Exchange” above. Additionally, Authorized > Participants are permitted to, but not obligated to, participate in the > 4:00 p.m. auction on the Gemini Exchange. To the extent that the Trust, > the Sponsor, the Custodian, an Authorized Participant, or any other > affiliated entity will participate in the two-sided auction which occurs > daily at 4:00 p.m. Eastern Time on the Gemini Exchange, such entity will > interact with the auction with the same standing and access as any other > customer of the Custodian and without any special priority, privilege, > or access to information. > > > > 55 > > Table of Contents --- 4664,4673d4994 ----------------------- < < 13 According to market data on bitcoinity.org. 14 See, e.g., < https://data.bitcoinity.org/markets/exchanges/USD/30d#volatility_asc. < < < < 52 < < Table of Contents < --- 4692c5013 ----------------------- < April 28, 2016, no single pool controlled more than a third of the > February 1, 2017, no single pool controlled more than a sixth of the --- 4718,4731c5039,5059 ----------------------- < accuracy. Users and merchants can dramatically reduce the risk of a < double-spend attack by waiting for multiple confirmations from the < Bitcoin Network before settling a transaction. The Bitcoin Network still < may be used to execute instantaneous, low-value transactions without < confirmation to the extent the recipient of bitcoin determines that a < malicious miner would be unwilling to carry out a double-spend attack < for low-value transactions because the reward from mining would be < higher than the small profit gained from double-spending. Users and < merchants can take additional precautions by adjusting their Bitcoin < Network software programs to connect only to other well-connected nodes < and to disable incoming connections. These precautions reduce the risk < of double-spend attacks involving manipulation of a target’s < connectivity to the Bitcoin Network (as is the case with vector76 and < race attacks). > accuracy. Users and merchants can > > > > 56 > > Table of Contents > > dramatically reduce the risk of a double-spend attack by waiting for > multiple confirmations from the Bitcoin Network before settling a > transaction. The Bitcoin Network still may be used to execute > instantaneous, low-value transactions without confirmation to the extent > the recipient of bitcoin determines that a malicious miner would be > unwilling to carry out a double-spend attack for low-value transactions > because the reward from mining would be higher than the small profit > gained from double-spending. Users and merchants can take additional > precautions by adjusting their Bitcoin Network software programs to > connect only to other well-connected nodes and to disable incoming > connections. These precautions reduce the risk of double-spend attacks > involving manipulation of a target’s connectivity to the Bitcoin Network > (as is the case with vector76 and race attacks). --- 4748,4757c5076,5077 ----------------------- < bitcoin by trading on Bitcoin Exchanges such < < < < 53 < < Table of Contents < < as Slovenia-based BitStamp and Hong Kong-based Bitfinex. See “Uses of < Bitcoin—Bitcoin Exchange Market” below. > bitcoin by trading on Bitcoin Exchanges. See “Uses of Bitcoin—Bitcoin > Exchange Market” below. --- 4772,4777c5092,5095 ----------------------- < Bitcoin Exchange Market’s economics. Additionally, institutions < including Fortress Investment Group and Pantera Capital made, or < proposed to make, direct or indirect investments in bitcoin or the < Bitcoin ecosystem. In addition, in October 2015, the Congressional < Research Service, at the request of one (1) or more Members, released a < report detailing the background and regulatory landscape of Bitcoin. > Bitcoin Exchange Market’s economics. In addition, in October 2015, the > Congressional Research Service, at the request of one (1) or more > Members, released a report detailing the background and regulatory > landscape of Bitcoin. --- 4788c5106 ----------------------- < consumer sends bitcoin to BitPay, Coinbase or GoCoin, which then > consumer sends bitcoin to BitPay, Coinbase, or GoCoin, which then --- 4796,4797c5114,5115 ----------------------- < purchase goods or services through retail companies such as < Overstock.com, DISH, Dell, Expedia, Microsoft, and Time, Inc. > purchase goods or services through retail companies such as Overstock, > DISH, Dell, Expedia, Microsoft, and Time, Inc. --- 4803,4808c5121,5129 ----------------------- < bitcoin. Bitfinex, Bit-X and BTC-e are three (3) of the largest global < U.S. Dollar-denominated Bitcoin Exchanges in the world based on < Bitcoinity.org as of May 3, 2016. Huobi and OKCoin are large Bitcoin < Exchanges based in China that primarily feature trading of bitcoin for < Chinese Yuan based on Bitcoinity.org as of May 3, 2016. Coinbase and < Circle are each multi-service financial institutions that provide > bitcoin. Coinbase and Circle are each multi-service financial > institutions that provide > > > > 57 > > Table of Contents > --- 4818c5139 ----------------------- < Historical Chart of the Price of Bitcoin, 2012-2016 > Historical Chart of the Price of Bitcoin, 2012-2017 --- 4830,4835d5150 ----------------------- < < < 54 < < Table of Contents < --- 4839c5154 ----------------------- < of bitcoin prices across certain US Dollar-denominated exchanges that > of bitcoin prices across certain U.S. Dollar-denominated exchanges that --- 4841c5156 ----------------------- < from January 1, 2012 to May 31, 2016. > from January 1, 2012 to February 1, 2017. --- 4846a5162,5182 ----------------------- > The WinkDex represents a blended average price of bitcoin trading across > a number of bitcoin exchanges, and is an indicator of the price of > bitcoin over a historical period. It is calculated by blending the > trading prices in U.S. dollars for the top three (by volume) qualified > Bitcoin Exchanges during the previous two-hour period using a > volume-weighted exponential moving average. This proprietary formula > weights transactions proportionally by volume as well as exponentially > by time to give greater weight both to higher volume transactions and > more recent transactions. WinkDex tracks each actual trade of bitcoins > for U.S. dollars on five qualified Bitcoin Exchanges. WinkDex’s > proprietary index dynamically determines the top three by volume of > these exchanges during the prior 24-hour period. It should not be > confused with pricing on the Gemini Exchange, which has existed only > since October 2015, nor the Gemini Exchange Auction Price. > > > > 58 > > Table of Contents > --- 4855,4867c5191,5205 ----------------------- < known ETP in the United States that seeks to track the price of a < Digital Asset (a “Digital Asset ETP”). Securitized instruments have been < created for other marketplaces, but have encountered limited success due < to their lack of transparency and thorough regulatory oversight. Two < notable examples are the Grayscale Investment Trust, which trades under < the ticker GBTC on OTC Markets (formerly the “Pink Sheets”) and does not < qualify as an exchange-listed product, and Bitcoin Tracker One, which < trades under the ticker COINXBT on the Stockholm Stock Exchange. Neither < of these instruments are held to the same regulatory scrutiny and < oversight as a security listed under the Securities Act. Because of the < high standards pursued in the creation and listing of the Trust, it will < finally provide investors with a reliable and transparent vehicle for < access to bitcoin as an asset class. > Digital Asset ETP. Securitized instruments have been created for other > marketplaces, but have encountered limited success due to their lack of > transparency and thorough regulatory oversight. Three notable examples > are the Grayscale Investment Trust, which trades under the ticker GBTC > on OTC Markets (formerly the “Pink Sheets”) and does not currently > qualify as an exchange-listed product, Bitcoin Tracker One, which trades > under the ticker COINXBT on the Stockholm Stock Exchange, and the > euro-denominated BitcoinETI Exchange Traded Instrument, which has been > approved for admission to the Gibraltar Stock Exchange and will be > co-listed on Deutsche Boerse. None of these instruments are held to the > same regulatory scrutiny and oversight as a security listed under the > Securities Act. Because of the high standards pursued in the creation > and listing of the Trust, it will finally provide investors with a > reliable and transparent vehicle for access to bitcoin as an asset > class. --- 4891,4897c5229,5258 ----------------------- < Online Bitcoin Exchanges traded over $450,000,000 dollars of notional < value during a twenty-four (24) hour period on May 31, 2016.15 These < marketplaces provide significant data with respect to prevailing < valuations of bitcoin. Most Bitcoin Exchanges operate through pooled < account systems, whereby the users of the Bitcoin Exchange send bitcoin < and/or fiat currency to an account of the Bitcoin Exchange, which < records user > U.S.-based Bitcoin Exchanges traded approximately $40 million of > notional value daily throughout the six months ending February 1, 2017, > compared to a self-reported daily notional trading volume of almost $1 > billion across all worldwide Bitcoin Exchanges. Over that period, the > Gemini Exchange’s daily volume has averaged approximately $2.7 million > notional. These marketplaces provide significant data with respect to > prevailing valuations of bitcoin. Most Bitcoin Exchanges operate through > pooled account systems, whereby the users of the Bitcoin Exchange send > bitcoin and/or fiat currency to an account of the Bitcoin Exchange, > which records user sub-account balances in a ledger entry system. Trades > on pooled account exchanges are typically conducted “off-Blockchain,” > meaning that they are settled by reallocating bitcoin and money to and > from users on the balanced ledger of the Bitcoin Exchange. Therefore, a > trade on a pooled account exchange will not result in a Bitcoin > transaction being transmitted and subsequently recorded on the > Blockchain, or of a money transfer going from one bank account to > another. For a pooled-account Bitcoin Exchange, Bitcoin transactions and > money transfers typically only occur during the withdrawal or deposit of > bitcoin or fiat currency by an exchange customer, or if the Bitcoin > Exchange needs to shift bitcoin or fiat currency between its pooled > accounts for internal purposes. Nevertheless, Bitcoin Exchanges > typically publish trade data including last price, bid and ask > information, and trade volume, among other data, on their respective > websites and through application programming interfaces (“APIs”). > > Bitcoin Exchanges Have a History of Security Breaches > > For most of 2013, Mt. Gox (a Japanese Bitcoin Exchange operated by > Tibanne Co. Ltd.) was the largest online Bitcoin Exchange in the world. > Supporting trading of bitcoin using sixteen (16) different fiat --- 4900d5260 ----------------------- < 15 See, e.g., https://data.bitcoinity.org/markets/volume/30d?c=e&t=a --- 4902,4904c5262 ----------------------- < < < 55 > 59 --- 4908,4932c5266,5271 ----------------------- < sub-account balances in a ledger entry system. Trades on pooled account < exchanges are typically conducted “off-Blockchain,” meaning that they < are settled by reallocating bitcoin and money to and from users on the < balanced ledger of the Bitcoin Exchange. Therefore, a trade on a pooled < account exchange will not result in a Bitcoin transaction being < transmitted and subsequently recorded on the Blockchain, or of a money < transfer going from one bank account to another. For a pooled-account < Bitcoin Exchange, Bitcoin transactions and money transfers typically < only occur during the withdrawal or deposit of bitcoin or fiat currency < by an exchange customer, or if the Bitcoin Exchange needs to shift < bitcoin or fiat currency between its pooled accounts for internal < purposes. Nevertheless, Bitcoin Exchanges typically publish trade data < including last price, bid and ask information, and trade volume, among < other data, on their respective websites and through application < programming interfaces (“APIs”). < < For most of 2013, Mt. Gox (a Japanese Bitcoin Exchange operated at < www.mtgox.com by Tibanne Co. Ltd.) was the largest online Bitcoin < Exchange in the world. Supporting trading of bitcoin using sixteen (16) < different fiat currencies, Mt. Gox accounted for nearly three-quarters < of all Bitcoin Exchange Market trading during the first half of 2013. By < August 2013, although Mt. Gox’s market share dropped to just over fifty < (50) percent according to Bitcoinity.org, the four (4) largest Bitcoin < Exchanges accounted for more than ninety (90) percent of the Bitcoin < Exchange Market volume. > currencies, Mt. Gox accounted for nearly three-quarters of all Bitcoin > Exchange Market trading during the first half of 2013. By August 2013, > although Mt. Gox’s market share dropped to just over fifty (50) percent > according to Bitcoinity, the four (4) largest Bitcoin Exchanges > accounted for more than ninety (90) percent of the Bitcoin Exchange > Market volume. --- 4935,4945c5274,5292 ----------------------- < surpassed US Dollar-denominated Bitcoin Exchanges. This was bolstered by < large speculative demand in China which led to the emergence of several < large Bitcoin Exchanges and volume on BTC China that was bolstered by a < commission-free trading program. Following a December regulatory notice < from the People’s Bank of China and five government ministries that < limited the ability of Chinese regulated financial and payment < institutions to do business with Bitcoin Exchanges, volume on BTC China < and similar exchanges such as Huobi and OKCoin dropped significantly. By < the end of 2014, volume on the major Bitcoin Exchanges that do not < charge trading commission fees again outpaced the volume on the major US < Dollar-denominated exchanges such as BTC-e, Bitfinex and BitStamp. > surpassed U.S. Dollar-denominated Bitcoin Exchanges. This was bolstered > by large speculative demand in China which led to the emergence of > several large Bitcoin Exchanges and volume on BTC China that was > bolstered by a commission-free trading program. Following a December > regulatory notice from the People’s Bank of China and five government > ministries that limited the ability of Chinese regulated financial and > payment institutions to do business with Bitcoin Exchanges, volume on > BTC China and similar exchanges such as Huobi and OKCoin dropped > significantly. By the end of 2014, volume on the major Bitcoin Exchanges > that do not charge trading commission fees again outpaced the volume on > the major U.S. Dollar-denominated exchanges such as BTC-e, Bitfinex and > BitStamp. In January 2017, the People’s Bank of China announced that it > had found several violations, including margin financing and a failure > to impose anti-money laundering controls, after on-site inspections of > two China-based Bitcoin Exchanges. In response to the Chinese > regulator’s oversight, the three largest China-based Bitcoin Exchanges, > OKCoin, Huobi, and BTC China, started charging trading commission fees > to suppress speculative trading and prevent price swings which resulted > in a significant drop in volume on these exchanges. --- 4954,4955c5301,5302 ----------------------- < withdrawal and sending a second withdrawal in the same amount. Mt. Gox < also continued to delay US Dollar withdrawals for a matter of weeks or > withdrawal and sending a second withdrawal in the same quantity. Mt. Gox > also continued to delay U.S. Dollar withdrawals for a matter of weeks or --- 4980,4982c5327,5340 ----------------------- < As the Bitcoin Exchange Market has evolved, additional entrants have < emerged and there are numerous Bitcoin Exchanges. Despite the regulatory < uncertainty that has, at times, temporarily limited the ability of > Bitcoin Exchanges may be susceptible to denial of service (“DoS”) > attacks. In a DoS attack, an attacker bombards a Bitcoin Exchange with a > large quantity of external requests, thus precluding the targeted > Bitcoin Exchange from processing requests from genuine users, > effectively or literally knocking the Bitcoin Exchange offline. In a > DDoS Attack, the attacker gains control of and uses another party’s > computer to launch the external requests. Mt. Gox was the victim of > three (3) DDoS Attacks in April 2013 alone. Other large Bitcoin > Exchanges also have suffered DDoS Attacks. DoS and DDoS Attacks can > cause the price of bitcoin to fall substantially. Users, miners and > service providers are similarly susceptible to such attacks. The Bitcoin > Network protocol and software programs have internal mechanisms that > mitigate but do not eliminate the likelihood and effects of DoS attacks > and DDoS Attacks. --- 4986c5344 ----------------------- < 56 > 60 --- 4989a5348,5362 ----------------------- > Bitcoin Exchanges also may be the victims of breaches in information > security. In June 2011, a malicious actor hacked the Mt. Gox database > and stole thousands of usernames, passwords and email addresses. In > September 2012, Bitfloor was forced to go offline as a result of an > attack through which a hacker gained access to private keys and twenty > four thousand (24,000) bitcoin. Additionally, in August 2016, Bitfinex, > a Hong Kong-based Bitcoin Exchange experienced a security breach > resulting in the loss of approximately one hundred twenty thousand > (120,000) bitcoin worth $65 million at the time.26 > > Bitcoin Exchanges Operate Globally and Under Various Regulatory Regimes > > As the Bitcoin Exchange Market has evolved, additional entrants have > emerged and there are numerous Bitcoin Exchanges. Despite the regulatory > uncertainty that has, at times, temporarily limited the ability of --- 4991,5004c5364,5401 ----------------------- < deposits of fiat currency, the policy of low or zero commission trading < on such China-based Bitcoin Exchanges has resulted in reported volumes < that exceed those of Bitcoin Exchanges primarily trading the BTC-USD < trading pair. According to Bitcoinity.org, in the six-month period ended < May 3, 2016, the trading pair of the Chinese Yuan and bitcoin has had < approximately 94.79 percent of the bitcoin trading market (relative to < other currency trading pairs), and has not accounted for less than half < of such market on any day during that period. However, many Bitcoin < enthusiasts are skeptical about the accuracy of these self-reported < volumes on the China-based Bitcoin Exchanges. During the six (6) month < period, the BTC-USD trading pair has accounted for approximately 4.07 < percent of the total bitcoin trading market. Bitcoin trades denominated < in Euros and British Pounds accounted for 0.70 and 0.11 percent of the < market, respectively. > deposits of fiat currency, the previous policy of low or zero commission > trading on such China-based Bitcoin Exchanges has resulted in reported > volumes that exceed those of Bitcoin Exchanges primarily trading the > BTC-USD trading pair. However, the self-reported volumes are often > considered suspect by knowledgeable market participants. According to > Bitcoinity’s tally of self-reported volumes, in the six-month period > ending February 1, 2017, the trading pair of the Chinese Yuan and > bitcoin represents approximately 95 percent of the bitcoin trading > market (relative to other currency trading pairs), and has not accounted > for less than half of such market on any day during that period. > However, many Bitcoin Exchange participants are skeptical about the > accuracy of these self-reported volumes on the China-based Bitcoin > Exchanges. During the same six-month period, the BTC-USD trading pair > has accounted for approximately 3 percent of the total self-reported > bitcoin trading market. Self-reported bitcoin trades denominated in > Euros and British Pounds accounted for 0.5 and 0.3 percent of the > market, respectively. This significant disparity among the China-based > Bitcoin Exchanges and the other Bitcoin Exchanges will likely no longer > continue due to the People’s Bank of China’s oversight of China-based > Bitcoin Exchanges. In January 2017, the People’s Bank of China announced > that it had found several violations, including margin financing and a > failure to impose anti-money laundering controls, after on-site > inspections of two China-based Bitcoin Exchanges. In response to the > Chinese regulator’s oversight, the three largest China-based Bitcoin > Exchanges, OKCoin, Huobi, and BTC China, started charging trading > commission fees to suppress speculative trading and prevent price swings > which resulted in a significant drop in volume on these exchanges that > will likely continue going forward. > > Similarly, pricing on overseas Bitcoin Exchanges can make it difficult > to accurately ascertain the equivalent pricing denominated in U.S. > Dollars. Various publicly available data published by Blockchain Data > LTD and others track foreign (fiat) currency arbitrage opportunities > across global jurisdictions and currencies. For the six-month period > ending February 1, 2017, daily bitcoin prices across U.S. Dollars, > euros, Chinese RMB, British Pounds, and Canadian Dollars deviated by > less than 1.9 percent on average and 3.1 at most, using standard spot > foreign exchange rates. --- 5008,5009c5405,5406 ----------------------- < Bitcoin Exchanges available on Bitcoinity.org for the six (6) month < period ended May 3, 2016 are located in Hong Kong, Singapore, and China. > Bitcoin Exchanges available from Bitcoinity for the six-month period > ending February 1, 2017 are located in Hong Kong, the U.S., and China. --- 5023,5050d5419 ----------------------- < As noted above, Gemini Exchange, an affiliate of the Sponsor and the < source of the Gemini Exchange Spot Price used by the Trust to calculate < its NAV, operates the website www.gemini.com. Gemini Exchange is owned < and operated by Gemini Trust Company, LLC, the Trust’s Custodian. As a < facility of a New York State-chartered limited liability trust company, < Gemini Exchange operates under the direct supervision and regulatory < authority of the NYSDFS. The Gemini Trust Company is a fiduciary and < must meet the capitalization, compliance, anti-money laundering, < consumer protection and cyber security requirements as set forth by the < NYSDFS. Gemini Exchange’s principal business is to provide an electronic < trading platform and associated online presence to allow customers to < exchange fiat currency (e.g., U.S. Dollars) for Digital Assets (e.g., < bitcoin or ether) and vice versa. < < Bitcoin Exchanges may be susceptible to denial of service (“DoS”) < attacks. In a DoS attack, an attacker bombards a Bitcoin Exchange with a < large quantity of external requests, thus precluding the targeted < Bitcoin Exchange from processing requests from genuine users, < effectively or literally knocking the Bitcoin Exchange offline. In a < DDoS attack, the attacker gains control of and uses another party’s < computer to launch the external requests. Mt. Gox was the victim of < three (3) DDoS Attacks in April 2013 alone. Other large Bitcoin < Exchanges also have suffered DDoS Attacks. DoS and DDoS attacks can < cause the price of bitcoin to fall substantially. Users, miners and < service providers are similarly susceptible to such attacks. The Bitcoin < Network protocol and software programs have internal mechanisms that < mitigate but do not eliminate the likelihood and effects of DoS attacks < and DDoS Attacks. --- 5052,5062c5421,5426 ----------------------- < Bitcoin Exchanges also may be the victims of breaches in information < security. In June 2011, a malicious actor hacked the Mt. Gox database < and stole thousands of usernames, passwords and email addresses. In < September 2012, Bitfloor was forced to go offline as a result of an < attack through which a hacker gained access to private keys and twenty < four thousand (24,000) bitcoin. Such attacks have caused multiple < Bitcoin Exchanges to close for brief periods. Hackers also can target < users, miners and service providers. These attacks reflect negatively on < the effectiveness of security measures undertaken by some participants < in the Bitcoin economy and do not reflect the inherent cryptographic < security of the Bitcoin Network. > 26 Such attacks have caused multiple Bitcoin Exchanges to close for > brief periods. Hackers also can target users, miners and service > providers. These attacks reflect negatively on the effectiveness of > security measures undertaken by some participants in the Bitcoin economy > and do not reflect the inherent cryptographic security of the Bitcoin > Network. --- 5066c5430 ----------------------- < 57 > 61 --- 5069a5434,5446 ----------------------- > Gemini Exchange is an affiliate of the Sponsor and the source of the > Gemini Exchange Auction Price used by the Trust to calculate its NAV. > Gemini Exchange is owned and operated by Gemini Trust Company, LLC, the > Trust’s Custodian. As a facility of a New York State-chartered limited > liability trust company, Gemini Exchange operates under the direct > supervision and regulatory authority of the NYSDFS. The Gemini Trust > Company is a fiduciary and must meet the capitalization, compliance, > anti-money laundering, consumer protection and cyber security > requirements as set forth by the NYSDFS. Gemini Exchange’s principal > business is to provide an electronic trading platform and associated > online presence to allow customers to exchange fiat currency (e.g., U.S. > Dollars) for Digital Assets (e.g., bitcoin or ether) and vice versa. > --- 5131,5144c5508,5510 ----------------------- < bitcoin trades. CFTC commissioners have previously expressed publicly < that derivatives based on Digital Assets such as bitcoin are subject to < regulation by the CFTC, including oversight to prevent market < manipulation of the price of bitcoin. As previously noted, in the < September 2015 Coinflip case, the CFTC instituted and settled < administrative proceedings that involved a bitcoin derivatives trading < platform and its chief executive officer. In Coinflip, the CFTC < determined that bitcoin and other “virtual currencies” (also known as < Digital Assets) are properly defined as commodities under the CEA and < CFTC regulations, and applied CEA provisions and CFTC regulations that < apply to transactions in commodity options and swaps to the conduct of < the bitcoin derivatives trading platform. While the SEC has not opined < on the legal characterization of bitcoin as a security, it has taken < various actions against persons or entities misusing bitcoin > bitcoin trades. As previously noted, in the September 2015 Coinflip > case, the CFTC instituted and settled administrative proceedings that > involved a bitcoin derivatives --- 5148c5514 ----------------------- < 58 > 62 --- 5152,5154c5518,5529 ----------------------- < in connection with fraudulent schemes (i.e., Ponzi schemes), inaccurate < and inadequate publicly disseminated information, and the offering of < unregistered securities.16 > trading platform and its chief executive officer. In Coinflip, the CFTC > determined that bitcoin and other “virtual currencies” (also known as > Digital Assets) are properly defined as commodities under the CEA and > CFTC regulations, and applied CEA provisions and CFTC regulations that > apply to transactions in commodity options and swaps to the conduct of > the bitcoin derivatives trading platform, including anti-manipulation > provisions. While the SEC has not opined on the legal characterization > of bitcoin as a security, it has taken various actions against persons > or entities misusing bitcoin in connection with fraudulent schemes > (i.e., Ponzi schemes), inaccurate and inadequate publicly disseminated > information, the offering of unregistered securities, and an > unauthorized share redemption program.27 --- 5162c5537 ----------------------- < Overstock.com and TigerDirect began accepting Bitcoin payments. Over the > Overstock and TigerDirect began accepting Bitcoin payments. Over the --- 5166,5187c5541,5563 ----------------------- < Dell began accepting bitcoin. There are thousands of additional online < merchants that accept bitcoin, and the variety of goods and services for < which bitcoin can be exchanged is increasing. Currently, local, regional < and national businesses, including Time Inc., Wikimedia, WordPress, < Expedia and Foodler, accept bitcoin. Bitcoin service providers such as < BitPay, Coinbase and GoCoin and online gift card retailer Gyft provide < other means to spend bitcoin for goods and services at additional < retailers. There are also many real-world locations that accept bitcoin < throughout the world. < < As of April 2016, it was estimated that as many as one hundred thousand < (100,000) merchants or businesses accept, or have the technological < infrastructure to choose to accept (e.g., Shopify merchants), bitcoin as < payment. In September 2014, payments giant PayPal announced a < partnership with BitPay, Coinbase and GoCoin to expand their < Bitcoin-related services to PayPal’s merchant customers, thereby < significantly expanding the reach of bitcoin-accepting merchants. To < date, the rate of consumer adoption and use of bitcoin in paying < merchants has trailed the broad expansion of retail and commercial < acceptance of bitcoin. Nevertheless, there will likely be a strong < correlation between continued expansion of the Bitcoin Network and its < retail and commercial market penetration. > Dell began accepting bitcoin. Additionally, Apple, Inc. approved the > inclusion of certain approved bitcoin wallet applications on the Apple > App Store. There are thousands of additional online merchants that > accept bitcoin, and the variety of goods and services for which bitcoin > can be exchanged is increasing. Currently, local, regional and national > businesses, including Time Inc., Wikimedia, WordPress, Expedia and > Foodler, accept bitcoin. Bitcoin service providers such as BitPay, and > Coinbase provide means to spend bitcoin for goods and services at > additional retailers. There are also many real-world locations that > accept bitcoin throughout the world. > > As of February 2017, it was estimated that as many as one hundred > thousand (100,000) merchants or businesses accept, or have the > technological infrastructure to choose to accept (e.g., Shopify > merchants), bitcoin as payment. In September 2014, payments giant PayPal > announced a partnership with merchant processors including BitPay and > Coinbase to expand their Bitcoin-related services to PayPal’s merchant > customers, thereby significantly expanding the reach of > bitcoin-accepting merchants. To date, the rate of consumer adoption and > use of bitcoin in paying merchants has trailed the broad expansion of > retail and commercial acceptance of bitcoin. Nevertheless, there will > likely be a strong correlation between continued expansion of the > Bitcoin Network and its retail and commercial market penetration. --- 5215,5225c5591 ----------------------- < send its bitcoin to different Bitcoin addresses multiple times to make < tracking the bitcoin through the Blockchain more difficult or, more < simply, engage a so-called “mixing” or “tumbling” service to switch its < bitcoin with those of other users. However, these precautions do not < guarantee anonymity and are illegal to the extent that they constitute < money laundering or otherwise violate the law. < < As with any other asset or medium of exchange, bitcoin can be used to < purchase illegal goods or fund illicit activities. For example, Silk < Road, an anonymous online marketplace that sold illegal substances prior < to > send its bitcoin to different Bitcoin addresses multiple times to --- 5228,5230c5594 ----------------------- < 16 < < See, supra note 3. > 27 See supra note 3. --- 5234c5598 ----------------------- < 59 > 63 --- 5238,5241c5602,5614 ----------------------- < its seizure and the arrest of its founder and operator in October 2013, < accepted only bitcoin. Although the SEC has not opined on the legal < characterization of bitcoin as a security, it has taken various actions < against persons or entities misusing bitcoin in connection with > make tracking the bitcoin through the Blockchain more difficult or, more > simply, engage a so-called “mixing” or “tumbling” service to switch its > bitcoin with those of other users. However, these precautions do not > guarantee anonymity and are illegal to the extent that they constitute > money laundering or otherwise violate the law. > > As with any other asset or medium of exchange, bitcoin can be used to > purchase illegal goods or fund illicit activities. For example, Silk > Road, an anonymous online marketplace that sold illegal substances prior > to its seizure and the arrest of its founder and operator in October > 2013, accepted only bitcoin. Although the SEC has not opined on the > legal characterization of bitcoin as a security, it has taken various > actions against persons or entities misusing bitcoin in connection with --- 5243,5245c5616,5619 ----------------------- < publicly disseminated information, and the offering of unregistered < securities.17 The use of bitcoin for illicit purposes, however, is not < promoted by the Bitcoin Network or the user community as a whole. > publicly disseminated information, the offering of unregistered > securities, and an unauthorized share redemption program.28 The use of > bitcoin for illicit purposes, however, is not promoted by the Bitcoin > Network or the user community as a whole. --- 5296,5309c5670,5673 ----------------------- < and the offering of unregistered securities.18 Commissioners of the CFTC < initially expressed the belief that bitcoin met the definition of a < commodity and that the CFTC has regulatory authority over futures and < other derivatives based on Digital Assets, subject to facts and < circumstances. The Sponsor also espoused the view that, on balance, the < important features of bitcoin and other Digital Assets are those that < are characteristics of commodities and therefore has referred to and < discussed these assets as such. Additional clarity was obtained on < September 17, 2015, when the CFTC instituted and settled the Coinflip < case. The Coinflip order found that the respondents (i) conducted < activity related to commodity options transactions without complying < with the provisions of the CEA and CFTC regulations, and (ii) operated a < facility for the trading of swaps without registering the facility as a < SEF or DCM. > and the offering of unregistered securities.29Clarity regarding the > treatment of bitcoin was obtained on September 17, 2015, when the CFTC > instituted and settled the Coinflip case. The Coinflip order found that > the respondents (i) conducted activity --- 5312c5676 ----------------------- < 17 See, supra note 3. 18 See, supra note 3. > 28 See supra note 3. 29 See supra note 3. --- 5316c5680 ----------------------- < 60 > 64 --- 5320c5684,5687 ----------------------- < The Coinflip order was significant as it is the first time the CFTC > related to commodity options transactions without complying with the > provisions of the CEA and CFTC regulations, and (ii) operated a facility > for the trading of swaps without registering the facility as a SEF or > DCM. The Coinflip order was significant as it is the first time the CFTC --- 5344c5711 ----------------------- < basis” without first registering with the CFTC.19 > basis” without first registering with the CFTC.30 --- 5347,5359c5714,5730 ----------------------- < currencies, such as bitcoin, for U.S. federal income tax purposes. The < guidance, the first issued by a U.S. government agency regarding the < asset classification of bitcoin, classified bitcoin as “property” for < U.S. federal income tax purposes. The guidance clarified that bitcoin < could be held as capital assets and that holders of bitcoin were < required to track gains and losses relating to their cost basis at < acquisition and their amount realized upon sale or other disposition of < the bitcoin. The IRS also clarified that bitcoin received as payment < (e.g., as wages or, in the case of a miner, as a reward for solving a < block) would be taxable as ordinary income using the fair market value < of bitcoin when received. The asset classification of bitcoin by the IRS < is not controlling on other government agencies for purposes other than < those relating to U.S. federal income tax. > convertible currencies, such as bitcoin, for U.S. federal income tax > purposes. The guidance, the first issued by a U.S. government agency > regarding the asset classification of bitcoin, classified bitcoin as > “property” that it is not currency for U.S. federal income tax purposes. > The guidance clarified that bitcoin could be held as capital assets and > that holders of bitcoin were required to track gains and losses relating > to their cost basis at acquisition and their amount realized upon sale > or other disposition of the bitcoin. The IRS also clarified that bitcoin > received as payment (e.g., as wages or, in the case of a miner, as a > reward for solving a block) is included in the recipient’s taxable > income based on the fair market value of bitcoin when received. The IRS > may revisit its treatment of digital currencies, including seeking > enforcement of existing guidance or issuing new guidance, in response to > recommendations in a September 2016 report by the U.S. Treasury > Inspector General for Tax Administration.31 The asset classification of > bitcoin by the IRS is not controlling on other government agencies for > purposes other than those relating to U.S. federal income tax. --- 5383,5393c5754 ----------------------- < hearings on Digital Assets, including bitcoin, and possible regulation < thereof. Members of the private sector and representatives of the < Department of Justice, Secret Service and FinCEN (among other government < agencies) had participated in such inquiries and hearings. < < U.S. state regulators, including the California Department of Financial < Institutions, NYSDFS, Virginia Corporation Commission, Idaho Department < of Financial Services and Washington State Department of Financial < Institutions, have similarly released interpretations or mandates that < Bitcoin Exchanges and similar Bitcoin service providers register on a < state-level as MTs or MSB. In June 2014, the State of California adopted > hearings on Digital Assets, --- 5396c5757 ----------------------- < 19 > 30 See supra note 5. 31 --- 5398c5759,5762 ----------------------- < See supra, note 5. > See U.S. Treasury Inspector General for Tax Administration, As the Use > of Virtual Currencies in Taxable Transactions Becomes More Common, > Additional Actions are Needed to Ensure Taxpayer Compliance, Notice > 2016-30-083 (Sept. 21, 2016). --- 5402c5766 ----------------------- < 61 > 65 --- 5405a5770,5780 ----------------------- > including bitcoin, and possible regulation thereof. Members of the > private sector and representatives of the Department of Justice, Secret > Service and FinCEN (among other government agencies) had participated in > such inquiries and hearings. > > U.S. state regulators, including the California Department of Financial > Institutions, NYSDFS, Virginia Corporation Commission, Idaho Department > of Financial Services and Washington State Department of Financial > Institutions, have similarly released interpretations or mandates that > Bitcoin Exchanges and similar Bitcoin service providers register on a > state-level as MTs or MSB. In June 2014, the State of California adopted --- 5412c5787,5789 ----------------------- < hasn’t been further consideration by the California State Assembly. > hasn’t been further consideration by the California State Assembly. As > of August 2016, the bill was withdrawn from consideration for vote for > the remainder of the year. --- 5427,5428c5804,5805 ----------------------- < compliance policies. As of April 2016, the NYSDFS has granted one (1) < “BitLicense” to a market participant. > compliance policies. As of June 2016, the NYSDFS has granted a > “BitLicense” to two (2) market participants. --- 5469,5482c5846 ----------------------- < other legal tender, and thus the bitcoin trading could be exempted from < VAT. The ruling shows that bitcoin tax treatment in the European Union < has moved more closely in-line with that of conventional currency. < Foreign government bodies have also initiated public inquiries similar < to those taken by US government bodies, including public hearings on < Digital Assets, including bitcoin, held by both the French and Canadian < Senates. In October 2015, the European Court of Justice determined that < exchanging transactions in Digital Assets are exempt from value-added < taxes in the same manner as traditional currencies. < < On December 5, 2013, the People’s Bank of China and five Chinese < ministries released a notice that restricted Bitcoin activity among its < financial and payment institutions while classifying bitcoin as a < “virtual > other legal tender, --- 5486c5850 ----------------------- < 62 > 66 --- 5490,5505c5854,5896 ----------------------- < commodity” that was legal to own and speculate in. Over the subsequent < six (6) months, news reports from China indicated that many banking < institutions and third-party payment processors in China had received < private guidance leading them to close Bitcoin Exchange bank accounts < that held Chinese Yuan on behalf of exchange customers. As a result, < though the Chinese government has not banned the use of bitcoin or the < holding of bitcoin, the effective result of the public and private < notices has been to severely restrict the operation of Chinese Bitcoin < Exchanges through the limitation of customers’ ability to deposit or < withdraw Chinese Yuan with or from the exchanges. During the second half < of 2014, Chinese Bitcoin Exchanges again began to accept deposits of < Chinese Yuan through the use of third-party payment providers, and < trading activity returned to higher levels. In January 2016, the < People’s Bank of China, China’s central bank, disclosed that it has been < studying a state-backed electronic monetary system and potentially had < plans for its own state-backed electronic money. > and thus the bitcoin trading could be exempted from VAT. The ruling > shows that bitcoin tax treatment in the European Union has moved more > closely in-line with that of conventional currency. Foreign government > bodies have also initiated public inquiries similar to those taken by US > government bodies, including public hearings on Digital Assets, > including bitcoin, held by both the French and Canadian Senates. In > October 2015, the European Court of Justice determined that exchanging > transactions in Digital Assets are exempt from value-added taxes in the > same manner as traditional currencies. In July 2016, the European > Commission released a draft directive that proposed applying > counter-terrorism and anti-money laundering regulations to virtual > currencies, and in September 2016, the European Banking authority > advised the European Commission to institute new regulation specific to > virtual currencies, with amendments to existing regulation as a stopgap > measure. > > On December 5, 2013, the People’s Bank of China and five Chinese > ministries released a notice that restricted Bitcoin activity among its > financial and payment institutions while classifying bitcoin as a > “virtual commodity” that was legal to own and speculate in. Over the > subsequent six (6) months, news reports from China indicated that many > banking institutions and third-party payment processors in China had > received private guidance leading them to close Bitcoin Exchange bank > accounts that held Chinese Yuan on behalf of exchange customers. As a > result, though the Chinese government has not banned the use of bitcoin > or the holding of bitcoin, the effective result of the public and > private notices has been to severely restrict the operation of Chinese > Bitcoin Exchanges through the limitation of customers’ ability to > deposit or withdraw Chinese Yuan with or from the exchanges. During the > second half of 2014, Chinese Bitcoin Exchanges again began to accept > deposits of Chinese Yuan through the use of third-party payment > providers, and trading activity returned to higher levels. In January > 2016, the People’s Bank of China, China’s central bank, disclosed that > it has been studying a state-backed electronic monetary system and > potentially had plans for its own state-backed electronic money. In > January 2017, the People’s Bank of China announced that it had found > several violations, including margin financing and a failure to impose > anti-money laundering controls, after on-site inspections of two > China-based Bitcoin Exchanges. In response to the Chinese regulator’s > oversight, the three largest China-based Bitcoin Exchanges, OKCoin, > Huobi, and BTC China, started charging trading commission fees to > suppress speculative trading and prevent price swings which resulted in > a significant drop in volume on these exchanges. --- 5517c5908 ----------------------- < Ministry is considering proposing regulations that would prohibit the > Ministry was considering proposing regulations that would prohibit the --- 5519,5521c5910,5913 ----------------------- < services in Russia. The legal status of Bitcoin in Russia remains < unclear, though the recently hostile approach of certain government arms < indicates a restrictive environment. > services in Russia. However, in July 2016, in a significant change in > tone, the Russian Ministry of Finance indicated it supports a proposed > law that bans bitcoin domestically but allows for its use as a foreign > currency. --- 5542,5546c5934,5945 ----------------------- < guidance on the further development and future application of laws to < Bitcoin-related activity in Switzerland. Among others, Australia, < Finland and the Netherlands have joined Canada and Germany among the < foreign countries releasing formal or informal tax guidance regarding < Bitcoin income or operations. > guidance on the further development and > > > > 67 > > Table of Contents > > future application of laws to Bitcoin-related activity in Switzerland. > Among others, Australia, Finland and the Netherlands have joined Canada > and Germany among the foreign countries releasing formal or informal tax > guidance regarding Bitcoin income or operations. --- 5568,5573d5966 ----------------------- < < < 63 < < Table of Contents < --- 5607c6000 ----------------------- < 64 > 68 --- 5615c6008 ----------------------- < with the Custodian as consideration, (ii) transferring actual bitcoin as > with the Custodian as consideration; (ii) transferring actual bitcoin as --- 5617c6010 ----------------------- < expenses not assumed by the Sponsor and other liabilities, (ii) > expenses not assumed by the Sponsor and other liabilities; (ii) --- 5619,5629c6012,6022 ----------------------- < redemption by the Authorized Participants, (iv) causing the < Administrator to sell bitcoin on the termination of the Trust, and (v) < engaging in all administrative and custodial procedures necessary to < accomplish such activities in accordance with the provisions of the < Trust Agreement, the Trust Servicing Agreement, the Trust Agency Service < Provider Agreement, the Trust Custody Agreement, the License Agreement < (as defined below under “The Sponsor—Intellectual Property License < Agreement”) and Authorized Participant Agreements. The Trust will not be < actively managed. It will not engage in any activities designed to < obtain a profit from, or to ameliorate losses caused by, changes in the < market prices of bitcoin. > redemption by the Authorized Participants; (iv) causing the Trustee to > sell bitcoin on the termination of the Trust; and (v) engaging in all > administrative and custodial procedures necessary to accomplish such > activities in accordance with the provisions of the Trust Agreement, the > Administration Agreement, the Transfer Agency and Services Agreement, > the Trust Custody Agreement, the License Agreement (as defined below > under “The Sponsor—Intellectual Property License Agreement”) and > Authorized Participant Agreements. The Trust will not be actively > managed. It will not engage in any activities designed to obtain a > profit from, or to ameliorate losses caused by, changes in the market > prices of bitcoin. --- 5634,5646c6027,6039 ----------------------- < price of bitcoin as measured at 4:00 p.m. Eastern time using the Gemini < Exchange Spot Price on each Business Day, less the Trust’s liabilities < (which include accrued but unpaid fees and expenses). The Shares are < designed for investors seeking a cost-effective and convenient means of < gaining investment exposure to bitcoin similar to a direct investment in < bitcoin. A substantial direct investment in bitcoin may require < expensive and sometimes complicated arrangements in connection with the < acquisition, security and safekeeping of the bitcoin and may involve the < payment of substantial fees to acquire such bitcoin from third-party < facilitators through cash payments of U.S. Dollars. Although the Shares < will not be the exact equivalent of a direct investment in bitcoin, they < provide investors with an alternative that allows them to gain < investment exposure to bitcoin. > price of bitcoin using the Gemini Exchange Auction Price on each > Business Day, less the Trust’s liabilities (which include accrued but > unpaid fees and expenses). The Shares are designed for investors seeking > a cost-effective and convenient means of gaining investment exposure to > bitcoin similar to a direct investment in bitcoin. A substantial direct > investment in bitcoin may require expensive and sometimes complicated > arrangements in connection with the acquisition, security and > safekeeping of the bitcoin and may involve the payment of substantial > fees to acquire such bitcoin from third-party facilitators through cash > payments of U.S. Dollars. Although the Shares will not be the exact > equivalent of a direct investment in bitcoin, they provide investors > with an alternative that allows them to gain investment exposure to > bitcoin. --- 5652c6045 ----------------------- < of trading, each Share in the Seed Baskets of equivalent value to [0.10] > of trading, each Share in the Seed Baskets of equivalent value to [0.01] --- 5676,5680c6069,6070 ----------------------- < < • < < Exchange-Traded and Transparent. The Shares will be listed and trade on < BATS, providing investors with an efficient means to implement various > Exchange-Traded and Transparent. The Shares will be listed on Bats, > providing investors with an efficient means to implement various --- 5685,5689c6075,6080 ----------------------- < Trust’s holdings will be reported each day on www.[ ].com, the Trust’s < website. Furthermore, the fact that the Trust will be regulated by the < Exchange and by the Commission under the Act provides a level of < oversight not provided by any other current Bitcoin Exchanges or service < providers. The Sponsor represents that the Trust will > Trust’s holdings will be reported each day on www.coin-etf.com, the > Trust’s website, and in quarterly financial statements. Furthermore, the > fact that the Trust will be regulated by the Exchange and by the > Commission under the Act provides a level of oversight not provided by > any other current Bitcoin Exchanges or service providers. The Sponsor > represents that --- 5693c6084 ----------------------- < 65 > 69 --- 5697,5706c6088,6097 ----------------------- < < enter into an information sharing agreement with the Gemini Exchange < enabling it to obtain and publish the Gemini Exchange Spot Price on the < Trust’s website. In addition, the Sponsor will arrange for the Gemini < Exchange to share data regarding the Gemini Exchange Spot Price and < other trading data with the Exchange. See “Bitcoin Value—Gemini Exchange < Spot Price” above. Lastly, the Exchange has the ability to halt trading < and delist the Shares of the Trust under certain circumstances and, more < generally, retains broad discretionary authority over the continued < listing of securities on the Exchange, as further described below. > the Trust will enter into an information sharing agreement with the > Gemini Exchange enabling it to obtain and publish the Gemini Exchange > Auction Price on the Trust’s website. In addition, the Sponsor will > arrange for the Gemini Exchange to share data regarding the Gemini > Exchange Auction Price and other trading data with the Exchange. See > “Bitcoin Value—Gemini Exchange Auction Price” above. Lastly, the > Exchange has the ability to halt trading and delist the Shares of the > Trust under certain circumstances and, more generally, retains broad > discretionary authority over the continued listing of securities on the > Exchange, as further described below. --- 5727,5732c6118,6123 ----------------------- < Proprietary Cold Storage System. The Trust utilizes the Custodian’s < state-of-the-art, proprietary Cold Storage System and related protocols < and internal controls for storing and safekeeping the Trust’s bitcoin. < Other Digital Asset ETPs may or may not utilize proprietary cold storage < systems that create similar redundancies and safeguards to protect < against theft or loss. > Proprietary Cold Storage of Private Keys. The Trust utilizes the > Custodian’s state-of-the-art, proprietary Cold Storage System and > related protocols and internal controls for storing and safekeeping the > Trust’s bitcoin. Other Digital Asset ETPs may or may not utilize > proprietary cold storage systems that create similar redundancies and > safeguards to protect against theft or loss. --- 5737,5758c6128,6155 ----------------------- < Cold Storage of Private Keys. The Custodian generates, stores and < manages the private keys that control the Trust’s bitcoin completely < offline (i.e., air-gapped) onboard hardware security modules (“HSMs”) < for the lifetime of each private key. The Cold Storage System only uses < HSMs that have achieved a rating of FIPS PUB 140-2 Level 3 (or higher). < HSMs (each, a “Signer”) are tamper-resistant computers used by the < Custodian to digitally sign (i.e., authenticate) any transfer of the < Trust’s bitcoin. The Custodian’s Cold Storage System utilizes < multiple-signature (“Multisig”) technology with an “M-of-N” signing < design that requires a signature from more than one Signer (but fewer < than the full complement of potential Signers) in order to move the < Trust’s bitcoin. This provides both security against attacks and < tolerance to losing access to a minority of facilities or private keys, < thereby eliminating single points of failure. In addition, the operation < of a Signer requires the coordinated actions of multiple employees (each < a “Signatory”) to protect against insider malfeasance. Lastly, the Cold < Storage System is comprised of hardware that is sourced from multiple, < diverse manufacturers to guard against supply-chain risks. Other Digital < Asset ETPs may not utilize proprietary cold storage or may utilize < different cold storage-related hardware and security protocols to store < private keys that do not create similar redundancies and safeguards to < surrounding private keys to protect against theft or loss. > Private Key Management. The Custodian generates, stores and manages the > private keys that control the Trust’s bitcoin completely offline (i.e., > air-gapped) onboard hardware security modules (“HSMs”) for the lifetime > of each private key. The Cold Storage System only uses HSMs that have > achieved a rating of FIPS PUB 140-2 Level 3 (or higher).32 HSMs (each, a > “Signer”) are tamper-resistant computers used by the Custodian to > digitally sign (i.e., authenticate) any transfer of the Trust’s bitcoin. > The Custodian’s Cold Storage System utilizes multiple-signature > (“Multisig”) technology with a “2-of-3” signing design that requires a > signature from at least two (2) of three (3) potential Signers in order > to move the Trust’s bitcoin. This provides both security against attacks > and tolerance to losing access to a minority of facilities or private > keys, thereby eliminating single points of failure. In addition, the > operation of a Signer requires the coordinated actions of multiple > employees (each a “Signatory”) to protect against insider malfeasance. > All Signatories have undergone background checks by a third-party vendor > and are subject to, with or without the Signatory’s knowledge, ongoing > background checks at the discretion of the Custodian. All Signatories > have been fingerprinted, and all fingerprint cards and accompanying > information are retained by the Custodian for the duration of the > Signatory’s tenure and for a minimum of three (3) years thereafter. > Lastly, the Cold Storage System is comprised of hardware that is sourced > from multiple, diverse manufacturers to guard against supply-chain > risks. Other Digital Asset ETPs may not utilize proprietary cold storage > or may utilize different cold storage-related hardware and security > protocols to store private keys that do not create similar redundancies > and safeguards to surrounding private keys to protect against theft or > loss. --- 5768,5771c6165 ----------------------- < Asset ETPs may store private keys in locations around the world, or may < use financial instruments to seek their investment objectives. The < geographic and political considerations of storing private keys in the < United States may appeal to certain investors. > Asset ETPs may store private keys in --- 5774c6168 ----------------------- < • > 32 --- 5776,5782c6170,6176 ----------------------- < Cold Storage System Controls Audit. The Custodian has authorized Sponsor < to engage an independent audit firm to periodically audit the < Custodian’s Cold Storage system protocols and internal controls < (“Internal Controls Audit”), and report to the Sponsor at least annually < on such matters. The Sponsor will pay costs relating to the engagement < of the independent audit firm, as well as the costs of any repairs or < upgrades to the Cold Storage System, up to a total amount of $[ ]. > NIST issued FIPS PUB 140-2 to coordinate the requirements and standards > for the secure design and implementation of cryptographic modules that > include both hardware and software components and it defines four > increasing, qualitative levels of security. See National Institute for > Standards and Technology, “Security Requirements for Cryptographic > Modules” Federal Information Processing Standards Publication 140-2 > (updated Dec. 3, 2002). See also, supra note 17. --- 5786c6180,6188 ----------------------- < 66 > 70 > > Table of Contents > > > locations around the world, or may use financial instruments to seek > their investment objectives. The geographic and political considerations > of storing private keys in the United States may appeal to certain > investors. --- 5788c6190,6202 ----------------------- < Table of Contents • > > • > > Cold Storage System Controls Audit. The Custodian will engage an > independent auditor to periodically audit the Custodian’s Cold Storage > system protocols and internal controls (“Internal Controls Audit”). The > Custodian will pay costs relating to the engagement of the independent > auditor, as well as the costs of any repairs or upgrades to the Cold > Storage System. The Custodian will share any reports related to the > Internal Controls Audit with the Sponsor. > > > • --- 5792,5800c6206,6213 ----------------------- < its public Bitcoin addresses. The Custodian has authorized the Sponsor < to engage an independent audit firm to biannually verify that the < Custodian can demonstrate “proof of control” of the private keys that < control the Trust’s bitcoin (“Proof of Control Audit”). One (1) Proof of < Control Audit will be conducted at the end of each calendar year and the < other at random, with the consent of the Custodian, on a date selected < by the Sponsor. Other Digital Asset ETPs may not be able to or willing < to provide “proof of control” of the private keys that control their < bitcoin. > its public Bitcoin addresses. The Sponsor and the Custodian have engaged > an independent auditor to examine and attest that the Custodian can > demonstrate “proof of control” of the private keys that control the > Trust’s bitcoin (“Proof of Control Examination”) on a monthly basis. > Other Digital Asset ETPs may not be able to or willing to provide “proof > of control” of the private keys that control their bitcoin. The results > of each monthly Proof of Control Examination will be made available on > the Trust’s website. --- 5813,5815c6226,6227 ----------------------- < ETPs that use cold storage may use not (i) use a custodian or (ii) may < use custodians other than the Gemini Trust Company, LLC to hold their < private keys. > ETPs that use cold storage may not use a licensed custodian or a > fiduciary to their private keys. --- 5830,5836c6242,6248 ----------------------- < Structure. The Shares are intended to track the price of bitcoin as < measured at 4:00 p.m. Eastern time using the Gemini Exchange Spot Price, < less the Trust’s liabilities (which include accrued but unpaid fees and < expenses). The Trust seeks to achieve this objective by directly owning < bitcoin. This structure may be different from other Digital Asset ETPs < that seek to track the price of bitcoin or other Digital Assets through < the use of futures contracts or through derivative instruments. > Structure. The Shares are intended to track the price of bitcoin using > the Gemini Exchange Auction Price, less the Trust’s liabilities (which > include accrued but unpaid fees and expenses). The Trust seeks to > achieve this objective by directly owning bitcoin. This structure may be > different from other Digital Asset ETPs that seek to track the price of > bitcoin or other Digital Assets through the use of futures contracts or > through derivative instruments. --- 5841,5853c6253,6266 ----------------------- < price of bitcoin as measured at 4:00 p.m. Eastern time using the Gemini < Exchange Spot Price on each Business Day, the Shares may trade in the < secondary market on BATS at prices that are lower or higher relative to < the NAV. The amount of the discount or premium in the trading price < relative to the NAV may be influenced by non-concurrent trading hours < and liquidity between BATS and larger Bitcoin Exchanges in the Bitcoin < Exchange Market. While the Shares will be listed and trade on BATS from < 9:30 a.m. until 4:00 p.m. Eastern time, liquidity in the global bitcoin < markets may fluctuate depending upon the volume and availability of < larger Bitcoin Exchanges. As a result, during periods in which Bitcoin < Exchange Market liquidity is limited or a major Bitcoin Exchange is < off-line, trading spreads, and the resulting premium or discount, on the < Shares may widen. > price of bitcoin using the Gemini Exchange Auction Price on each > Business Day, the Shares may trade in the secondary market on Bats at > prices that are lower or higher relative to the NAV. The amount of the > discount or premium in the trading price relative to the NAV may be > influenced by non-concurrent trading hours and liquidity between Bats > and larger Bitcoin Exchanges in the Bitcoin Exchange Market. While the > Shares will be listed on Bats, which has its Regular Trading Session > from 9:30 a.m. until 4:00 p.m. Eastern Time on Business Days, shares may > be traded at other times and in other venues. The price of Shares may > reflect the liquidity in the global bitcoin markets, which may fluctuate > depending upon the volume and availability of larger Bitcoin Exchanges. > As a result, during periods in which Bitcoin Exchange Market liquidity > is limited or a major Bitcoin Exchange is offline, trading spreads, and > the resulting premium or discount, on the Shares may widen. --- 5860,5869d6272 ----------------------- < incurred by the Trust: the Trustee’s monthly fee and reimbursable < expenses (including indemnification amounts) under the Trust Agreement, < the Administrator’s monthly fees and reimbursable expenses under the < Trust Servicing Agreement, the Trust Agency Service Provider’s monthly < fees and reimbursable expenses under the Trust Agency Service Provider < Agreement, the Custodian’s monthly fees and reimbursable expenses under < the Trust Custody Agreement, Exchange listing fees, SEC registration < fees, printing and mailing costs, costs associated with maintaining the < Trust’s website, audit fees, up to $[ ] per annum in marketing expenses < and up --- 5873c6276 ----------------------- < 67 > 71 --- 5877,5881c6280,6291 ----------------------- < to $[100,000] per annum in legal expenses. Any such amounts in excess of < $[ ] per annum will be borne by the Trust as extraordinary expenses. The < Sponsor will also pay the costs of the Trust’s organization and the < initial sale of the Shares, including the applicable SEC registration < fees. > incurred by the Trust: the Trustee’s monthly fee and reimbursable > expenses (including indemnification amounts) under the Trust Agreement, > the Administrator’s monthly fees and reimbursable expenses under the > Administration Agreement, the Transfer Agent’s monthly fees and > reimbursable expenses under the Transfer Agency and Services Agreement, > the Custodian’s monthly fees and reimbursable expenses under the Trust > Custody Agreement, Exchange listing fees, SEC registration fees, > printing and mailing costs, costs associated with maintaining the > Trust’s website, audit fees, marketing expenses, and up to $100,000 per > annum in legal expenses. The Sponsor will also pay the costs of the > Trust’s organization and the initial sale of the Shares, including the > applicable SEC registration fees. --- 5895,5903c6305,6312 ----------------------- < Upon the receipt of written instructions from the Administrator, the < Custodian will transfer bitcoin from the Trust Custody Account to the < Trust Expense Account to permit the payment of Trust Expenses not < assumed by the Sponsor. The Administrator will, when directed by the < Sponsor, and, in the absence of such direction, may, in its own < discretion, instruct the Custodian to the transfer the bitcoin needed to < pay extraordinary expenses to the Trust Expense Account. Once such < bitcoin is in the Trust Expense Account, the Administrator may sell, or < cause to be sold, such number of bitcoin at such times as may be > Upon the receipt of written instructions from the Sponsor, and based on > amounts determined by the Administrator, the Custodian will transfer > bitcoin from the Trust Custody Account to the Trust Expense Account to > permit the payment of Trust Expenses not assumed by the Sponsor. The > Sponsor will instruct the Custodian to the transfer the quantity of > bitcoin needed to pay extraordinary expenses to the Trust Expense > Account. Once such bitcoin is in the Trust Expense Account, the > Custodian will sell such number of bitcoin at such times as may be --- 5906,5921c6315,6331 ----------------------- < Account to the Trust Expense Account at such times and in the smallest < amounts required to permit such payments as they become due. < Accordingly, the number of bitcoin to be transferred out of the Trust < Custody Account will vary from time to time depending on the level of < the Trust’s expenses and the Gemini Exchange Spot Price. < < If the Administrator sells, or causes to be sold, bitcoin in the Trust < Expense Account, any cash received by the Administrator pending payment < of the Trust’s expenses will not bear any interest. To the extent the < Administrator transfers to the Trust Expense Account bitcoin in excess < of the amount needed to pay the Trust’s extraordinary expenses, the < Administrator will promptly return such remaining bitcoin by transfer to < the Trust Custody Account. Each delivery, transfer or sale of bitcoin by < the Trust to pay the Sponsor’s Fee or other Trust expenses will be a < taxable event for Shareholders. See “United States Federal Income Tax < Consequences—Taxation of U.S. Shareholders.” > Account to the Trust Expense Account at such times required to permit > such payments as they become due. Accordingly, the number of bitcoin to > be transferred out of the Trust Custody Account will vary from time to > time depending on the level of the Trust’s expenses and the Gemini > Exchange Auction Price. > > If the Administrator instructs the Sponsor or the Custodian to sell > bitcoin in the Trust Expense Account, any cash received by the seller > pending payment of the Trust’s expenses will not bear any interest. To > the extent the Administrator instructs the Sponsor or the Custodian to > transfer to the Trust Expense Account bitcoin in excess of the quantity > needed to pay the Trust’s extraordinary expenses, the Administrator will > instruct the Custodian to promptly return such remaining bitcoin by > transfer to the Trust Custody Account. Each delivery, transfer or sale > of bitcoin by the Trust to pay the Sponsor’s Fee or other Trust expenses > will be a taxable event for Shareholders. See “United States Federal > Income Tax Consequences—Taxation of U.S. Shareholders.” --- 5935a6346,6348 ----------------------- > any other expenses and charges as the Sponsor may, in its sole > discretion, deem necessary or proper to incur; • > --- 5941c6354 ----------------------- < any indemnification of the Sponsor, Administrator or other agents, > any indemnification of the Custodian, Administrator or other agents, --- 5944,5946c6357,6359 ----------------------- < The Administrator, at the direction of the Sponsor, may liquidate the < Trust’s property from time to time as necessary to permit payment of the < fees and expenses that the Trust is required to pay. > The Sponsor or the Custodian, at the direction of the Sponsor, may > liquidate the Trust’s property from time to time as necessary to permit > payment of the fees and expenses that the Trust is required to pay. --- 5948,5953d6360 ----------------------- < Impact of Trust Expenses on the Trust’s Net Asset Value < < The Trust will transfer bitcoin to the Sponsor Custody Account in < payment of the Sponsor’s Fee and transfer bitcoin to the Trust Expense < Account and sell bitcoin to raise the funds needed for the payment of < all --- 5956,5957c6363 ----------------------- < < 68 > 72 --- 5961,5972c6367,6384 ----------------------- < Trust expenses not assumed by the Sponsor. The purchase price received < as consideration for such sales will be the Trust’s sole source of funds < to cover its liabilities. The Trust will not engage in any activity < designed to derive a profit from changes in the prices of bitcoin. All < bitcoin not needed to redeem Baskets, or to cover the Sponsor’s Fee and < Trust expenses not assumed by the Sponsor, will be held by the Custodian < in the Trust Custody Account. As a result of the recurring transfers of < bitcoin to pay the Sponsor’s Fee and the Trust expenses not assumed by < the Sponsor, the NAV and, correspondingly, the bitcoin represented by < each Share, will decrease over the life of the Trust. New deposits of < bitcoin into the Trust Custody Account, received in exchange for < additional new Baskets issued by the Trust, will not reverse this trend. > Impact of Trust Expenses on the Trust’s Net Asset Value > > The Trust will transfer bitcoin to the Sponsor Custody Account in > payment of the Sponsor’s Fee and transfer bitcoin to the Trust Expense > Account and sell bitcoin to raise the funds needed for the payment of > all Trust expenses not assumed by the Sponsor. The purchase price > received as consideration for such sales will be the Trust’s sole source > of funds to cover its liabilities. The Trust will not engage in any > activity designed to derive a profit from changes in the prices of > bitcoin. All bitcoin not needed to redeem Baskets, or to cover the > Sponsor’s Fee and Trust expenses not assumed by the Sponsor, will be > held by the Custodian in the Trust Custody Account. As a result of the > recurring transfers of bitcoin to pay the Sponsor’s Fee and the Trust > expenses not assumed by the Sponsor, the NAV and, correspondingly, the > bitcoin represented by each Share, will decrease over the life of the > Trust. New deposits of bitcoin into the Trust Custody Account, received > in exchange for additional new Baskets issued by the Trust, will not > reverse this trend. --- 5993c6405 ----------------------- < Hypothetical price per bitcoin $ 100.00 $ 100.00 $ 100.00 > Hypothetical price (per bitcoin) $ 800.00 $ 800.00 $ 800.00 --- 5995c6407 ----------------------- < Sponsor’s Fee 0.[ ] % 0.[ ] % 0.[ ] % > Expenses: --- 5997d6408 ----------------------- < Shares of Trust, beginning [ ],000.00 [ ],000.00 [ ],000.00 --- 5999c6410 ----------------------- < Bitcoin in Trust, beginning [ ].00 [ ].[ ] [ ].[ ] > Sponsor’s Fee % 0.[ ] % 0.[ ] % 0.[ ] % --- 6001,6002c6412 ----------------------- < Hypothetical value of bitcoin in Trust $ [ ],000,000.00 $ [ ].[ ] $ [ < ].[ ] > Sponsor’s Fee in Bitcoin [ ].[ ] [ ].[ ] [ ].[ ] --- 6004c6414 ----------------------- < Beginning net asset value of the Trust $ [ ].[ ] $ [ ].[ ] $ [ ].[ ] > Beginning Bitcoin in Trust [ ].[ ] [ ].[ ] [ ].[ ] --- 6006c6416,6417 ----------------------- < Sponsor’s Fee [ ].[ ] [ ].[ ] [ ].[ ] > Less: Bitcoin to be delivered to cover the Sponsor’s Fee [ ].[ ] [ ].[ ] > [ ].[ ] --- 6008c6419 ----------------------- < Bitcoin in Trust, ending [ ].[ ] [ ].[ ] [ ].[ ] > Ending Bitcoin in Trust [ ].[ ] [ ].[ ] [ ].[ ] --- 6010,6011c6421,6423 ----------------------- < Bitcoin to be delivered to cover the Sponsor’s Fee [ ].[ ] [ ].[ ] [ ].[ < ] > Beginning net asset value of the Trust $ [ ].[ ] $ [ ].[ ] $ [ ].[ ] > > Less: Sponsor’s Fee in $ $ [ ].[ ] $ [ ].[ ] $ [ ].[ ] --- 6015c6427 ----------------------- < Ending NAV $ [ ].[ ] $ [ ].[ ] $ [ ].[ ] > Shares Outstanding [ ],000.00 [ ],000.00 [ ],000.00 --- 6016a6429 ----------------------- > NAV (per share) $ [ ].[ ] $ [ ].[ ] $ [ ].[ ] --- 6019c6432,6433 ----------------------- < 69 > > 73 --- 6029,6030c6443,6444 ----------------------- < authorized by the Trust Agreement, including the Trust Servicing < Agreement, the Trust Agency Service Provider Agreement, and the Trust > authorized by the Trust Agreement, including the Administration > Agreement, the Transfer Agency and Services Agreement, and the Trust --- 6038,6061c6452,6476 ----------------------- < to the Authorized Participants by the Trust in exchange for the delivery < to the Trust of the appropriate number of bitcoin (i.e., bitcoin equal < in value to the value of the Shares being purchased). On a redemption, < the Trust will distribute bitcoin equal in value to the value of the < Shares being redeemed to the redeeming Authorized Participant in < exchange for the delivery to the Trust of one or more Baskets. On each < Business Day, the value of each Basket accepted by the Administrator in < a creation or redemption transaction will be the same (i.e., each Basket < will consist of 50,000 Shares and the value of the Basket will be equal < to the value of 50,000 Shares at their net asset value per Share on that < day). The Trust will not issue or redeem fractions of a Basket. The < investment objective of the Trust is for the Shares to track the price < of bitcoin, as measured at 4:00 p.m. Eastern time using the Gemini < Exchange Spot Price on each Business Day, less the Trust’s liabilities < (which include accrued but unpaid fees and expenses). The Sponsor < believes that, for many investors, the Shares will represent a < cost-effective and convenient means of gaining investment exposure to < bitcoin similar to a direct investment in bitcoin. The material terms of < each of the Trust Documents are discussed under “Description of the < Trust Documents—Description of the Trust Agreement,” “Description of the < Trust Documents—Description of the Trust Servicing Agreement,” < “Description of the Trust Documents—Description of the Trust Agency < Service Provider Agreement” and “Description of the Trust < Documents—Description of the Trust Custody Agreement,” below. > to the creating Authorized Participant by the Trust in exchange for the > delivery to the Trust of the appropriate number of bitcoin (i.e., > bitcoin equal in value to the NAV multiplied by the number of Shares in > the Basket). On a redemption, the Trust will distribute bitcoin equal in > value to the NAV multiplied by the number of Shares in the Basket to the > redeeming Authorized Participant in exchange for the delivery to the > Trust of one or more Baskets. On each Business Day, the value of each > Basket accepted by the Transfer Agent in a creation or redemption > transaction will be the same (i.e., each Basket will initially consist > of 100,000 Shares and the value of the Basket will be equal to the value > of 100,000 Shares at their net asset value per Share on that day). The > Trust will not issue or redeem fractions of a Basket. The investment > objective of the Trust is for the Shares to track the price of bitcoin > using the Gemini Exchange Auction Price on each Business Day, less the > Trust’s liabilities (which include accrued but unpaid fees and > expenses). The Sponsor believes that, for many investors, the Shares > will represent a cost-effective and convenient means of gaining > investment exposure to bitcoin similar to a direct investment in > bitcoin. The material terms of each of the Trust Documents are discussed > under “Description of the Trust Documents—Description of the Trust > Agreement,” “Description of the Trust Documents—Description of the > Administration Agreement,” “Description of the Trust > Documents—Description of the Transfer Agency and Services Agreement” and > “Description of the Trust Documents—Description of the Trust Custody > Agreement,” below. --- 6067,6075c6482,6489 ----------------------- < Trust Custody Account in the following circumstances: (i) transferred to < pay the Sponsor’s Fee, (ii) distributed to Authorized Participants in < connection with the redemption of Baskets, (iii) transferred to the < Trust Expense Account to be sold on an as-needed basis to pay Trust < expenses not assumed by the Sponsor, or (iv) sold on behalf of the Trust < in the event the Trust terminates and liquidates its assets or as < otherwise required by law or regulation. Each transfer, delivery or sale < of bitcoin by the Trust to pay fees and expenses is a taxable event for < Shareholders. See “United States Federal Income Tax > Trust Custody Account in the following circumstances: (i) distributed to > Authorized Participants in connection with the redemption of Baskets; > (ii) transferred to pay the Sponsor’s Fee; (iii) transferred and sold as > needed to pay the Trust’s expenses not assumed by the Sponsor; or (iv) > sold in connection with the termination and liquidation of the Trust or > as otherwise required by law or regulation. Each transfer, delivery or > sale of bitcoin by the Trust to pay fees and expenses is a taxable event > for Shareholders. See “United States Federal Income Tax --- 6104c6518 ----------------------- < 70 > 74 --- 6126,6145c6540,6566 ----------------------- < Baskets will be distributed to the Authorized Participants by the Trust < in exchange for the delivery to the Trust of the appropriate number of < bitcoin (i.e., bitcoin equal in value to the value of the Shares being < purchased). On a redemption, the Trust will distribute bitcoin equal in < value to the value of the Shares being redeemed to the redeeming < Authorized Participant in exchange for the delivery to the Trust of one < or more Baskets. On each Business Day, the value of each Basket accepted < by the Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value of < the Basket will be equal to the value of 50,000 Shares at their net < asset value per Share on that day). The Trust will not issue or redeem < fractions of a Basket. Only Authorized Participants will be able to < create or redeem Baskets. On the first day of trading, each Share in the < Seed Baskets will be comprised of 0.10 bitcoin, and each Seed Basket < will be made up of [5,000] bitcoin. Baskets may be created or redeemed < only by Authorized Participants, who may be required to pay a < Transaction Fee the Trust Agency Service Provider for each order to < create or redeem Baskets. Authorized Participants may sell to other < investors all or part of the Shares included in the Baskets they < purchase from the Trust. See “Plan of Distribution.” > Baskets will be distributed to the creating Authorized Participant by > the Trust in exchange for the delivery to the Trust of the appropriate > number of bitcoin (i.e., bitcoin equal in value to the NAV multiplied by > the number of Shares in the Basket). On a redemption, the Trust will > distribute bitcoin equal in value to the NAV multiplied by the number of > Shares in the Basket to the redeeming Authorized Participant in exchange > for the delivery to the Trust of one or more Baskets. On each Business > Day, the value of each Basket accepted by the Transfer Agent in a > creation or redemption transaction will be the same (i.e., each Basket > will initially consist of 100,000 Shares and the value of the Basket > will be equal to the value of 100,000 Shares (or such other amount as > determined by the Trust from time to time) at their net asset value per > Share on that day). The Trust will not issue or redeem fractions of a > Basket. The number of bitcoin required to create a Basket, or to be > delivered upon the redemption of a Basket, will gradually decrease over > time, due to the accrual of the Trust’s expenses, the transfer of the > Trust’s bitcoin to pay the Sponsor’s Fee, and the transfer of the > Trust’s bitcoin to pay any Trust expenses not assumed by the Sponsor. > Only Authorized Participants will be able to create or redeem Baskets. > On the first day of trading, each Share in the Seed Baskets will be > comprised of 0.01 bitcoin, and each Seed Basket will be made up of 1,000 > bitcoin. Baskets may be created or redeemed only by Authorized > Participants, who may be required to pay a Transaction Fee to the > Transfer Agent for each order to create or redeem Baskets. Authorized > Participants may sell to other investors all or part of the Shares > included in the Baskets they purchase from the Trust. See “Plan of > Distribution.” --- 6149c6570 ----------------------- < by the number of outstanding Shares as of 4:00 p.m. Eastern time each > by the number of outstanding Shares as of 4:00 p.m. Eastern Time each --- 6151,6156c6572,6580 ----------------------- < Exchange Spot Price. In the event that the Sponsor determines that the < Gemini Exchange Spot Price is not an appropriate basis for evaluation of < the Trust’s bitcoin, the Sponsor will instruct the Administrator to use < the spot price of the itBit bitcoin exchange (the “itBit Exchange”) as < an alternative basis for calculating the Trust’s NAV. The itBit Exchange < is operated by the itBit Trust Company, LLC, a New York State-chartered > Exchange Auction Price, which is publicly available and will be provided > to the Administrator by the Sponsor each Business Day. In the event that > the Sponsor determines that the Gemini Exchange Auction Price is not an > appropriate basis for evaluation of the Trust’s bitcoin on a given > Business Day, the Sponsor will instruct the Administrator to use the > 4:00 p.m. Eastern Time spot price on the Gemini Exchange or the itBit > bitcoin exchange (the “itBit Exchange”) as an alternative basis for > calculating the Trust’s NAV on that Business Day. The itBit Exchange is > operated by the itBit Trust Company, LLC, a New York State-chartered --- 6159,6184c6583,6600 ----------------------- < determination that the Gemini Exchange Spot Price is unavailable or < otherwise not an appropriate basis for calculating the Trust’s NAV would < be based upon extraordinary criteria in which the operation of Gemini < Exchange is disrupted or otherwise experiencing material calculation or < reporting irregularities. If the Sponsor determines in good faith that < neither the Gemini Exchange Spot Price nor the spot price on the itBit < Exchange is reliable for calculating the Trust’s NAV on a particular < Business Day, including but not limited to situations where it does not < reflect material events occurring between the time of calculation of < such Gemini Exchange Spot Price or the spot price on the itBit Exchange < and the time the Trust’s Shares are valued, bitcoin will be valued using < fair market value pricing as determined in good faith by the Sponsor and < calculated by the Administrator under procedures established in the < Trust Servicing Agreement. Determining the fair market value of bitcoin < involves the consideration of a number of subjective factors and thus < the prices for bitcoin may differ from the Gemini Exchange Spot Price or < the spot price on the itBit Exchange. The Sponsor may consider the < market price for bitcoin on other Bitcoin Exchanges, or in other forums < for which bitcoin prices are published publicly. Neither the < Administrator nor the Sponsor shall be liable to any person for the < determination that the Gemini Exchange Spot Price or an alternative < basis for a fair market value of bitcoin is not appropriate as a basis < for calculation of the Trust’s NAV provided that such determination is < made in good faith. The Sponsor will publish the Trust’s NAV on the < Trust’s website as soon as practicable after their calculation by the < Administrator. See “Valuation of Bitcoin and Definition of NAV.” > determination that the Gemini Exchange Auction Price is unavailable or > otherwise not an appropriate basis for calculating the Trust’s NAV on a > given Business Day would be based upon extraordinary criteria in which > the operation of the Gemini Exchange is disrupted or otherwise > experiencing material calculation or reporting irregularities. If the > Sponsor determines in good faith that none of the Gemini Exchange > Auction Price, the spot price on the Gemini Exchange, or the spot price > on the itBit Exchange are reliable for calculating the Trust’s NAV on a > particular Business Day, including but not limited to situations where > it does not reflect material information or events occurring between the > time of calculation of such prices and the time the Trust’s Shares are > valued, bitcoin will be valued by the Sponsor using fair market value > pricing as determined in good faith by the Sponsor and calculated by the > Administrator. Determining the fair market value of bitcoin involves the > consideration of a number of subjective factors and thus the prices for > bitcoin may differ from the Gemini Exchange Auction Price or the spot > price on the Gemini Exchange or itBit Exchange. The Sponsor may consider > the market price for --- 6188c6604 ----------------------- < 71 > 75 --- 6191a6608,6617 ----------------------- > bitcoin on other Bitcoin Exchanges, or in other forums for which bitcoin > prices are published publicly. The Sponsor shall not be liable to any > person for the determination that the Gemini Exchange Auction Price or > an alternative basis for a fair market value of bitcoin is not > appropriate as a basis for calculation of the Trust’s NAV provided that > such determination is made in good faith. The Sponsor will publish the > Trust’s NAV on the Trust’s website as soon as practicable after its > calculation by the Administrator. See “Valuation of Bitcoin and > Definition of NAV.” > --- 6204,6211c6630,6637 ----------------------- < Network information sites such as BitcoinCharts.com or bitcoinity.org. < Bloomberg financial terminals include pricing data in USD and in Euro < from several Bitcoin Exchanges. Recently, the CME and the ICE announced < bitcoin pricing indices. Current bitcoin market prices are also < generally available with bid/ask spreads directly from Bitcoin < Exchanges. In addition, on each Business Day the Trust’s website will < provide pricing information for the Gemini Exchange Spot Price and the < Shares. The Gemini Exchange itself provides comprehensive last trade > Network information sites. Bloomberg financial terminals include pricing > data in USD and in Euro from several Bitcoin Exchanges. Recently, the > CME and the ICE announced bitcoin pricing indices. Current bitcoin > market prices are also generally available with bid/ask spreads directly > from Bitcoin Exchanges. In addition, on each Business Day the Trust’s > website will provide pricing information for the Gemini Exchange Auction > Price, the 4:00 p.m. Eastern Time spot price on the Gemini Exchange, and > the Shares. The Gemini Exchange itself provides comprehensive last trade --- 6213,6219c6639,6644 ----------------------- < level within its limit order book, all through its public website < (www.gemini.com) and public market data feeds. Market prices for the < Shares will be available from a variety of sources including brokerage < firms, information websites and other information service providers. < Each Business Day, the Sponsor will publish the Trust’s NAV on the < Trust’s website as soon as practicable after their calculation by the < Administrator. > level within its limit order book, all through its public website and > public market data feeds. Market prices for the Shares will be available > from a variety of sources including brokerage firms, information > websites and other information service providers. Each Business Day, the > Sponsor will publish the Trust’s NAV on the Trust’s website as soon as > practicable after its calculation by the Administrator. --- 6225c6650 ----------------------- < 72 > 76 --- 6232,6237c6657,6662 ----------------------- < May 9, 2013. The Sponsor’s mailing address is 1007 Orange Street, < Nemours Building, Suite 1463, Wilmington, DE 19801. Under the Delaware < Limited Liability Company Act and the governing documents of the < Sponsor, the sole member of the Sponsor, Winklevoss Capital Management, < LLC, is not responsible for the debts, obligations and liabilities of < the Sponsor solely by reason of being the sole member of the Sponsor. > May 9, 2013. The Sponsor’s mailing address is 301 N. Market Street, > Suite 1463, Wilmington, DE 19801. Under the Delaware Limited Liability > Company Act and the governing documents of the Sponsor, the sole member > of the Sponsor, Winklevoss Capital Fund, LLC, is not responsible for the > debts, obligations and liabilities of the Sponsor solely by reason of > being the sole member of the Sponsor. --- 6243c6668 ----------------------- < listing of the Shares on BATS. The Sponsor has agreed to assume the > listing of the Shares on Bats. The Sponsor has agreed to assume the --- 6246,6258c6671,6682 ----------------------- < indemnification amounts) under the Trust Agreement, (ii) the < Administrator’s monthly fee and expenses reimbursable under the Trust < Servicing Agreement, (iii) the Trust Agency Service Provider’s monthly < fee and expenses under the Trust Agency Service Provider Agreement, (iv) < the Custodian’s monthly fee and expenses reimbursable under the Trust < Custody Agreement, (v) Exchange listing fees, (vi) SEC registration < fees, (vii) printing and mailing costs, (viii) the costs associated with < maintaining the Trust’s website, (ix) audit fees, (x) up to $[ ] per < annum in marketing expenses and (xi) up to $[100,000] per annum in legal < expenses. Any such amounts in excess of $[ ] per annum will be borne by < the Trust as extraordinary expenses. The Sponsor will also pay the costs < of the Trust’s organization and the initial sale of the Shares, < including the applicable SEC registration fees. > indemnification amounts) under the Trust Agreement; (ii) the > Administrator’s monthly fee and expenses reimbursable under the > Administration Agreement; (iii) the Transfer Agent’s monthly fee and > expenses under the Transfer Agency and Services Agreement; (iv) the > Custodian’s monthly fee and expenses reimbursable under the Trust > Custody Agreement; (v) Exchange listing fees; (vi) SEC registration > fees; (vii) printing and mailing costs;(viii) the costs associated with > maintaining the Trust’s website; (ix) audit fees; (x) marketing > expenses; and (xi) up to $100,000 per annum in legal expenses. The > Sponsor will also pay the costs of the Trust’s organization and the > initial sale of the Shares, including the applicable SEC registration > fees. --- 6267,6291c6691,6703 ----------------------- < System have been borne by the Custodian, which will, together with the < Sponsor, administer the ongoing analysis of needed maintenance, repairs < or upgrades to the Cold Storage System. The Sponsor has agreed to pay < for the costs, up to $[ ] per annum, relating to the engagement of an < independent audit firm to consult on and oversee any repairs or upgrades < to the Cold Storage System used by the Custodian and to report to the < Sponsor and Custodian at least annually. < < While the Sponsor will not exercise day-to-day oversight over the Trust, < the Sponsor will engage the Administrator and the Custodian to assist in < in implementing the creation and redemption process for the Trust. The < Sponsor may remove the Trustee and appoint a successor trustee (i) if < the Trustee ceases to meet certain objective requirements (including the < requirement that it have capital, surplus and undivided profits of at < least $[ ]), (ii) if, having received written notice of a material < breach of its obligations under the Trust Agreement, the Trustee has not < cured the breach within thirty (30) days, or (iii) if the Trustee < refuses to consent to the implementation of an amendment to the Trust’s < initial Internal Control Over Financial Reporting. The Sponsor also has < the right to replace the Trustee during the ninety (90) days following < any merger, consolidation or conversion in which the Trustee is not the < surviving entity or, in its discretion, on the [ ] anniversary of the < creation of the Trust or on any subsequent [ ] anniversary thereafter. < The Sponsor also has the right to approve any new or additional < custodian that the Administrator or Custodian may wish to appoint. > System have been borne by the Custodian, which will, administer the > ongoing analysis of needed maintenance, repairs or upgrades to the Cold > Storage System. > > The Sponsor will exercise day-to-day oversight over the Trust, and the > Sponsor will engage the Administrator and the Custodian to assist in in > implementing the creation and redemption process for the Trust. The > Sponsor may at any time, upon thirty (30) days’ prior notice to the > Trustee, remove the Trustee and appoint a successor trustee by written > instrument delivered to the Trustee and to the successor trustee > appointed. The Sponsor also has the right to approve any new or > additional custodian that the Administrator or Custodian may wish to > appoint. --- 6294,6315c6706,6717 ----------------------- < the Trust Agency Service Provider or the Custodian. The Sponsor may < remove the Administrator and/or the Trust Agency Service Provider and/or < the Custodian and appoint a successor administrator and/or agency < service provider and/or custodian if, having received notice of a < material breach of its obligations under the Trust Servicing Agreement < and/or the Trust Agency Service Provider Agreement and/or the Trust < Custody Agreement, respectively, if the Administrator and/or the Trust < Agency Service Provider and /or the Custodian has not cured the breach < within thirty (30) days. The Sponsor also has the right to replace the < Administrator and/or the Custodian during the < < < < 73 < < Table of Contents < < ninety (90) days following any merger, consolidation or conversion in < which the Administrator and/or the Trust Agency Service Provider and/or < the Custodian is not the surviving entity, or, in its discretion, on the < [ ] anniversary of the creation of the Trust or on any subsequent [ ] < anniversary thereafter. > the Transfer Agent or the Custodian. The Trust may remove the > Administrator and/or the Transfer Agent and/or the Custodian and appoint > a successor administrator and/or transfer agent and/or custodian if, > having received notice of a material breach of its obligations under the > Administration Agreement and/or the Transfer Agency and Services > Agreement and/or the Trust Custody Agreement, respectively, if the > Administrator and/or the Transfer Agent and/or the Custodian has not > taken steps to cure the breach within a specified time period. The > Administrator, Transfer Agent, and Custodian may terminate their > respective agreements if, having provided notice to the Trust of the > Trust’s breach of such agreement, the Trust has not cured the breach > within a specified time period. --- 6318c6720 ----------------------- < marketing plan for the Trust on an ongoing basis, (ii) prepare marketing > marketing plan for the Trust on an ongoing basis; (ii) prepare marketing --- 6320,6322c6722,6723 ----------------------- < website and (iii) execute the marketing plan for the Trust. The Sponsor < has agreed to assume up to $[ ] per annum in marketing expenses on < behalf of the Trust. > website; and (iii) execute the marketing plan for the Trust. The Sponsor > has agreed to assume all marketing expenses on behalf of the Trust. --- 6328a6730,6736 ----------------------- > > > > 77 > > Table of Contents > --- 6339,6358c6747,6750 ----------------------- < and to licensed patents; (ii) a non-exclusive, worldwide, right and < license under and to licensed know-how; (iii) a non-exclusive, < worldwide, right and license to use, modify, maintain, adapt, translate, < improve, and prepare derivative works of, the licensed software; (iv) an < exclusive license to use the licensed service marks for the listed < services; and (v) an exclusive license to use licensed domain name(s) in < connection with the advertising and promotion of services covered under < the licensed service marks. < < Under the License Agreement, the Sponsor is required to pay a monthly < royalty equal to a percent of the net Sponsor Fee received by the < Sponsor during the previous month based on a running royalty rate of < between eight (8) percent and sixteen (16) percent of such net Sponsor < Fees. WIP retains the right, but is not required, to terminate the < license if the Sponsor does not meet a minimum royalty payment of < $300,000 during the prior 12-month period, starting on the third < anniversary of the License Agreement. The Sponsor has the right to < sublicense its rights within the Field of Use in exchange for an < obligation to pay a seventy-five (75) percent royalty based on revenue < and/or any other compensation, if any, collected from such sub-license. > and to licensed patents; (ii) an exclusive license to use the licensed > service marks for the listed services; and (iii) an exclusive license to > use licensed domain name(s) in connection with the advertising and > promotion of services covered under the licensed service marks. --- 6363,6370c6755,6759 ----------------------- < performed by the Sponsor, any service provider to the Trust including < the Custodian and the Administrator, or on behalf of the Sponsor and is < authorized under the Trust Agreement and the Trust Custody Agreement to < operate and administer the Cold Storage System for the purposes of < storing and transferring bitcoin. The Trust is not required to pay any < additional fees for these rights, other than the payment of the < Sponsor’s Fee paid to the Sponsor in consideration of its services to < the Trust. > performed by the Sponsor, any service provider to the Sponsor with > respect to the operation of the Trust, or on behalf of the Sponsor. The > Trust is not required to pay any additional fees for these rights, other > than the payment of the Sponsor’s Fee paid to the Sponsor in > consideration of its services to the Trust. --- 6384,6387c6773,6774 ----------------------- < principal executive officer, principal financial officer, principal < operating officer, and general counsel of the Sponsor. < < > Chief Executive Officer, Chief Financial Officer, and Chief Operating > Officer of the Sponsor. --- 6389,6393c6776 ----------------------- < 74 < < Table of Contents < < Cameron Winklevoss, Chief Executive Officer. Cameron Winklevoss, 34, has > Cameron Winklevoss, Chief Executive Officer. Cameron Winklevoss, 35, has --- 6400,6412c6783,6795 ----------------------- < the Chief Operating Officer of WCM, a private investment firm he < co-founded in 2012 that invests in varied asset classes with an emphasis < on providing seed funding and infrastructure to early-stage startups. < Prior to the formation of WCM, Mr. Winklevoss was a member of the U.S. < Men’s National Rowing Team and actively pursued early stage investment < opportunities. Mr. Winklevoss began participating in the Bitcoin economy < through direct investment in 2012. He has been an angel investor and < entrepreneur in emerging technologies since 2003. In 2004, he graduated < from Harvard University with a Bachelor of Arts in Economics. In 2010, < Mr. Winklevoss received a Masters of Business Administration from the < Saïd Business School at the University of Oxford. Together with his < brother Tyler, he represented the United States at the 2008 Olympic < Games in Beijing, China. > the Chief Operating Officer of Winklevoss Capital Management, LLC > (“WCM”), a private investment firm he co-founded in 2012 that invests in > varied asset classes with an emphasis on providing seed funding and > infrastructure to early-stage startups. Prior to the formation of WCM, > Mr. Winklevoss was a member of the U.S. Men’s National Rowing Team and > actively pursued early stage investment opportunities. Mr. Winklevoss > began participating in the Bitcoin economy through direct investment in > 2012. He has been an angel investor and entrepreneur in emerging > technologies since 2003. In 2004, he graduated from Harvard University > with a Bachelor of Arts in Economics. In 2010, Mr. Winklevoss received a > Masters of Business Administration from the Saïd Business School at the > University of Oxford. Together with his brother Tyler, he represented > the United States at the 2008 Olympic Games in Beijing, China. --- 6414c6797 ----------------------- < Tyler Winklevoss, Chief Financial Officer. Tyler Winklevoss, 34, has > Tyler Winklevoss, Chief Financial Officer. Tyler Winklevoss, 35, has --- 6433,6443c6816,6832 ----------------------- < Benjamin Small, Chief Operating Officer. Benjamin Small, 35, has served < as Chief Operating Officer of the Sponsor since March, 2016 and oversees < or executes key operational duties of the Sponsor for the Trust. Dr. < Small is currently the Head of Market Structure at Gemini Trust Company, < LLC, a next generation Digital Asset exchange; he is also an employee of < WCM. His prior experience includes portfolio management, quantitative < research, high-speed trading, and market making at various bulge-bracket < banks and large hedge funds. Dr. Small graduated from the Georgia < Institute of Technology with a Bachelor of Science in electrical and < computer engineering in 2001 and a Master of Science in the same field < in 2002. He also received a Ph.D. in electrical engineering from > > > 78 > > Table of Contents > > Benjamin Small, Chief Operating Officer. Benjamin Small, Ph.D., 35, has > served as Chief Operating Officer of the Sponsor since March 2016, and > oversees or executes key operational duties of the Sponsor for the > Trust. Dr. Small is currently the Head of Market Structure at Gemini > Trust Company, LLC, a next generation Digital Asset exchange; he is also > an employee of WCM. His prior experience includes portfolio management, > quantitative research, high-speed trading, and market making at various > bulge-bracket banks and large hedge funds. Dr. Small graduated from the > Georgia Institute of Technology with a Bachelor of Science in electrical > and computer engineering in 2001 and a Master of Science in the same > field in 2002. He also received a Ph.D. in electrical engineering from --- 6448,6463d6836 ----------------------- < David H. Brill, General Counsel. David Brill, 46, has served as General < Counsel of the Sponsor since March, 2016 and advises and handles all < legal matters of the Sponsor for the Trust. Mr. Brill is General Counsel < for Gemini Trust Company, LLC. His prior experiences includes serving as < General Counsel for American Stock Transfer & Trust Company and Vice < President and Principal Legal Counsel for Thomson Reuters. Mr. Brill is < the former President of the Association of Corporate Counsel New York < City Chapter and is currently the Chair of its Corporate and Securities < Committee. In 1991, he graduated from the University of Michigan with a < Bachelor of Arts in History. In 1996, Mr. Brill received his Juris < Doctorate from American University, Washington College of Law. He is a < frequent writer and speaker on law department management, securities, < risk management and social media issues. Mr. Brill has been interviewed < and quoted in the Wall Street Journal, New York Times, the New York Law < Journal and American Lawyer among others. < --- 6466c6839 ----------------------- < 75 > 79 --- 6474,6478c6847,6854 ----------------------- < principal office at 2711 Centerville Road, Wilmington, DE 19808. The < Trustee is subject to supervision by the [ ]. A copy of the Trust < Agreement is available for inspection at the Trustee’s principal office < identified above. Under the Trust Agreement, the Trustee is required to < maintain capital, surplus and undivided profits of $[ ]. > principal office at Little Falls Centre One, 2711 Centerville Road, > Wilmington, DE 19808. A copy of the Trust Agreement is available for > inspection at the Trustee’s principal office identified above. Under the > Trust Agreement, the Trustee is required to, among other things, > maintain capital, surplus and undivided profits of $50,000,000, be > authorized to exercise corporate trust powers under the laws of the > jurisdiction of its organization, and be subject to supervision or > examination by federal or state authorities. --- 6492,6504c6868,6872 ----------------------- < Shareholders, such duties and liabilities will be replaced by the duties < and liabilities of the Trustee expressly set forth in the Trust < Agreement. The Trustee will have no obligation to supervise, nor will it < be liable for, the acts or omissions of the Sponsor, Administrator, < Trust Agency Service Provider, Custodian or any other entity or person. < < Neither the Trustee, either in its capacity as trustee on in its < individual capacity, nor any director, officer or controlling person of < the Trustee is, or has any liability as, the issuer, director, officer < or controlling person of the issuer of the Shares. The Trustee’s < liability in connection with the issuance and sale of the Shares is < limited solely to the express obligations of the Trustee as set forth in < the Trust Agreement. > Sponsor, such duties and liabilities will be replaced by the duties and > liabilities of the Trustee expressly set forth in the Trust Agreement. > The Trustee will have no obligation to supervise, nor will it be liable > for, the acts or omissions of the Sponsor, Administrator, Transfer > Agent, Custodian or any other entity or person. --- 6506,6507c6874,6875 ----------------------- < The Trustee is permitted to resign upon at least ninety (90) days’ < notice to the Trust, provided that any such resignation will not be > The Trustee is permitted to resign upon at least thirty (30) days’ > notice to the Sponsor, provided that any such resignation will not be --- 6509,6515c6877,6884 ----------------------- < Trustee will be compensated by the Sponsor and indemnified by the < Sponsor and the Trust against any expenses it incurs relating to or < arising out of the formation, operation or termination of the Trust, or < the performance of its duties pursuant to the Trust Agreement except to < the extent that such expenses result from gross negligence, willful < misconduct or bad faith of the Trustee. The Sponsor has the discretion < to replace the Trustee. > Trustee will be compensated by the Sponsor and indemnified by the Trust > (as primary obligor) and the Sponsor (as secondary obligor) against any > expenses it incurs relating to or arising out of the formation, > operation or termination of the Trust, or the performance of its duties > pursuant to the Trust Agreement except to the extent that such expenses > result from gross negligence, willful misconduct or bad faith of the > Trustee. The Sponsor has the discretion to replace the Trustee upon > thirty (30) days’ prior written notice to the Trustee. --- 6517,6518c6886 ----------------------- < The Trustee’s fees and expenses under the Trust Agreement will be paid < by the Sponsor. > The Trustee’s fees and expenses will be paid by the Sponsor. --- 6522c6890 ----------------------- < 76 > 80 --- 6528,6533c6896,6902 ----------------------- < [ ], a [ ], is authorized to serve as the Administrator of the Trust < under the Trust Agreement and pursuant to the terms and provisions of < the Trust Servicing Agreement. The Administrator has its principal < office at [ ], [ ], [ ]. A copy of the Trust Servicing Agreement is < available for inspection at the Administrator’s principal office < identified above. > State Street Bank and Trust Company, a trust company organized under the > laws of the Commonwealth of Massachusetts, is authorized to serve as the > Administrator of the Trust under the Trust Agreement and pursuant to the > terms and provisions of the Administration Agreement. The Administrator > has its principal office at Channel Center, One Iron Street, Boston, MA > 02210. A copy of the Administration Agreement is available for > inspection at the Administrator’s principal office identified above. --- 6537,6573c6906,6924 ----------------------- < The Administrator serves the Trust pursuant to appointment by the < Sponsor and is generally responsible for the day-to-day administration < of the Trust, including keeping the Trust’s operational records pursuant < to the Trust Servicing Agreement between the Administrator and Sponsor < on behalf of the Trust. The Administrator’s principal responsibilities < in its role as administrator of the Trust include (i) instructing the < Custodian to deposit bitcoin into, or transfer bitcoin out of, the < Authorized Participant Custody Accounts and the Trust Custody Account to < facilitate the creation or redemption of Baskets, (ii) instructing the < Custodian to transfer to the Sponsor Custody Account the Trust’s bitcoin < as needed to pay the Sponsor’s Fee (such distributions of bitcoin are < expected to occur approximately monthly in the ordinary course), (iii) < calculating the Trust’s net asset value and NAV, (iv) assisting the < Sponsor in receiving and processing orders from Authorized Participants < to create and redeem Baskets and coordinating the processing of such < orders with the Custodian, the Trust Agency Service Provider and DTC, < (v) transferring to the Trust Expense Account and selling, or causing to < be sold, the Trust’s bitcoin as needed to pay any Trust expenses that < are not assumed by the Sponsor, (vi) receiving and reviewing reports on < the Custodian’s custody of and transactions in the Trust’s bitcoin and < (vii) undertaking all other administrative actions as necessary to < accomplish such purposes. < < The Administrator intends to regularly communicate with the Sponsor to < monitor the overall performance of the Trust, and with the Custodian by < reviewing the reports provided by the Custodian pursuant to the Trust < Agreement. The Administrator, along with the Sponsor, will liaise with < the Trust’s legal, accounting and other professional service providers < as needed. The Administrator will coordinate with the Trust Agency < Service Provider in its role as transfer agent for the Trust, and will < assist and support the Sponsor with the preparation of all periodic < reports and other documents required to be filed with the SEC on behalf < of the Custodian. < < The Administrator also serves as the Trust Agency Service Provider. The < Administrator’s fees and expenses under the Trust Servicing Agreement < are paid by Sponsor. > Pursuant to the Administration Agreement between the Administrator and > the Trust, the Administrator provides fund administration and fund > accounting services with regard to the Trust, including calculating the > Trust’s net asset value and NAV, maintaining the Trust’s records, and > providing such other administrative services as are specified in the > Administration Agreement. > > The Administrator intends to regularly communicate with the Sponsor > regarding the services it provides with regard to the Trust. The > Administrator, along with the Sponsor, will liaise with the Trust’s > legal, accounting and other professional service providers as needed. > The Administrator will coordinate with the Transfer Agent in its role as > transfer agent for the Trust, and will assist and support the Sponsor > with the preparation of certain periodic reports and other documents > required to be filed with the SEC on behalf of the Trust. > > The Administrator also serves as the Transfer Agent. The Administrator’s > fees and expenses under the Administration Agreement are paid by > Sponsor. --- 6577c6928 ----------------------- < 77 > 81 --- 6581c6932 ----------------------- < THE TRUST AGENCY SERVICE PROVIDER > THE TRANSFER AGENT --- 6583,6603c6934,6956 ----------------------- < [ ], a [ ], is authorized to serve as the Trust Agency Service Provider < of the Trust under the Trust Agreement and pursuant to the terms and < provisions of the Trust Agency Service Provider Agreement. The Trust < Agency Service Provider has its principal office at [ ], [ ], [ ]. A < copy of the Trust Agency Service Provider Agreement is available for < inspection at the Administrator’s principal office identified above. < < The Trust Agency Service Provider’s Role < < The Trust Agency Service Provider serves as the transfer agent for the < Trust pursuant to appointment by the Sponsor and the terms of the Trust < Agency Service Provider Agreement. The Trust Agency Service Provider, < among other things, provides transfer agent services with respect to the < creation and redemption of Baskets by Authorized Participants, the < issuance and redemption of Shares, the payment, if any, of distributions < with respect to the Shares, the recording of the issuance of the Shares < and the maintaining of certain records therewith. < < The Administrator serves as the Trust Agency Service Provider. The fees < and expenses of the Trust Agency Service Provider under the Trust Agency < Service Provider Agreement are paid by the Sponsor. > State Street Bank and Trust Company, a trust company organized under the > laws of the Commonwealth of Massachusetts, is authorized to serve as the > Transfer Agent of the Trust under the Trust Agreement and pursuant to > the terms and provisions of the Transfer Agency and Services Agreement. > The Transfer Agent has its principal office at Channel Center, One Iron > Street, Boston, MA 02210. A copy of the Transfer Agency and Services > Agreement is available for inspection at the Transfer Agent’s principal > office identified above. > > The Transfer Agent’s Role > > The Transfer Agent serves as the transfer agent for the Trust pursuant > to appointment by the Sponsor and the terms of the Transfer Agency and > Services Agreement. The Transfer Agent, among other things, provides > transfer agent services with respect to the creation and redemption of > Baskets by Authorized Participants, the issuance and redemption of > Shares, the payment, if any, of distributions with respect to the > Shares, the recording of the issuance of the Shares and the maintaining > of certain records therewith. > > The Administrator serves as the Transfer Agent. The fees and expenses of > the Transfer Agent under the Transfer Agency and Services Agreement are > paid by the Sponsor. --- 6607c6960 ----------------------- < 78 > 82 --- 6613,6621c6966,6974 ----------------------- < Gemini Trust Company, LLC, a New York State-chartered limited liability < trust company that operates under the direct supervision and regulatory < authority of the NYSFDS. The Custodian is a fiduciary and required to < meet the capitalization, compliance, anti-money laundering, consumer < protection and cyber security requirements as set forth by the NYSDFS. < The Custodian is an affiliate of the Sponsor and is authorized to serve < as the Trust’s Custodian under the Trust Agreement and pursuant to the < terms and provisions of the Trust Custody Agreement. The Custodian’s < address is 600 Third Avenue, 2nd Floor, New York, NY 10016. > Gemini Trust Company, LLC, is a New York State-chartered limited > liability trust company that operates under the direct supervision and > regulatory authority of the NYSDFS. The Custodian is a fiduciary and > required to meet the capitalization, compliance, anti-money laundering, > consumer protection and cyber security requirements as set forth by the > NYSDFS. The Custodian is an affiliate of the Sponsor and is authorized > to serve as the Trust’s Custodian under the Trust Agreement and pursuant > to the terms and provisions of the Trust Custody Agreement. The > Custodian’s address is 600 Third Avenue, 2nd Floor, New York, NY 10016. --- 6631,6634c6984,6988 ----------------------- < accordance with the instructions of the Administrator. If the Custodian < resigns in its capacity as custodian of the Trust’s bitcoin, the Sponsor < shall appoint an additional or replacement custodian and enter into a < custody agreement on behalf of the Trust with such custodian. > accordance with the instructions of the Trust, the Sponsor, or > Administrator. If the Custodian resigns in its capacity as custodian of > the Trust’s bitcoin, the Sponsor shall appoint an additional or > replacement custodian and enter into a custody agreement on behalf of > the Trust with such custodian. --- 6636,6637c6990,6991 ----------------------- < The Custodian’s fees and expenses under the Trust Custody will be paid < by the Sponsor. > The Custodian’s fees and expenses under the Trust Custody Agreement will > be paid by the Sponsor. --- 6639c6993 ----------------------- < The Custodian and its affiliates may from time to time purchase or sell > Affiliates of the Custodian may from time to time purchase or sell --- 6645c6999 ----------------------- < 79 > 83 --- 6653,6660c7007,7014 ----------------------- < Participant Agreement which it must enter into with the Sponsor and the < Administrator, and is subject to acceptance by the Trust Agency Service < Provider. Each Authorized Participant must be (i) a registered < broker-dealer or other securities market participant such as a bank or < other financial institution which is not required to register as a < broker-dealer to engage in securities transactions and (ii) a < participant in the DTC in order to enter into an Authorized Participant < Agreement. > Participant Agreement which it must enter into with the Sponsor, subject > to acceptance by the Transfer Agent. Each Authorized Participant must be > (i) a registered broker-dealer or other securities market participant > such as a bank or other financial institution which is not required to > register as a broker-dealer to engage in securities transactions and > (ii) a participant in the DTC in order to enter into an Authorized > Participant Agreement with the Sponsor on behalf of the Trust, subject > to the acceptance by the Transfer Agent. --- 6665,6667c7019,7021 ----------------------- < more Baskets. Authorized Participant Agreements set forth the procedures < for the creation and redemption of Baskets. A list of the current < Authorized Participants can be obtained from the Sponsor. > more Baskets. The Authorized Participant Agreements set forth the > procedures for the creation and redemption of Baskets. A list of the > current Authorized Participants can be obtained from the Sponsor. --- 6671c7025 ----------------------- < 80 > 84 --- 6692,6695c7046 ----------------------- < enterprise with management and a board of directors. A Shareholder will < not have the statutory rights normally associated with the ownership of < shares of a corporation; however, the DSTA does provide Shareholders the < right to bring “oppression” or “derivative” actions. All of the Shares > enterprise with management and a board of directors. All of the Shares --- 6700c7051 ----------------------- < any conversion or pre-emptive rights or, except as provided below, any > any conversion or preemptive rights or, except as provided below, any --- 6705,6714c7056,7065 ----------------------- < If the Trust is terminated and liquidated, the Administrator will < distribute to Shareholders any amounts of the cash proceeds of the < liquidation remaining after the satisfaction of all outstanding < liabilities of the Trust and the establishment of reserves for < applicable taxes, other governmental charges and contingent or future < liabilities as the Administrator shall determine. See “Description of < the Trust Agreement—Termination of the Trust.” Shareholders of record on < the record date fixed by the Trust Agency Service Provider for a < distribution will be entitled to receive their pro rata portion of any < distribution. > If the Trust is terminated and liquidated, any amounts of the cash > proceeds of the liquidation remaining after the satisfaction of all > outstanding liabilities of the Trust and the establishment of reserves > for applicable taxes, other governmental charges and contingent or > future liabilities of the Trust shall be distributed to Shareholders in > accordance with the Trust Agreement. See “Description of the Trust > Agreement—Termination of the Trust.” Shareholders of record on the > record date fixed by the Transfer Agent for a distribution will be > entitled to receive the distribution of the amount of Trust assets (paid > in cash) represented by those Shares. --- 6721,6724c7072 ----------------------- < of the outstanding Shares. In addition, certain amendments to the Trust < Agreement require advance notice to Shareholders before the < effectiveness of such amendments, but no Shareholder vote or approval is < required for any amendment to the Trust Agreement. > of the outstanding Shares. --- 6735,6745c7083,7099 ----------------------- < or more global certificates will be deposited by the Trust Agency < Service Provider with the DTC and registered in the name of Cede & Co., < as nominee for the DTC. The global certificates will evidence all of the < Shares outstanding at any time. Under the Trust Agreement, Shareholders < are limited to (i) DTC Participants such as banks, brokers, dealers and < trust companies, (ii) those who maintain, either directly or indirectly, < a custodial relationship with a DTC Participant (“Indirect < Participants”), and (iii) those banks, brokers, dealers, trust companies < and others who hold interests in the Shares through DTC Participants or < Indirect Participants. The Shares are only transferable through the < book- > or more global certificates will be deposited by the Transfer Agent with > the DTC and registered in the name of Cede & Co., as nominee for the > DTC. The global certificates will evidence all of the Shares outstanding > at any time. Authorized Participants will be able to place orders to > create or redeem Baskets. Authorized Participants must be (i) registered > broker-dealers or other securities market participants, such as banks > and other financial institutions, which are not required to register as > broker-dealers to engage in securities transactions, and (ii) DTC > Participants. To become an Authorized Participant, a person must enter > into an Authorized Participant Agreement with the Sponsor on behalf of > the Trust, subject to acceptance by the Transfer Agent. The Shares are > only transferable through the book-entry system of the DTC. Shareholders > who are not DTC Participants may transfer their Shares through the DTC > by instructing the DTC Participant holding their Shares (or by > instructing the Indirect Participant or other entity through which their > Shares are held) to transfer the Shares. Transfers will be made in > accordance with standard securities industry practice. --- 6749c7103 ----------------------- < 81 > 85 --- 6753,6759d7106 ----------------------- < entry system of the DTC. Shareholders who are not DTC Participants may < transfer their Shares through the DTC by instructing the DTC Participant < holding their Shares (or by instructing the Indirect Participant or < other entity through which their Shares are held) to transfer the < Shares. Transfers will be made in accordance with standard securities < industry practice. < --- 6764,6766c7111,7113 ----------------------- < the Sponsor may direct the Trust Agency Service Provider to declare a < split or reverse split in the number of Shares outstanding and to make a < corresponding change in the number of Shares constituting a Basket. > the Sponsor may direct the Transfer Agent to declare a split or reverse > split in the number of Shares outstanding and to make a corresponding > change in the number of Shares constituting a Basket. --- 6770c7117 ----------------------- < 82 > 86 --- 6795,6808c7142,7161 ----------------------- < that have achieved a rating of FIPS PUB 140-2 Level 3 (or higher). HSMs < (each, a “Signer”) are tamper-resistant computers used by the Custodian < to digitally sign (i.e., authenticate) any transfer of the Trust’s < bitcoin. All Signers are stored, as well as backed up, in various < geographically distributed, access-controlled facilities throughout the < United States. In addition, the Custodian’s Cold Storage System utilizes < multiple-signature (“Multisig”) technology with an “M-of-N” signing < design that requires a signature from more than one (1) Signer (but < fewer than the full complement of potential Signers) in order to move < the Trust’s bitcoin. This provides both security against attacks and < tolerance to losing access to a minority of facilities or private keys, < thereby eliminating single points of failure. In addition, the operation < of a Signer requires the coordinated actions of multiple employees (each < a “Signatory”) to protect against insider malfeasance. Lastly, the Cold > that have achieved a rating of FIPS PUB 140-2 Level 3 (or higher).33 > HSMs (each, a “Signer”) are tamper-resistant computers used by the > Custodian to digitally sign (i.e., authenticate) any transfer of the > Trust’s bitcoin. All Signers are stored, as well as backed up, in > various geographically distributed, access-controlled facilities > throughout the United States. In addition, the Custodian’s Cold Storage > System utilizes multiple-signature (“Multisig”) technology with a > “2-of-3” signing design that requires a signature from at least two (2) > of three (3) potential Signers in order to move the Trust’s bitcoin. > This provides both security against attacks and tolerance to losing > access to a minority of facilities or private keys, thereby eliminating > single points of failure. In addition, the operation of a Signer > requires the coordinated actions of multiple individuals (each a > “Signatory”) to protect against insider malfeasance. All Signatories > have undergone background checks by a third-party vendor and are subject > to, with or without the Signatory’s knowledge, ongoing background checks > at the discretion of the Custodian. All Signatories have been > fingerprinted, and all fingerprint cards and accompanying information > are retained by the Custodian for the duration of the Signatory’s tenure > and for a minimum of three (3) years thereafter. Lastly, the Cold --- 6819,6820c7172,7174 ----------------------- < of the Trust’s assets periodically during audits on-demand and without < necessitating the transfer of any of the Trust’s bitcoin. > of the Trust’s assets periodically during audits or examinations > on-demand and without necessitating the transfer of any of the Trust’s > bitcoin. --- 6828,6829c7182,7184 ----------------------- < Custody Agreement, the Custodian is also responsible for the maintenance < of, and periodic updates to, the Cold Storage System. > Custody Agreement, the Custodian is also responsible for the > establishment and maintenance of, and periodic updates to, the Cold > Storage System. --- 6840a7196,7206 ----------------------- > > 33 > > See “Business of the Trust” above. > > > > 87 > > Table of Contents > --- 6843,6851c7209,7216 ----------------------- < example, the Sponsor must engage an independent audit firm to < periodically audit the Custodian’s Cold Storage System protocols and < internal controls (“Internal Controls Audit”), and report to the Sponsor < at least annually on such matters. Additionally, the Sponsor must engage < an independent audit firm to biannually verify that the Custodian can < demonstrate “proof of control” of the private keys that control the < Trust’s bitcoin (“Proof of Control Audit”). One Proof of Control Audit < will be conducted at the end of each calendar year and the other at < random. > example, the Custodian will engage an independent auditor to audit the > Custodian’s Cold Storage System protocols and internal controls > (“Internal Controls Audit”). Additionally, the Sponsor and the Custodian > have engaged an independent auditor to examine and attest that the > Custodian can demonstrate “proof of control” of the private keys that > control the Trust’s bitcoin (“Proof of Control Examination”) on a > monthly basis. The results of each monthly Proof of Control Examination > will be made available on the Trust’s website. --- 6855c7220 ----------------------- < 83 > 88 --- 6862,6864c7227,7233 ----------------------- < with the relevant provisions of the Trust Documents. The following is a < description of the material terms of the Trust Documents as they relate < to the creation and redemption of the Trust’s Shares. > with the relevant provisions of the Trust Documents, Authorized > Participant Agreements and this Registration Statement as they may be > amended from time to time. The following is a description of the > material terms of the Trust Documents and Authorized Participant > Agreements as they relate to the creation and redemption of the Trust’s > Shares as of the date of this Registration Statement (and which may > change over time). --- 6870,6889c7239,7264 ----------------------- < Baskets will be distributed to the Authorized Participants by the Trust < in exchange for the delivery to the Trust of the appropriate number of < bitcoin (i.e., bitcoin equal in value to the value of the Shares being < purchased). On a redemption, the Trust will distribute bitcoin equal in < value to the value of the Shares being redeemed to the redeeming < Authorized Participant in exchange for the delivery to the Trust of one < or more Baskets. On each Business Day, the value of each Basket accepted < by the Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value of < the Basket will be equal to the value of 50,000 Shares at their net < asset value per Share on that day). The Trust will not issue or redeem < fractions of a Basket. Only Authorized Participants will be able to < place orders to create or redeem Baskets. Authorized Participants must < be (i) registered broker-dealers or other securities market < participants, such as banks and other financial institutions, which are < not required to register as broker-dealers to engage in securities < transactions, and (ii) DTC Participants. To become an Authorized < Participant, a person must enter into an Authorized Participant < Agreement with the Administrator and the Sponsor on behalf of the Trust, < subject to acceptance by the Trust Agency Service Provider. Authorized > Baskets will be distributed to the creating Authorized Participant by > the Trust in exchange for the delivery to the Trust of the appropriate > number of bitcoin (i.e., bitcoin equal in value to the NAV multiplied by > the number of Shares in the Basket). On a redemption, the Trust will > distribute bitcoin equal in value to the NAV multiplied by the number of > Shares in the Basket to the redeeming Authorized Participant in exchange > for the delivery to the Trust of one or more Baskets. On each Business > Day, the value of each Basket accepted by the Transfer Agent in a > creation or redemption transaction will be the same (i.e., each Basket > will initially consist of 100,000 Shares and the value of the Basket > will be equal to the value of 100,000 Shares (or such other amount as > determined by the Trust from time to time) at their net asset value per > Share on that day). The Trust will not issue or redeem fractions of a > Basket. The number of bitcoin required to create a Basket, or to be > delivered upon the redemption of a Basket, will gradually decrease over > time, due to the accrual of the Trust’s expenses, the transfer of the > Trust’s bitcoin to pay the Sponsor’s Fee, and the transfer of the > Trust’s bitcoin to pay any Trust expenses not assumed by the Sponsor. > Only Authorized Participants will be able to place orders to create or > redeem Baskets. Authorized Participants must be (i) registered > broker-dealers or other securities market participants, such as banks > and other financial institutions, which are not required to register as > broker-dealers to engage in securities transactions, and (ii) DTC > Participants. To become an Authorized Participant, a person must enter > into an Authorized Participant Agreement with the Sponsor on behalf of > the Trust, subject to acceptance by the Transfer Agent. Authorized --- 6891c7266 ----------------------- < redemption of Baskets as well as the amount of bitcoin required for > redemption of Baskets as well as the quantity of bitcoin required for --- 6894,6901c7269,7276 ----------------------- < thereto may be amended by Administrator and the Sponsor without the < consent of any Shareholder or Authorized Participant. A Transaction Fee < may be imposed to offset the transfer and other transaction costs < associated with creation or redemption. Authorized Participants will not < receive a fee, or any other form of compensation or inducement from < either the Sponsor or the Trust, and no Authorized Participant has any < obligation or responsibility to the Sponsor or the Trust to effect any < sale or resale of the Shares. > thereto may be amended by the Trust and the Sponsor without the consent > of any Shareholder or Authorized Participant. A Transaction Fee may be > imposed to offset the transfer and other transaction costs associated > with creation or redemption. Authorized Participants will not receive a > fee, or any other form of compensation or inducement from either the > Sponsor or the Trust, and no Authorized Participant has any obligation > or responsibility to the Sponsor or the Trust to effect any sale or > resale of the Shares. --- 6925,6930c7300 ----------------------- < states or other jurisdictions where the nature of its business so < requires. Certain Authorized Participants will be regulated under < federal and state banking laws and regulations. Each Authorized < Participant will have its own set of rules and procedures, internal < controls and information barriers as it determines is appropriate in < light of its own regulatory regime. > states or other jurisdictions --- 6934c7304 ----------------------- < 84 > 89 --- 6937a7308,7313 ----------------------- > where the nature of its business so requires. Certain Authorized > Participants will be regulated under federal and state banking laws and > regulations. Each Authorized Participant will have its own set of rules > and procedures, internal controls and information barriers as it > determines is appropriate in light of its own regulatory regime. > --- 6942c7318,7320 ----------------------- < of the date of this prospectus, [ ] have each signed an Authorized > of the date of this registration statement, Convergex Execution > Solutions LLC, KCG Americas LLC, and Virtu Financial BD LLC > (collectively, the “Current APs”) have each signed an Authorized --- 6944,6949c7322,7327 ----------------------- < agreement, may create and redeem Baskets as described above. Persons < interested in placing orders to create or redeem Baskets should contact < the Sponsor or the Administrator to obtain the contact information for < the Authorized Participants. Shareholders who are not Authorized < Participants will only be able to redeem their Shares through an < Authorized Participant. > agreement and the Registration Statement, may create and redeem Baskets > as described above. Persons interested in placing orders to create or > redeem Baskets should contact the Sponsor or the Transfer Agent to > obtain the contact information for the Authorized Participants. > Shareholders who are not Authorized Participants will only be able to > redeem their Shares through an Authorized Participant. --- 6955c7333,7335 ----------------------- < of one or more Baskets. > of one or more Baskets. Each of the Current APs has established a > custody account with the Custodian to facilitate bitcoin transactions > with the Trust. --- 6963,6965c7343,7345 ----------------------- < the relevant provisions of the Trust Agreement, the Trust Servicing < Agreement and the form of Authorized Participant Agreements for more < detail, each of which is attached as an exhibit to the registration > the relevant provisions of the Trust Agreement, the Transfer Agency and > Service Agreement and the form of Authorized Participant Agreements for > more detail, each of which is attached as an exhibit to the registration --- 6973c7353 ----------------------- < the Administrator to create one or more Baskets (each a “Creation > the Transfer Agent to create one or more Baskets (each a “Creation --- 6976,6977c7356,7357 ----------------------- < Shares to the Authorized Participant, will occur only on days BATS is < open for regular trading. > Shares to the Authorized Participant, will occur only on days Bats is > open for regular trading (each a “Business Day”). --- 6981,6984c7361,7364 ----------------------- < The number of bitcoin required to be delivered to the Trust in exchange < for a Creation Basket is determined by the Trust Agreement. All < questions as to the amount of bitcoin necessary to deliver to purchase a < Creation Basket will be conclusively determined by the Administrator. > The quantity of bitcoin required to be delivered to the Trust in > exchange for a Creation Basket is determined by the Trust Agreement. All > questions as to the quantity of bitcoin necessary to deliver to purchase > a Creation Basket will be conclusively determined by the Administrator. --- 6991c7371 ----------------------- < Administrator is responsible for delivering the bitcoin to the Trust > Transfer Agent is responsible for delivering the bitcoin to the Trust --- 7004a7385,7390 ----------------------- > > > 90 > > Table of Contents > --- 7006c7392 ----------------------- < Account by the Custodian, the Administrator will direct the DTC to > Account by the Custodian, the Transfer Agent will direct the DTC to --- 7011,7017c7397 ----------------------- < borne solely by the Authorized Participant. < < < < 85 < < Table of Contents > borne by the Trust. --- 7030,7037c7410,7416 ----------------------- < The Administrator may, in its discretion, and when directed by the < Sponsor, suspend the right to place Creation Basket orders, or postpone < the Creation Basket settlement date, (i) for any period during which < BATS is closed other than customary weekend or holiday closings, or < trading on BATS is suspended or restricted or (ii) for any period during < which an emergency exists as a result of which receipt or evaluation of < bitcoin delivery is not reasonably practicable or presents, in the < judgment of the Administrator, the Custodian or the Sponsor or their > The Sponsor may suspend the right to place Creation Basket orders, or > postpone the Creation Basket settlement date, (i) for any period during > which Bats is closed other than customary weekend or holiday closings, > or trading on Bats is suspended or restricted; or (ii) for any period > during which an emergency exists as a result of which receipt or > evaluation of bitcoin delivery is not reasonably practicable or > presents, in the judgment of the Custodian or the Sponsor or their --- 7041,7044c7420,7423 ----------------------- < Storage System (e.g., because of power failure or acts of God) are < examples of such emergencies. None of the Administrator, the Custodian, < the Sponsor, or their agents will be liable to any person or in any way < for any loss or damages that may result from any such suspension or > Storage System (e.g., because of power failure, terrorism, or acts of > God) are examples of such emergencies. None of the Custodian, the > Sponsor, or their agents will be liable to any person or in any way for > any loss or damages that may result from any such suspension or --- 7047,7056c7426,7436 ----------------------- < The Administrator may also reject a Creation Basket order if (i) such < order is not presented in proper form as described in the Authorized < Participant Agreements, (ii) such order is incorrect, (iii) if the < Creation Basket Order presents, in the opinion of the Administrator, the < Custodian, the Sponsor or their agents, a security risk to the Cold < Storage System, or (iv) the fulfillment of the Creation Basket order, in < the opinion of counsel, might be unlawful. None of the Trustee, < Administrator, Trust Agency Service Provider, Custodian, Sponsor, or < their agents will be liable for the rejection of any Creation Basket < order. > The Sponsor may also reject a Creation Basket order if (i) such order is > not presented in proper form as described in the Authorized Participant > Agreements; (ii) such order is incorrect; (iii) the Creation Basket > Order presents, in the opinion of the Custodian, the Sponsor or their > agents, a security risk to the Cold Storage System; (iv) the fulfillment > of the Creation Basket order, in the opinion of counsel, might be > unlawful; or (v) circumstances outside the control of the Sponsor, the > Transfer Agent or the Custodian, as applicable, make it, for all > practical purposes, not feasible to process the Creation Basket Order. > None of the Custodian, the Sponsor, the Transfer Agent, nor their agents > will be liable for the rejection of any Creation Basket order. --- 7063c7443 ----------------------- < place a Redemption Basket order with the Administrator. The settlement > place a Redemption Basket order with the Transfer Agent. The settlement --- 7066,7080c7446,7458 ----------------------- < only occur when BATS is open for regular trading. Settlement of < Redemption Baskets orders may be delayed longer than three (3), but no < more than five (5), Business Days following the Redemption Basket order < date. Settlement of Redemption Baskets may be delayed only in the < instance of administrative or custodial delays in the processing of a < distribution of bitcoin from the Trust Custody Account, whether by < reason of Bitcoin Network delays, mechanical or clerical error or by act < of God. Settlement of a Redemption Basket will occur only on Business < Days. Redemption Basket orders must be placed no later than 4:00 p.m. < Eastern time on a Business Day. A Redemption Basket order so received < will be effective on the date it is received if the Administrator finds < it to be in satisfactory form. The redemption procedures allow only < Authorized Participants to place Redemption Basket orders and do not < entitle an Authorized Participant to receive a distribution of bitcoin < in an amount that is different than the value of a Redemption Basket. > only occur when Bats is open for regular trading. Settlement of > Redemption Baskets may be delayed only in the instance of administrative > or custodial delays in the processing of a distribution of bitcoin from > the Trust Custody Account, whether by reason of Bitcoin Network delays, > mechanical or clerical error or by act of God. Settlement of a > Redemption Basket will occur only on Business Days. Redemption Basket > orders must be placed no later than 3:00 p.m. Eastern Time on a Business > Day. A Redemption Basket order so received will be effective on the date > it is received if the Sponsor finds it to be in satisfactory form. The > redemption procedures allow only Authorized Participants to place > Redemption Basket orders and do not entitle an Authorized Participant to > receive a distribution of bitcoin in a quantity that is different than > the value of a Redemption Basket. --- 7084,7085c7462,7463 ----------------------- < book-entry system to the Administrator’s DTC account not later than the < third Business Day following the effective date of the Redemption Basket > book-entry system to the Transfer Agent’s DTC account not later than the > next Business Day following the effective date of the Redemption Basket --- 7087a7466,7471 ----------------------- > > > 91 > > Table of Contents > --- 7097,7102d7480 ----------------------- < < < 86 < < Table of Contents < --- 7106,7108c7484,7486 ----------------------- < transferred to the Authorized Participant on the third Business Day < following the Redemption Basket order date if, by 9:00 a.m. Eastern time < on such third Business Day, the Administrator’s DTC account has been > transferred to the Authorized Participant on the next Business Day > following the Redemption Basket order date if, by 3:00 p.m. Eastern Time > on such next Business Day, the Transfer Agent’s DTC account has been --- 7110c7488 ----------------------- < Administrator will instruct the Custodian to transfer bitcoin from the > Transfer Agent will instruct the Custodian to transfer bitcoin from the --- 7112c7490 ----------------------- < Participant. If the Administrator’s DTC account has not been credited > Participant. If the Transfer Agent’s DTC account has not been credited --- 7115c7493 ----------------------- < Administrator is also authorized to instruct the Custodian to transfer > Transfer Agent is also authorized to instruct the Custodian to transfer --- 7118,7123c7496,7500 ----------------------- < to be redeemed are not credited to the Administrator’s DTC account by < 9:00 a.m. Eastern time on the third Business Day following the < Redemption Basket order date, if the Authorized Participant has < collateralized its obligation to deliver the Redemption Baskets through < DTC’s book-entry system on such terms as the Sponsor and the < Administrator may from time to time agree upon. > to be redeemed are not credited to the Transfer Agent’s DTC account by > the appropriate time, if the Authorized Participant has collateralized > its obligation to deliver the Redemption Baskets through DTC’s > book-entry system on such terms as the Sponsor and the Transfer Agent > may from time to time agree upon. --- 7128c7505 ----------------------- < instruct the Custodian to distribute that amount of bitcoin to the > instruct the Custodian to distribute that quantity of bitcoin to the --- 7133,7153c7510,7529 ----------------------- < The Administrator may, in its discretion, and will, when directed by the < Sponsor, suspend the right to place Redemption Basket orders, or < postpone the Redemption Basket order settlement date, (i) for any period < during which BATS is closed other than customary weekend or holiday < closings, or trading on BATS is suspended or restricted or (ii) for any < period during which an emergency exists as a result of which the < distribution or evaluation of bitcoin is not reasonably practicable or < presents, in the judgment of Administrator, the Custodian, the Sponsor, < or their agents, a security risk to the Cold Storage System. The < inability of the Custodian to operate the Cold Storage System because of < a failure of hardware, software or personnel or an inability to access < the Cold Storage System (e.g., because of power failure or acts of God) < are examples of such emergencies. None of the Administrator, the < Custodian, the Sponsor, or their agents will be liable to any person or < in any way for any loss or damages that may result from any such < suspension or postponement. < < The Administrator will reject a Redemption Basket order if the order is < not in proper form as described in the Authorized Participant Agreement < or if the fulfillment of the Redemption Basket order, in the opinion of < its counsel, might be unlawful. > The Sponsor, the Administrator, or the Transfer Agent may suspend the > right to place Redemption Basket orders, or postpone the Redemption > Basket order settlement date, (i) for any period during which Bats is > closed other than customary weekend or holiday closings, or trading on > Bats is suspended or restricted or (ii) for any period during which an > emergency exists as a result of which the distribution or evaluation of > bitcoin is not reasonably practicable or presents, in the judgment of > the Custodian, the Sponsor, or their agents, a security risk to the Cold > Storage System. The inability of the Custodian to operate the Cold > Storage System because of a failure of hardware, software or personnel > or an inability to access the Cold Storage System (e.g., because of > power failure, terrorism, or acts of God) are examples of such > emergencies. None of the Custodian, the Sponsor, or their agents will be > liable to any person or in any way for any loss or damages that may > result from any such suspension or postponement. > > The Sponsor will reject a Redemption Basket order if, among other > things, the order is not in proper form as described in the Authorized > Participant Agreement or if the fulfillment of the Redemption Basket > order, in the opinion of its counsel, might be unlawful. --- 7157,7165c7533,7548 ----------------------- < To defray the costs incurred by the Trust Agency Service Provider for < services in processing the creation and redemption of Baskets and < transferring bitcoin, including the payment of any transaction fees to < miners, an Authorized Participant may be required to pay to the Trust < Agency Service Provider a Transaction Fee. The Trust Agency Service < Provider shall promptly notify the DTC of any agreement to include or < change the Transaction Fee and will not implement any increase in the < Transaction Fee for the redemption of Baskets until thirty (30) days < after the date of the notice. > To defray the costs incurred by the Transfer Agent for services in > processing the creation and redemption of Baskets and transferring > bitcoin, including the payment of any transaction fees to miners, an > Authorized Participant may be required to pay to the Transfer Agent a > Transaction Fee. The Transfer Agent shall promptly notify the DTC of any > agreement to include or change the Transaction Fee and will not > implement any increase in the Transaction Fee for the redemption of > Baskets until thirty (30) days after the date of the notice. The Initial > Purchaser will not be subject to a Transaction Fee for the purchase of > the Seed Baskets. > > > > 92 > > Table of Contents --- 7180c7563 ----------------------- < 87 > 93 --- 7192,7205c7575,7605 ----------------------- < Trust as measured at 4:00 p.m. Eastern time (the “Evaluation Time”) < using the Gemini Exchange Spot Price on each Business Day. The NAV of < the Trust is the asset value of the Trust less its liabilities (which < include accrued but unpaid fees and expenses) divided by the number of < outstanding Shares as of 4:00 p.m. Eastern time each Business Day. < < Any determination that the Gemini Exchange Spot Price is unavailable or < otherwise not an appropriate basis for calculating the Trust’s NAV would < be based upon extraordinary criteria in which the operation of Gemini < Exchange is disrupted or otherwise experiencing material calculation or < reporting irregularities. An example of a situation in which the Gemini < Exchange Spot Price may be deemed to not fairly represent the fair < market value of the Trust’s bitcoin would be if operational or trading < problems with the Gemini Exchange result in both (i) trading shutdowns > Trust as measured at 4:00 p.m. Eastern Time (the “Evaluation Time”) > using the Gemini Exchange Auction Price on each Business Day. The > Sponsor will provide the Gemini Exchange Auction Price, which is > publicly available, to the Administrator each day. The NAV of the Trust > is the asset value of the Trust less its liabilities (which include > accrued but unpaid fees and expenses) divided by the number of > outstanding Shares as of 4:00 p.m. Eastern Time each Business Day. > > Any determination that the Gemini Exchange Auction Price is unavailable > or otherwise not an appropriate basis for calculating the Trust’s NAV on > a given Business Day would be based upon extraordinary criteria in which > the operation of the Gemini Exchange is disrupted or otherwise > experiencing material calculation or reporting irregularities. An > example of a situation in which the Gemini Exchange Auction Price may be > deemed to not fairly represent the fair market value of the Trust’s > bitcoin would be if operational or trading problems with the Gemini > Exchange result in both (i) trading shutdowns or reductions in volume to > less than twenty (20) percent of the prior week’s average daily volume > and (ii) daily volume weighted average trading price (“VWAP”) that > varies by more than one (1) standard deviation from the VWAP of other > U.S.-based Bitcoin Exchanges that are both (a) not the Gemini Exchange > and (b) not undergoing trading irregularities or trading shutdowns. In > the event that the Sponsor determines that the Gemini Exchange Auction > Price is not an appropriate basis for evaluation of the Trust’s bitcoin > on a given Business Day, the Sponsor will instruct the Administrator to > use the 4:00 p.m. Eastern Time spot price of the Gemini Exchange or > itBit Exchange34 as an alternative basis for calculating the Trust’s NAV > on that Business Day (an “Alternate Price”). An example of a situation > in which the Alternate Price may be deemed to not fairly represent the > fair market value of the Trust’s bitcoin would be if operational or > trading problems with an exchange result in both (i) trading shutdowns --- 7207,7220c7607,7612 ----------------------- < week’s average daily volume and (ii) daily volume weighted average < trading price (“VWAP”) that varies by more than one (1) standard < deviation from VWAP of other U.S.-based Bitcoin Exchanges that are both < (a) not the Gemini Exchange and (b) not undergoing trading < irregularities or trading shutdowns. In the event that the Sponsor < determines that the Gemini Exchange Spot Price is not an appropriate < basis for evaluation of the Trust’s bitcoin, the Sponsor will instruct < the Administrator to use the spot price of the itBit Exchange as an < alternative basis for calculating the Trust’s NAV. The itBit Exchange is < operated by the itBit Trust Company, LLC, a New York State-chartered < limited liability trust company that, like the Gemini Exchange, operates < under the direct supervision and regulatory oversight of the NYSDFS. If < the Sponsor determines in good faith that neither the Gemini Exchange < Spot Price nor the spot price on the itBit Exchange is reliable for > week’s average daily volume on that exchange and (ii) daily VWAP on that > exchange that varies by more than one (1) standard deviation from the > VWAP of other U.S.-based Bitcoin Exchanges that are both (a) not the > exchange and (b) not undergoing trading irregularities or trading > shutdowns. If the Sponsor determines in good faith that neither the > Gemini Exchange Auction Price nor an Alternate Price are reliable for --- 7222,7237c7614,7649 ----------------------- < not limited to situations where it does not reflect material events < occurring between the time of calculation of such Gemini Exchange Spot < Price or the spot price on the itBit Exchange and the time the Trust’s < Shares are valued, bitcoin will be valued using fair market value < pricing as determined in good faith by the Sponsor and calculated by the < Administrator under procedures established in the Trust Servicing < Agreement. Determining the fair market value of bitcoin involves the < consideration of a number of subjective factors and thus the prices for < bitcoin may differ from the Gemini Exchange Spot Price or the spot price < on the itBit Exchange. The Sponsor may consider the market price for < bitcoin on other Bitcoin Exchanges, or in other forums for which bitcoin < prices are published publicly. Neither the Administrator nor the Sponsor < shall be liable to any person for the determination that the Gemini < Exchange Spot Price or an alternative basis for a fair market value of < bitcoin is not appropriate as a basis for calculation of the Trust’s NAV < provided that such determination is made in good faith. > not limited to situations where it does not reflect material information > or events occurring between the time of calculation of such prices and > the time the Trust’s Shares are valued, bitcoin will be valued by the > Sponsor using fair market value pricing as determined in good faith by > the Sponsor and calculated by the Administrator. Determining the fair > market value of bitcoin involves the consideration of a number of > subjective factors and thus the prices for bitcoin may differ from the > Gemini Exchange Auction Price or the spot price on the Gemini Exchange > or the itBit Exchange. Factors the Sponsor may consider include the > market price for bitcoin on other Bitcoin Exchanges, or in other forums > for which bitcoin prices are published publicly, recent significant > transactions on the Blockchain where the USD-bitcoin exchange rate can > be readily ascertained (e.g., sales of items with widely available USD > prices where the cost in bitcoin can be readily determined), movements > in the price of other Digital Assets or fiat currencies, movements in > the price of other Digital Asset ETPs, global or regional political, > economic or financial events, and other factors determined by the > Sponsor in good faith. The Sponsor shall not be liable to any person for > the determination that the Gemini Exchange Auction Price, Alternate > Price, or an alternative basis for a fair market value of bitcoin is not > appropriate as a basis for calculation of the Trust’s NAV provided that > such determination is made in good faith. > > > 34 > > The itBit Exchange is operated by the itBit Trust Company, LLC, a New > York State-chartered limited liability trust company that, like the > Gemini Exchange, operates under the direct supervision and regulatory > oversight of the NYSDFS. > > > > 94 > > Table of Contents --- 7240,7244c7652,7656 ----------------------- < as practicable after their calculation by the Administrator. To the < extent that the NAV has been calculated using a price per bitcoin other < than the Gemini Exchange Spot Price for such Business Day, the < publication on the Trust’s website will note the valuation methodology < and the price per bitcoin resulting from such calculation. > as practicable after its calculation by the Administrator. To the extent > that the NAV has been calculated using a price per bitcoin other than > the Gemini Exchange Auction Price for such Business Day, the publication > on the Trust’s website will note the valuation methodology and the price > per bitcoin resulting from such calculation. --- 7248,7249c7660,7661 ----------------------- < and no revision or correction in any computation made under the Trust < Servicing Agreement will be required by reason of any difference in > and no revision or correction in any computation made under the > Administration Agreement will be required by reason of any difference in --- 7256c7668 ----------------------- < errors contained in, information reasonably available to it. The > errors contained in information reasonably available to it. The --- 7260,7261c7672,7673 ----------------------- < Administrator against any liability resulting from gross negligence, < willful misconduct or bad faith in the performance of its duties. > Administrator against any liability resulting from fraud, negligence, or > willful misconduct in the performance of its duties. --- 7265c7677 ----------------------- < 88 > 95 --- 7273,7287c7685,7698 ----------------------- < Under the terms of the Agreement, the Sponsor has agreed to assume the < following administrative and marketing expenses incurred by the Trust: < (i) the Trustee’s monthly fee and expenses (including indemnification < amounts) reimbursable under the Trust Agreement, (ii) the < Administrator’s monthly fee and expenses reimbursable under the Trust < Servicing Agreement, (iii) the Trust Agency Service Provider’s monthly < fee and expenses under the Trust Agency Service Provider Agreement and < (iv) the Custodian’s monthly fee and expenses reimbursable under the < Trust Custody Agreement. In addition, the Sponsor has agreed to pay (i) < exchange listing fees, (ii) SEC registration fees, (iii) printing and < mailing costs, (iv) costs of maintaining the Trust’s website, (v) audit < fees, (vi) up to $[ ] per annum in marketing expenses and (vii) up to < $[100,000] per annum in legal expenses. In addition, the Sponsor will < also pay the costs of the Trust’s organization and the initial issuance < and sale of the Shares, including the applicable SEC registration fees. > The Sponsor has agreed to assume the following administrative and > marketing expenses incurred by the Trust: (i) the Trustee’s monthly fee > and expenses (including indemnification amounts) reimbursable under the > Trust Agreement; (ii) the Administrator’s monthly fee and expenses > reimbursable under the Administration Agreement; (iii) the Transfer > Agent’s monthly fee and expenses under the Transfer Agency and Services > Agreement; and (iv) the Custodian’s monthly fee and expenses > reimbursable under the Trust Custody Agreement. In addition, the Sponsor > has agreed to pay (i) exchange listing fees; (ii) SEC registration fees; > (iii) printing and mailing costs; (iv) costs of maintaining the Trust’s > website; (v) audit fees; (vi) marketing expenses; and (vii) up to > $100,000 per annum in legal expenses. In addition, the Sponsor will also > pay the costs of the Trust’s organization and the initial issuance and > sale of the Shares, including the applicable SEC registration fees. --- 7293,7296c7704,7706 ----------------------- < litigation), the Administrator will at the discretion of the Sponsor or < in its own discretion instruct the Custodian to transfer to the Trust < Expense Account the Trust’s bitcoin for later sale as necessary to pay < such expenses. > litigation), the Sponsor will instruct the Custodian to transfer to the > Trust Expense Account a quantity of the Trust’s bitcoin determined by > the Administrator for later sale as necessary to pay such expenses. --- 7304,7306c7714,7715 ----------------------- < The Administrator will, when directed by the Sponsor or in its own < discretion, instruct the Custodian to sell, or otherwise cause the sale < of that number of bitcoin as may be necessary to pay the Trust’s > The Sponsor will instruct the Custodian to sell, or otherwise cause the > sale of that quantity of bitcoin as may be necessary to pay the Trust’s --- 7308,7329c7717,7724 ----------------------- < procedures. The Administrator will instruct the Custodian to transfer < bitcoin from the Trust Custody Account to the Trust Expense Account. The < Trust Expense Account is an account of the Administrator and any < transfer thereto shall be held in order to pay such extraordinary < expenses. If the Administrator causes the sale of bitcoin in the Trust < Expense Account, any cash received by the Administrator pending payment < of the Trust’s expenses will not bear any interest. The Administrator < will use the cash proceeds of any sales to pay the outstanding < extraordinary expenses of the Trust. To the extent the Administrator < ceases the transfers to the Trust Expense Account of bitcoin in excess < of the amount needed to pay the Trust’s extraordinary expenses, the < Administrator will promptly return such remaining bitcoin by transfer to < the Trust Custody Account. < < The Administrator will cause bitcoin to be sold through dealers or by < the Custodian or Administrator directly on a Bitcoin Exchange (which may < include the Gemini Exchange), as directed by the Sponsor or, in the < absence of such direction, with dealers or on Bitcoin Exchanges through < which the Administrator may reasonably expect to obtain a favorable < price and good execution of orders. The Administrator may consider the < market price (relative to the value of a bitcoin as represented by the < Gemini Exchange Spot Price) expected to be obtained by such dealer or > procedures. The Sponsor will instruct the Custodian to transfer bitcoin > from the Trust Custody Account to the Trust Expense Account. > > The Sponsor will cause bitcoin to be sold through dealers or by the > Custodian or Sponsor directly on a Bitcoin Exchange (which may include > the Gemini Exchange). The Sponsor may consider the market price > (relative to the value of a bitcoin as represented by the Gemini > Exchange Auction Price) expected to be obtained by such dealer or --- 7332,7341c7727,7743 ----------------------- < market price of bitcoin. The Administrator may offset the importance of < one factor against the remaining factors. The Custodian may be the < purchaser of such bitcoin only if the sale transaction is made at the < next Gemini Exchange Spot Price or such other publicly available price < that the Sponsor deems fair and reasonable with respect to the Trust, in < each case as set following the sale order. Neither the Administrator nor < the Sponsor is liable for depreciation or loss incurred by reason of any < sale. See “United States Federal Income Tax Consequences—Taxation of < U.S. Shareholders” for information on the tax treatment of bitcoin < sales. > market price of bitcoin. The Sponsor may offset the importance of one > factor against the remaining factors. The Custodian may be the purchaser > of such bitcoin only if the transaction is the result of a separate > arm’s-length transaction and the sale transaction is made at the Gemini > Exchange Auction Price or such other publicly available price that the > Sponsor in good faith deems fair and reasonable with respect to the > Trust, in each case as set following the sale order. Neither the Sponsor > nor the Administrator is liable for depreciation or loss incurred by > reason of any sale. See “United States Federal Income Tax > Consequences—Taxation of U.S. Shareholders” for information on the tax > treatment of bitcoin sales. > > The Sponsor will cause the Custodian to transfer bitcoin from the Trust > Custody Account into the Trust Expense Account for sale by the Sponsor > or the Custodian if a sale is required by applicable law or regulation. > The Sponsor or Custodian will sell the bitcoin in the Trust Custody > Account in connection with the termination and liquidation of the Trust. --- 7345c7747 ----------------------- < 89 > 96 --- 7349,7367c7751,7754 ----------------------- < The Administrator will also cause the Custodian to transfer bitcoin from < the Trust Custody Account into the Trust Expense Account and sell the < Trust’s bitcoin if the Sponsor notifies the Administrator that sale is < required by applicable law or regulation. In addition, the Administrator < will, if directed by the Sponsor, sell the bitcoin in the Trust Custody < Account in connection with the termination and liquidation of the Trust. < The Administrator will not be liable or responsible in any way for < depreciation or loss incurred by reason of any sale of bitcoin directed < by the Sponsor. < < The Administrator will not cause the sale of bitcoin to pay the < Sponsor’s Fee, which is an ordinary expense of the Trust. The Sponsor’s < Fee will be paid through the transfer of bitcoin from the Trust Custody < Account to the Sponsor Custody Account. < < THE TRUST MAY TRANSACT IN BITCOIN ON A LIMITED NUMBER OF EXCHANGES, < WHICH MAY RESULT IN LESS FAVORABLE PRICES AND DECREASED LIQUIDITY FOR < THE TRUST AND THEREFORE COULD HAVE AN ADVERSE EFFECT ON THE TRUST AND < SHAREHOLDERS. > The Sponsor will not cause the sale of bitcoin to pay the Sponsor’s Fee, > which is an ordinary expense of the Trust. The Sponsor’s Fee will be > paid through the transfer of the appropriate quantity of bitcoin from > the Trust Custody Account to the Sponsor Custody Account. --- 7368a7756,7759 ----------------------- > THE TRUST MAY TRANSACT IN BITCOIN ON A LIMITED NUMBER OF BITCOIN > EXCHANGES, INCLUDING THE GEMINI EXCHANGE, WHICH MAY RESULT IN LESS > FAVORABLE PRICES AND DECREASED LIQUIDITY FOR THE TRUST AND THEREFORE > COULD HAVE AN ADVERSE EFFECT ON THE TRUST AND SHAREHOLDERS. --- 7371c7762,7763 ----------------------- < 90 > > 97 --- 7405,7412c7797,7804 ----------------------- < or more global certificates will be signed by the Trust Agency Service < Provider on behalf of the Trust, registered in the name of Cede & Co., < as nominee for DTC, and deposited with the Trust Agency Service Provider < on behalf of DTC. The global certificates will evidence all of the < Shares outstanding at any time. The representations, undertakings and < agreements made on the part of the Trust in the global certificates are < made and intended for the purpose of binding only the Trust and not the < Trust Agency Service Provider or the Sponsor individually. > or more global certificates will be signed by the Transfer Agent on > behalf of the Trust, registered in the name of Cede & Co., as nominee > for DTC, and deposited with the Transfer Agent on behalf of DTC. The > global certificates will evidence all of the Shares outstanding at any > time. The representations, undertakings and agreements made on the part > of the Trust in the global certificates are made and intended for the > purpose of binding only the Trust and not the Transfer Agent or the > Sponsor individually. --- 7417,7419c7809,7811 ----------------------- < redeemed to the accounts of the appropriate DTC Participants. The Trust < Agency Service Provider and the Authorized Participants will designate < the accounts to be credited and charged in the case of creation or > redeemed to the accounts of the appropriate DTC Participants. The > Transfer Agent and the Authorized Participants will designate the > accounts to be credited and charged in the case of creation or --- 7443,7447c7835,7838 ----------------------- < Baskets and/or the Shares by giving notice to the Trust Agency Service < Provider and the Sponsor. Under such circumstances, the Sponsor will < find a replacement for DTC to perform its functions at a comparable cost < or, if a replacement is unavailable, the Sponsor will act to terminate < the Trust. > Baskets and/or the Shares by giving notice to the Transfer Agent and the > Sponsor. Under such circumstances, the Sponsor will find a replacement > for DTC to perform its functions at a comparable cost or, if a > replacement is unavailable, the Sponsor will act to terminate the Trust. --- 7451c7842 ----------------------- < 91 > 98 --- 7467c7858 ----------------------- < 92 > 99 --- 7475,7487c7866,7876 ----------------------- < The Trust Agency Service Provider will keep proper books of record and < account of the Trust at its office located in New York or such office as < it may subsequently designate. These books and records are open to < inspection at all reasonable times during the usual business hours of < the Trust Agency Service Provider by any person who establishes to the < Trust Agency Service Provider’s satisfaction that such person is a < Shareholder. < < The Trust Agency Service Provider also will keep a copy of the Trust < Agreement and the Trust Agency Service Provider Agreement, on file in < its office which will be available for inspection on reasonable advance < notice at all reasonable times during its usual business hours by any < Shareholder. > The Transfer Agent will keep proper books of record and account of the > Trust at its office located in Massachusetts or such office as it may > subsequently designate. These books and records are open to inspection > at all reasonable times during the usual business hours of the Transfer > Agent by any person who establishes to the Transfer Agent’s satisfaction > that such person is a Shareholder. > > The Transfer Agent also will keep a copy of the Trust Agreement and the > Transfer Agency and Services Agreement, on file in its office which will > be available for inspection on reasonable advance notice at all > reasonable times during its usual business hours by any Shareholder. --- 7496c7885 ----------------------- < be included. The annual report shall be filed with the SEC and BATS and > be included. The annual report shall be filed with the SEC and Bats and --- 7505,7506c7894,7895 ----------------------- < Exchange Act. The Trust Agency Service Provider will assist and support < the Sponsor in the preparation of such reports. > Exchange Act. The Transfer Agent will assist and support the Sponsor in > the preparation of such reports. --- 7510,7517c7899,7900 ----------------------- < designated from time to time by the Sponsor. The accountants report will < be furnished by the Trust Agency Service Provider to Shareholders upon < request. < < The Trust Agency Service Provider will make such elections, file such < tax returns, and prepare, disseminate and file such tax reports, as it < is advised to by its counsel or accountants or as required from time to < time by any applicable statute, rule or regulation. > designated from time to time by the Sponsor. The accountants’ report > will be furnished by the Transfer Agent to Shareholders upon request. --- 7527c7910 ----------------------- < 93 > 100 --- 7534,7535c7917,7918 ----------------------- < the Trust Agreement, as well as pursuant to the terms of the Trust < Servicing Agreement, the Trust Agency Services Provider Agreement and > the Trust Agreement, as well as pursuant to the terms of the > Administration Agreement, the Transfer Agent and Service Agreement and --- 7541,7605c7924 ----------------------- < Agreement. The Trust Agreement establishes the roles of the Sponsor and < the Trustee and sets forth the rights and duties of each party. < < The Sponsor < < This section summarizes some of the important provisions of the Trust < Agreement which apply to the Sponsor. For a general description of the < Sponsor’s role concerning the Trust, see “The Sponsor—The Sponsor’s < Role.” < < Liability of the Sponsor and indemnification < < The Sponsor will not be liable to the Trust or any Shareholder for any < action taken, or for refraining from taking any action in good faith, or < for errors in judgment or for depreciation or loss incurred by reason of < the sale of bitcoin or other assets of the Trust. However, the preceding < liability exclusion will not protect the Sponsor against any liability < resulting from its own gross negligence, willful misconduct or bad faith < in the performance of its duties. < < The Sponsor and its members, managers, directors, officers, employees, < affiliates (as such term is defined under the Securities Act) and < subsidiaries shall be indemnified by the Trust and held harmless against < any loss, liability or expense incurred without gross negligence, < willful misconduct or bad faith on the part of such indemnified party < arising out of or in connection with the performance of its obligations < under the Trust Agreement and under each other agreement entered into by < the Sponsor in furtherance of the administration of the Trust < (including, without limiting the scope of the foregoing, any Authorized < Participant Agreement) or any actions taken in accordance with the < provisions of the Trust Agreement. Such indemnity shall include payment < from the Trust of the costs and expenses incurred by such indemnified < party in defending itself against any claim or liability in its capacity < as Sponsor. Any amounts payable to an indemnified party may be payable < in advance or shall be secured by a lien on the Trust. The Sponsor may, < in its discretion, undertake any action that it may deem necessary or < desirable in respect of the Trust Agreement and the interests of < Shareholders and, in such event, the legal expenses and costs of any < such actions shall be expenses and costs of the Trust and the Sponsor < shall be entitled to be reimbursed therefor by the Trust. < < The Sponsor may rely on all information provided by the Administrator < for securities filings, including a free writing prospectus or marketing < materials. If such information is incorrect or omits material < information and is the foundation for a claim against the Sponsor, the < Sponsor may be entitled to indemnification from the Trust. < < Successor sponsors < < If the Sponsor is adjudged bankrupt or insolvent, or a receiver of the < Sponsor or of its property is appointed, or a trustee or liquidator or < any public officer takes charge or control of the Sponsor or of its < property or affairs for the purpose of rehabilitation, conservation or < liquidation, then, in any such case, each of the Administrator and the < Trustee may terminate and liquidate the Trust and distribute its < remaining assets. Neither the Administrator nor the Trustee has any < obligation to appoint a successor sponsor or to assume the duties of the < Sponsor, and neither will have any liability to any person because the < Trust is or is not terminated as described in the preceding sentence. < < < < 94 < < Table of Contents > Agreement. --- 7607c7926 ----------------------- < The Trustee > Duties of the Sponsor; Conflicts of interest --- 7609,7612c7928,7967 ----------------------- < This section summarizes some of the important provisions of the Trust < Agreement which apply to the Trustee. For a general description of the < Trustee’s role concerning the Trust, see “The Trustee—The Trustee’s < Role.” > To the extent that, at law or in equity, the Sponsor has duties > (including fiduciary duties) and liabilities relating thereto to the > Trust, the Shareholders or to any other Person, the Sponsor acting under > the Trust Agreement shall not be liable to the Trust, the Shareholders > or to any other Person for its good faith reliance on the provisions of > the Trust Agreement. The provisions of the Trust Agreement, to the > extent that they restrict or eliminate the duties and liabilities of the > Sponsor otherwise existing at law or in equity replace such other duties > and liabilities of the Sponsor. To the fullest extent permitted by law, > no person other than the Sponsor and the Trustee shall have any duties > (including fiduciary duties) or liabilities at law or in equity to the > Trust and the Shareholders (including any Person that becomes a > Shareholder) or any other person. > > In the absence of bad faith by the Sponsor, the resolution, action or > terms so made, taken or provided by the Sponsor regarding a conflict of > interest shall not constitute a breach of the Trust Agreement or of any > duty or obligation of the Sponsor at law or in equity or otherwise. > > The Sponsor and any affiliate of the Sponsor may engage in or possess an > interest in other profit-seeking or business ventures of any nature or > description, independently or with others, whether or not such ventures > are competitive with the Trust and the doctrine of corporate > opportunity, or any analogous doctrine, shall not apply to the Sponsor. > If the Sponsor acquires knowledge of a potential transaction, agreement, > arrangement or other matter that may be an opportunity for the Trust, it > shall have no duty to communicate or offer such opportunity to the > Trust, and the Sponsor shall not be liable to the Trust or to the > Shareholders for breach of any fiduciary or other duty by reason of the > fact that the Sponsor pursues or acquires for, or directs such > opportunity to another Person or does not communicate such opportunity > or information to the Trust. Neither the Trust nor any Shareholders > shall have any rights or obligations by virtue of the Trust Agreement or > the trust relationship in or to such independent ventures or the income > or profits or losses derived therefrom, and the pursuit of such > ventures, even if competitive with the activities of the Trust, shall > not be deemed wrongful or improper. Except to the extent expressly > provided in the Trust Agreement, the Sponsor may engage or be interested > in any financial or other transaction with the Trust, the Shareholders > or any affiliate of the Trust or the Shareholders. --- 7616,7621c7971,7978 ----------------------- < The Trustee and any successor trustee must be (i) a bank, trust company, < corporation or national banking association organized and doing business < under the laws of the United States or any of its states, and authorized < under such laws to exercise corporate trust powers. The Trustee and any < successor trustee must have, at all times, an aggregate capital, < surplus, and undivided profits of at least $[ ]. > The Trustee and any successor trustee must satisfy the requirements of > Section 3807 of the DSTA and be authorized to exercise corporate trust > powers under the laws of the jurisdiction of its organization. The > Trustee and any successor trustee must have, at all times, an aggregate > capital, surplus, and undivided profits of at least $50,000,000 and > subject to supervision or examination by federal or state authorities. > In case at any time the Trustee shall cease to be eligible in accordance > with the above provisions, the Trustee shall resign promptly. --- 7625,7681c7982,7986 ----------------------- < The Trustee is a fiduciary under the Trust Agreement; provided, however, < that the fiduciary duties, responsibilities and liabilities of the < Trustee are limited by, and are only those specifically set forth in, < the Trust Agreement. For limitations on the fiduciary duties of the < Trustee, see the limitations on liability set forth below in “The < Trustee—Limitation on Trustee’s liability” and “The Trustee—Trustee’s < liability for agents.” < < Limitation on Trustee’s liability < < Under the Trust Agreement, the Sponsor has exclusive control of the < management of all aspects of the business of the Trust and the Trustee < has only nominal duties and liabilities to the Trust, as described in < the remainder of this paragraph. The Trustee is appointed to serve as < the trustee of the Trust in the State of Delaware for the sole purpose < of satisfying the requirement of Section 3807(a) of the DSTA that the < Trust have at least one (1) trustee with a principal place of business < in the State of Delaware. The duties of the Trustee will be limited to < (i) accepting legal process served on the Trust in the State of Delaware < and (ii) the execution of any certificates required to be filed with the < Delaware Secretary of State which the Delaware Trustee is required to < execute under the DSTAt. To the extent that, at law or in equity, the < Trustee has duties (including fiduciary duties) and liabilities relating < thereto to the Trust or Shareholders, such duties and liabilities will < be replaced by the duties and liabilities of the Trustee expressly set < forth in the Trust Agreement. The Trustee will have no obligation to < supervise, nor will it be liable for, the acts or omissions of the < Sponsor, Administrator, Trust Agency Service Provider, Custodian or any < other entity or person. < < Neither the Trustee, either in its capacity as trustee on in its < individual capacity, nor any director, officer or controlling person of < the Trustee is, or has any liability as, the issuer, director, officer < or controlling person of the issuer of the Shares. The Trustee’s < liability in connection with the issuance and sale of the Shares is < limited solely to the express obligations of the Trustee as set forth in < the Trust Agreement. < < The Trustee will not be liable for the disposition of bitcoin or moneys < which is made in accordance with the Trust Agreement or otherwise, or < for any action taken or omitted or for any loss or injury resulting from < its actions or its performance or lack of performance of its duties < under the Trust Agreement in the absence of gross negligence, willful < misconduct or bad faith on its part. In no event will the Trustee be < liable for acting in accordance with or conclusively relying upon any < instruction, notice, demand, certificate or document (i) from the < Sponsor, the Administrator, the Trust Agency Service Provider or the < Custodian or any entity acting on behalf of which the Trustee believes < is given as authorized by the Trust Agreement, The Trust Servicing < Agreement, the Trust Agency Service Provider Agreement or the Trust < Custody Agreement, respectively, or (ii) from or on behalf of any < Authorized Participant which the Trustee believes is given pursuant to, < or is authorized by, an Authorized Participant Agreement. In no event < will the Trustee be liable for acting or omitting to act in reliance < upon the advice of or information from legal counsel, accountants or any < other person believed by it in good faith to be competent to give such < advice or information. In addition, the Trustee will not be liable > To the extent that, at law or in equity, the Trustee has duties > (including fiduciary duties) and liabilities relating thereto to the > Trust or the Sponsor, such duties and liabilities will be replaced by > the duties and liabilities of the Trustee expressly set forth in the > Trust Agreement. --- 7685c7990 ----------------------- < 95 > 101 --- 7689,7712c7994 ----------------------- < for any delay in performance or for the non-performance of any of its < obligations under the Trust Agreement by reason of causes beyond its < reasonable control, including acts of God, war or terrorism. The Trustee < will not be liable for any indirect, consequential, punitive or special < damages, regardless of the form of action and whether or not any such < damages were foreseeable or contemplated, or for an amount in excess of < the value of the Trust’s assets. < < Trustee’s liability for agents < < The Trustee will not be answerable for the default of the Administrator, < the Trust Agency Service Provider or the Custodian (or any entity acting < on behalf of which Custodian or any successor custodian of the Trust) < engaged at the direction of the Sponsor. The Trustee may employ agents, < attorneys, accountants, auditors and other professionals and shall not < be answerable for the default or misconduct of any of them if they were < selected with reasonable care. The fees and expenses charged by any < successor custodians to the Trust, agents, attorneys, accountants, < auditors or other professionals, and expenses reimbursable to any < successor custodian under a custody agreement authorized by the Trust < Agreement, exclusive of fees for services to be performed by the < Trustee, will be expenses of the Sponsor or the Trust. < < Taxes > Limitation on Trustee’s liability --- 7714,7724c7996,8065 ----------------------- < The Trustee will not be personally liable for any taxes or other < governmental charges imposed upon bitcoin, moneys or other Trust assets < in its custody, upon the income therefrom or the gains or proceeds from < the sale thereof, or upon it as Trustee in respect of the Trust or the < Shares, which taxes or charges it may be required to pay under any < present or future law of the United States or of any other taxing < authority having jurisdiction. The Trustee will be reimbursed and < indemnified out of the Trust’s assets for all such taxes and charges and < for any expenses, including counsel’s fees, which the Trustee may < sustain or incur as a result of such taxes or charges, and the payment < of such amounts shall be secured by a lien on the Trust. > The Sponsor has exclusive control of the management of all aspects of > the business of the Trust and the Trustee has only nominal duties and > liabilities to the Trust, as described in the remainder of this > paragraph. The Trustee is appointed to serve as the trustee of the Trust > in the State of Delaware for the sole purpose of satisfying the > requirement of Section 3807(a) of the DSTA that the Trust have at least > one (1) trustee with a principal place of business in the State of > Delaware. The duties of the Trustee will be limited to (i) accepting > legal process served on the Trust in the State of Delaware and (ii) the > execution of any certificates required to be filed with the Delaware > Secretary of State which the Delaware Trustee is required to execute > under the DSTA. To the extent that, at law or in equity, the Trustee has > duties (including fiduciary duties) and liabilities relating thereto to > the Trust or the Sponsor, such duties and liabilities will be replaced > by the duties and liabilities of the Trustee expressly set forth in the > Trust Agreement. The Trustee will have no obligation to supervise, nor > will it be liable for, the acts or omissions of the Sponsor, > Administrator, Transfer Agent, Custodian or any other entity or person. > > The Trustee will not be liable for any action taken or omitted or for > any loss or injury resulting from its actions or its performance or lack > of performance of its duties under the Trust Agreement in the absence of > gross negligence, willful misconduct or bad faith on its part. The > Trustee shall not be liable with respect to any action omitted to be > taken in the case of documents received by the Trustee which do not > materially conform to the requirements of the Trust Agreement until such > corrected documents or satisfactory explanation is received by the > Trustee. In the absence of willful misconduct on the part of the > Trustee, the Trustee may conclusively rely, as to the truth of the > statements and the correctness of the opinions expressed therein, upon > any certificates or opinions furnished to the Trustee and conforming to > the requirements of the Trust Agreement. The Trustee shall not be liable > for an error of judgment made in good faith by an officer or employee of > the Trustee, unless it shall be proved that the Trustee was grossly > negligent in ascertaining the pertinent facts. Additionally, the Trustee > shall not be liable with respect to any action taken, suffered or > omitted to be taken by it in good faith in accordance with the direction > of the Sponsor or any other person with the right to direct the Trustee. > > Additionally, the Trustee shall be under no obligation to exercise any > of the duties or powers vested in it by the Trust Agreement; or to make > any investigation of matters arising under the Trust Agreement; or to > institute, conduct or defend any litigation; or (except as provided in > the Trust Agreement) to make any investigation into the facts or matters > stated in any document, unless requested in writing to do so by the > Sponsor. The Trustee shall not be liable for any action reasonably > taken, suffered or omitted by it in good faith and believed by it to be > authorized or within the discretion or rights or powers conferred upon > it by the Trust Agreement. In the absence of gross negligence, willful > misconduct or bad faith on the part of the Trustee, a certificate signed > by the Sponsor shall be full warrant for the Trustee to take or refrain > from taking action under the provisions of the Trust Agreement. In no > event shall the Trustee be liable for special, indirect, punitive or > consequential loss or damage of any kind whatsoever (including but not > limited to lost profits), even if the Trustee has been advised of the > likelihood of such loss or damage and regardless of the form of action. > In no event shall the Trustee be liable for any failure or delay in the > performance of its obligations under the Trust Agreement because of > circumstances beyond its control as described in the Trust Agreement, > including acts of God, war or terrorism, provided, however, that the > Trustee shall exercise commercially reasonable efforts to resume > performance of its obligations hereunder as soon as practicable under > the circumstances. In the absence of bad faith, the Trustee shall have > no liability for taking or refraining from action directed by the > Sponsor if it shall have reasonably determined or shall have been > advised by counsel, that such performance may involve the Trustee in > personal liability or is contrary to the terms of the Trust Agreement. > The Trustee shall have no obligation or duty to monitor the Trust’s > obligations and duties under the agreements to which the Trust or the > Trustee is a party or to ensure its compliance with the terms thereof. --- 7726c8067 ----------------------- < Indemnification of the Trustee > Trustee’s liability for agents --- 7728,7764c8069,8074 ----------------------- < The Trustee, its directors, employees and agents shall be indemnified < and defended by the Trust and the Sponsor, jointly and severally, and < held harmless against any and all losses, claims, damages, liabilities, < joint or several, expenses (including legal fees and expenses), < judgments, fines, penalties, interest, settlements or other amounts < arising from any and all threatened, pending or completed claims, < demands, actions, suits or proceedings, whether civil, criminal, < administrative or investigative, and whether formal or informal and < including appeals, in which any indemnitee may be involved, or is < threatened to be involved, as a party or otherwise, by reason of its < status as an indemnitee whether arising from acts or omissions to act < occurring before or after the date of the Trust Agreement, (including < the Trustee’s indemnification obligations under these agreements) or by < reason of the Trustee’s acceptance of the Trust Agreement incurred < without gross negligence, willful misconduct or bad faith on the part of < such indemnified party in connection with the performance of its < obligations under the Trust Agreement or any such other agreement or any < actions taken in accordance with the provisions of the Trust Agreement < or any such other agreement. Such indemnity shall include payment from < the Trust or the Sponsor of the costs and expenses incurred by such < indemnified party in defending itself against any claim or liability in < its capacity as Trustee. Any amounts payable to an indemnified party may < be payable in advance or shall be secured by a lien on the Trust. < < Protection for amounts due to Trustee < < If any fees or costs owed to the Trustee under the Trust Agreement are < not paid when due by the Sponsor, the Trustee may instruct the Custodian < to transfer out of the Trust Custody Account any Trust assets, and < thereafter cause the sale or other disposition of any such assets < (including bitcoin) and pay itself from the proceeds; provided, however, < that the Trustee may not charge to the Trust unpaid fees owed to the < Trustee by the Sponsor in excess of the fees payable to the Sponsor by < the Trust without regard to any waiver by the Sponsor of its fees. As < security for all obligations owed to the Trustee under the Trust < Agreement, the Trustee is granted a continuing security interest in, and < a lien on, the Trust’s assets and all Trust distributions. > The Trustee may employ with due care agents, nominees, or > attorneys-in-fact and shall not be responsible for any willful > misconduct or negligence on the part of such agents, nominees, or > attorneys-in-fact. The appointment of agents, nominees, or > attorneys-in-fact will not relieve the Trustee of any of its obligations > or liabilities under the Trust Agreement. --- 7768c8078 ----------------------- < 96 > 102 --- 7772c8082 ----------------------- < Holding of Trust property other than bitcoin > Indemnification of the Trustee --- 7774,7805c8084,8096 ----------------------- < The Trust will hold and record the ownership of the Trust’s assets < pursuant to the Trust Servicing Agreement and Custody Agreement in a < manner so that it will be owned for the benefit of Shareholders for the < purposes of, and subject to and limited by the terms and conditions set < forth in, the Trust Agreement. Other than issuance and sale of the < Shares, the Trust shall not issue or sell any certificates or other < obligations or, except as provided in the Trust Agreement, otherwise < incur, assume or guarantee any indebtedness for money borrowed or lend < any assets owned by the Trust. < < All moneys, if any, held by the Administrator under the Trust Servicing < Agreement or by the Trustee under the Trust Agreement shall be held by < it, without interest thereon or investment thereof, as a deposit for the < account of the Trust. Such monies held hereunder shall be deemed < segregated by maintaining such monies in an account or accounts for the < exclusive benefit of the Trust. The Trustee may also employ custodians < for Trust assets other than bitcoin, if any, including agents, < attorneys, accountants, auditors and other professionals and shall not < be answerable for the default or misconduct of any such custodians, < agents, attorneys, accountants, auditors and other professionals if such < custodians, agents, attorneys, accountants, auditors or other < professionals shall have been selected with reasonable care. Any Trust < assets other than bitcoin or cash, if any, will be held by the < Administrator either directly or through the Federal Reserve/Treasury < Book Entry System for United States and federal agency securities (“Book < Entry System”), DTC, or through any other clearing agency or similar < system (“Clearing Trust Agency”), if available. The Trustee will have no < responsibility or liability for the actions or omissions of the Book < Entry System, DTC or any Clearing Trust Agency. The Trustee shall not be < liable for ascertaining or acting upon any calls, conversions, exchange < offers, tenders, interest rate changes, or similar matters relating to < securities held at DTC. > The Trustee, its officers, directors, employees, affiliates and agents > shall be indemnified and defended by the Trust and held harmless against > any and all losses, damages, liabilities, claims, actions, suits, costs, > expenses, disbursements (including reasonable legal fees and expenses in > connection with enforcement of its rights to indemnity under the Trust > Agreement and including the reasonable fees and expenses of counsel), > taxes and penalties of any kind and nature whatsoever to the extent that > such expenses relate to the performance of the Trust Agreement, the > creation, operation or termination of the Trust, provided that the > expenses are incurred without willful misconduct, bad faith or gross > negligence of such indemnified party. Any amounts payable to an > indemnified party may be payable in advance or shall be secured by a > lien on the Trust. --- 7809,7844c8100,8124 ----------------------- < The Trustee may at any time resign as Trustee by written notice of its < election so to do, delivered to the Sponsor, and such resignation shall < take effect upon the appointment of a successor trustee and its < acceptance of such appointment. < < The Sponsor may remove the Trustee in its discretion by written notice < delivered to the Trustee at least ninety (90) days prior to such date. < < The Sponsor may also remove the Trustee at any time if the Trustee (i) < ceases to be a Qualified Bank (as defined below) or (ii) is in material < breach of its obligations under the Trust Agreement and fails to cure < such breach within thirty (30) days after receipt of written notice from < the Sponsor or Shareholders acting on behalf of at least twenty-five < (25) percent of the outstanding Shares specifying such default and < requiring the Trustee to cure such default. Under such circumstances, < the Sponsor, acting on behalf of Shareholders, may remove the Trustee by < written notice delivered to the Trustee and such removal shall take < effect upon the appointment of a successor trustee and its acceptance of < such appointment. < < A “Qualified Bank” means a bank, trust company, corporation or national < banking association organized and doing business under the laws of the < United States or any State of the United States that is authorized under < those laws to exercise corporate trust powers and that had, as of the < date of its most recent annual financial statements, an aggregate < capital, surplus and undivided profits of at least $[ ]. < < The Sponsor may also remove the Trustee at any time if the Trustee < merges into, consolidates with or is converted into another corporation < or entity in a transaction in which the Trustee is not the surviving < entity. The surviving entity from such a transaction shall be the < successor of the Trustee without the execution or filing of any document < or any further act; however, during the ninety (90) day period following < the effectiveness of such transaction, the Sponsor may, by written < notice to the Trustee, remove the Trustee and designate a successor < trustee. > The Trustee may at any time resign as Trustee upon thirty (30) days’ > prior written notice of its election so to do, delivered to the Sponsor, > and such resignation shall take effect upon the appointment of a > successor trustee and its acceptance of such appointment. If no > successor has been appointed by the Sponsor within such thirty (30) day > period, the Trustee may, at the expense of the Trust, petition a court > to appoint a successor trustee. > > If at any time the Trustee shall cease to be eligible because it ceases > to satisfy the requirements under the Trust Agreement, or if at any time > the Trustee shall become incapable of acting, or shall be adjudged > bankrupt or insolvent, or a receiver of the Trustee or of its property > shall be appointed, or any public officer shall take charge or control > of the Trustee or of its property or affairs for the purpose of > rehabilitation, conservation or liquidation, then the Sponsor may remove > the Trustee and appoint a successor trustee by written instrument which > instrument shall be delivered to the Trustee and the successor trustee. > > The declination to serve, resignation, removal of the Trustee, or all of > them, shall not operate to annul the Trust or to revoke any existing > agency created pursuant to the terms of the Trust Agreement. > > The Sponsor may remove the Trustee and appoint a successor trustee in > its discretion by written notice delivered to the Trustee at least > thirty (30) days prior to such date. --- 7845a8126 ----------------------- > Amendments to the Trust Agreement --- 7846a8128,8157 ----------------------- > The Sponsor may, without the approval of the Shareholders, make such > amendments to the Trust Agreement which (i) are necessary to add to the > representations, duties or obligations of the Sponsor or surrender any > right or power granted to the Sponsor herein, for the benefit of the > Shareholders; (ii) are necessary to cure any ambiguity, to correct or > supplement any provision in the Trust Agreement which may be > inconsistent with any other provision in the Trust Agreement or in this > registration statement, or to make any other provisions with respect to > matters or questions arising under the Trust Agreement or this > registration statement which will not be inconsistent with the > provisions of the Trust Agreement or this registration statement; or > (iii) the Sponsor deems advisable, provided, however, that no amendment > shall be adopted unless the adoption thereof (a) is not adverse to the > interests of the Shareholders, (b) is consistent with the powers under > the Trust Agreement, (c) does not affect the allocation of profits and > losses among the Shareholders or between the Shareholders and the > Sponsor, and (d) does not adversely affect the limitations on liability > of the Shareholders or the status of the Trust as a grantor trust for > U.S. federal income tax purposes. Amendments to the Trust Agreement > which adversely affect (i) the rights of Shareholders, (ii) the > dissolution of the Trust, and (iii) any material changes in the Trust’s > basic investment policies or structure shall occur only upon the written > approval or affirmative vote of Shareholders holding Shares equal to at > least a majority (over 50%) of the Shares. > > Notwithstanding the above, the Sponsor may, without the approval of the > Shareholders, amend the provisions of the Trust Agreement if the Trust > is advised at any time by the Trust’s accountants or legal counsel that > the amendments made are necessary to ensure that the Trust will qualify > as a grantor trust for U.S. federal income tax purposes. --- 7848d8158 ----------------------- < 97 --- 7850d8159 ----------------------- < Table of Contents --- 7852,7873c8161 ----------------------- < If the Trustee resigns or is removed, the Sponsor, acting on behalf < of—Shareholders, shall use its reasonable efforts to appoint a successor < trustee, which shall be a Qualified Bank. Every successor trustee shall < execute and deliver to its predecessor and to the Sponsor, acting on < behalf of Shareholders, an instrument in writing accepting its < appointment hereunder, and thereupon such successor trustee, without any < further act or deed, shall become fully vested with all the rights, < powers, duties and obligations of its predecessor; but such predecessor, < nevertheless, upon payment of all sums due it and on the written request < of the Sponsor, acting on behalf of Shareholders, shall execute and < deliver an instrument transferring to such successor all rights and < powers of such predecessor hereunder, shall duly assign, transfer and < deliver all right, title and interest in the Trust’s assets to such < successor, and shall deliver to such successor a list of Shareholders of < all outstanding Shares. The Sponsor or any such successor trustee shall < promptly mail notice of the appointment of such successor trustee to < Shareholders. < < If the Trustee resigns and no successor trustee is appointed within < sixty (60) days after the date the Trustee issues its notice of < resignation, the Trustee will terminate and liquidate the Trust and < distribute its remaining assets. > 103 --- 7875c8163 ----------------------- < Amendments to the Trust Agreement > Table of Contents --- 7877,7895c8165,8195 ----------------------- < The Sponsor may amend any provisions of the Trust Agreement without the < consent of any Shareholder. Any amendment that imposes or increases any < fees or charges (other than taxes and other governmental charges, < registration fees or other such expenses), or that otherwise prejudices < any substantial existing right of Shareholders will not become effective < as to outstanding Shares until thirty (30) days after notice of such < amendment is given to Shareholders. Amendments to allow redemption for < quantities of bitcoin smaller or larger than a Basket or to allow for < the sale of bitcoin to pay cash proceeds upon redemption shall not < require notice pursuant to the preceding sentence. Every Shareholder, at < the time any amendment becomes so effective, shall be deemed, by < continuing to hold any Shares or an interest therein, to consent and < agree to such amendment and to be bound by the Trust Agreement as < amended thereby. In no event shall any amendment impair the right of the < Shareholder to surrender Shares and receive delivery of the amount of < Trust assets (paid in cash) represented by those Shares (less fees in < connection with the surrender of Shares and any applicable taxes or < other governmental charges), except in order to comply with mandatory < provisions of applicable law. > No amendment affecting the rights or duties of the Trustee shall be > binding upon or effective against the Trustee unless consented to by the > Trustee in writing. No amendment shall be made to the Trust Agreement > without the consent of the Trustee if it reasonably believes that such > amendment adversely affects any of the rights, duties or liabilities of > the Trustee. The Trustee shall be under no obligation to execute any > amendment to the Trust Agreement or to any agreement to which the Trust > is a party until it has received an instruction letter from the Sponsor, > in form and substance reasonably satisfactory to the Trustee (i) > directing the Trustee to execute such amendment, (ii) representing and > warranting to the Trustee that such execution is authorized and > permitted by the terms of the Trust Agreement and (if applicable) such > other agreement to which the Trust is a party and does not conflict with > or violate any other agreement to which the Trust is a party, and (iii) > confirming that such execution and acts related thereto are covered by > the indemnity provisions of the Trust Agreement in favor of the Trustee > and do not adversely affect the Trustee. > > Trust Limitations > > Notwithstanding anything contained in the Trust Agreement, the Trust and > the Sponsor shall not, and any other Person acting for or on behalf of > the Trust shall cause the Trust not to: (i) acquire any asset other than > bitcoin; (ii) sell or otherwise dispose of Trust assets other than in > order to pay expenses of the Trust, to facilitate the termination of the > Trust or to facilitate a redemption; (iii) have any power to or consent > to any action that would vary the investment (within the meaning of > Treasury Regulation section 301.7701-4(c)) of the Trust or the > Shareholders or (iv) take any action or fail to take any action that > would cause the Trust to fail or cease to qualify as a grantor trust for > U.S. federal income tax purposes. --- 7899,7901c8199,8201 ----------------------- < The Administrator will set a date on which the Trust shall terminate and < mail notice of the termination to Shareholders at least thirty (30) days < prior to the date set for termination if any of the following occurs: > The Trust may be dissolved at the written direction of the Sponsor. At > its discretion, the Sponsor may elect to terminate the Trust in certain > circumstances, which include, without limitation: --- 7906c8206 ----------------------- < the Trust is notified that the Shares are delisted from BATS and are not > the Trust is notified that the Shares are delisted from Bats and are not --- 7913,7914c8213,8214 ----------------------- < Shareholders acting in respect of at least seventy (75) percent of the < outstanding Shares notify the Administrator that they elect to terminate > Shareholders acting in respect of at least seventy-five (75) percent of > the outstanding Shares notify the Sponsor that they elect to terminate --- 7920c8220 ----------------------- < sixty (60) days have elapsed since the Trustee notified the Sponsor of > thirty (30) days have elapsed since the Trustee notified the Sponsor of --- 7928,7930c8228,8229 ----------------------- < Investment Company Act, and the Administrator receives notice from the < Sponsor that, because of such determination, termination of the Trust is < advisable; > Investment Company Act, and the Sponsor determines that, because of such > determination, termination of the Trust is advisable; --- 7936,7937c8235,8236 ----------------------- < and the Administrator receives notice from the Sponsor that, because of < such determination, termination of the Trust is advisable; > and the Sponsor determines that, because of such determination, > termination of the Trust is advisable; --- 7940,7943c8239 ----------------------- < < 98 < < Table of Contents • > • --- 7948c8244 ----------------------- < be an MT or equivalent designation under the laws of any state in which > be a MT (or equivalent designation) under the laws of any state in which --- 7958,7959c8254 ----------------------- < grantor trust for U.S. federal income tax purposes, and the < Administrator receives notice from the Sponsor that the Sponsor > grantor trust for U.S. federal income tax purposes, and the Sponsor --- 7970c8265,8268 ----------------------- < • > > 104 > > Table of Contents • --- 7973c8271 ----------------------- < price of the Shares, was less than $[ ] million (as adjusted for > price of the Shares, was less than $10 million (as adjusted for --- 7975,7979c8273,8276 ----------------------- < after the first anniversary of the Trust’s formation and the < Administrator receives, within six (6) months after the last trading < date on which the aggregate market capitalization of the Trust was less < than $[ ] million, notice from the Sponsor of its decision to terminate < the Trust; > after the first anniversary of the Trust’s formation and the Sponsor > determines, within six (6) months after the last trading date on which > the aggregate market capitalization of the Trust was less than $10 > million, to terminate the Trust; --- 7991c8288 ----------------------- < the Administrator elects to terminate the Trust after the Sponsor is > the Trustee elects to terminate the Trust after the Sponsor is --- 8009,8038c8306,8356 ----------------------- < In respect of termination events that rely on Sponsor determinations to < terminate the Trust (i.e., if the CFTC determines that the Trust is a < commodity pool under the CEA; the Trust is determined to be an MT under < the regulations promulgated by FinCEN; the Trust fails to qualify for < treatment, or ceases to be treated, as a grantor trust for U.S. federal < income tax purposes; or, following a resignation by a trustee or < custodian, the Sponsor determines that no replacement is acceptable to < it), the Sponsor may make any such determination in its sole discretion. < The Sponsor may consider, without limitation, the profitability to the < Sponsor and other service providers of the operation of the Trust, any < obstacles or costs relating to the operation or regulatory compliance of < the Trust relating to the determination’s triggering event, and the < ability to market the Trust to investors. To the extent that the Sponsor < determines to continue operation of the Trust following a < determination’s triggering event, the Trust will be required to alter < its operations to comply with the triggering event. In the instance of a < determination that the Trust is a commodity pool, the Trust and the < Sponsor would have to comply with regulations and disclosure and < reporting requirements applicable to commodity pools and commodity pool < operators or commodity trading advisers, respectively. In the event that < the Trust is determined to be an MT, the Trust and the Sponsor will have < to comply with applicable federal and state registration and regulatory < requirements for MTs and/or MSBs. In the event that the Trust ceases to < qualify for treatment as a grantor trust for U.S. federal tax purposes, < the Trust will be required to alter its disclosure and tax reporting < procedures and may no longer be able to operate or to rely on < pass-through tax treatment. In each such case and in the case of the < Sponsor’s determination as to whether a potential successor trustee or < custodian is acceptable to it, the Sponsor shall not be liable to anyone < for its determination of whether to continue or to terminate the Trust. > The Sponsor may make any such determination in its sole discretion. The > Sponsor may direct the Trustee to utilize the Custodian or another > party, including an affiliate of the Trustee, Custodian or > Administrator, to liquidate the assets of the Trust in the event of the > termination of the Trust. An Authorized Participant may, but is not > required to, participate in the liquidation of the Trust. If the Trustee > or a designated receiver decides to liquidate the assets of the Trust by > participating in the two-sided auction which occurs daily at 4:00 p.m. > Eastern Time on the Gemini Exchange, the Trust, the Sponsor, the > Custodian, and any other affiliated entity will interact with the > auction with the same standing and access as any other customer of the > Custodian and without any special priority, privilege, or access to > information. > > In determining to terminate the Trust, the Sponsor may consider, without > limitation, the profitability to the Sponsor and other service providers > of the operation of the Trust, any obstacles or costs relating to the > operation or regulatory compliance of the Trust relating to the > determination’s triggering event, and the ability to market the Trust to > investors. To the extent that the Sponsor determines to continue > operation of the Trust following a determination’s triggering event, the > Trust will be required to alter its operations to comply with the > triggering event. In the instance of a determination that the Trust is a > commodity pool, the Trust and the Sponsor would have to comply with > regulations and disclosure and reporting requirements applicable to > commodity pools and commodity pool operators or commodity trading > advisers, respectively. In the event that the Trust is determined to be > an MT, the Trust and the Sponsor will have to comply with applicable > federal and state registration and regulatory requirements for MTs > and/or MSBs. In the event that the Trust ceases to qualify for treatment > as a grantor trust for U.S. federal tax purposes, the Trust will be > required to alter its disclosure and tax reporting procedures and may no > longer be able to operate or to rely on pass-through tax treatment. In > each such case and in the case of the Sponsor’s determination as to > whether a potential successor trustee or custodian is acceptable to it, > the Sponsor shall not be liable to anyone for its determination of > whether to continue or to terminate the Trust. > > On and after the date of termination of the Trust and upon completion of > the winding up of the Trust in accordance with the DSTA, Shareholders > will be entitled to the distribution of the amount of Trust assets (paid > in cash) represented by those Shares, upon (i) surrender of Shares then > held, (ii) payment of the expenses of liquidation and termination and > any fee to the Transfer Agent in connection with the surrender of Shares > and (iii) payment of any applicable taxes or other governmental charges. > The Trust shall not accept any delivery of bitcoin after the date of > termination. If any Shares remain outstanding after the date of > termination, the Transfer Agent thereafter shall (i) discontinue the > registration of transfers of Shares and (ii) shall not give any further > notices or perform any further acts under the Transfer Agency and > Services Agreement. The Sponsor will (or will --- 8042c8360 ----------------------- < 99 > 105 --- 8046,8057d8363 ----------------------- < On and after the date of termination of the Trust, Shareholders will be < entitled to the distribution of the amount of Trust assets (paid in < cash) represented by those Shares, upon (i) surrender of Shares then < held, (ii) payment of any fee to the Trust Agency Service Provider in < connection with the surrender of Shares and (iii) payment of any < applicable taxes or other governmental charges. The Trust shall not < accept any delivery of bitcoin after the date of termination. If any < Shares remain outstanding after the date of termination, the Trust < Agency Service Provider thereafter shall (i) discontinue the < registration of transfers of Shares and (ii) shall not give any further < notices or perform any further acts under the Trust Agreement and the < Trust Agency Service Provider Agreement. The Administrator will (or will --- 8059,8103c8365,8371 ----------------------- < necessary, as directed by the Sponsor, to meet those expenses and will < (or will cause to) continue to distribute Trust assets (paid in cash), < as well as the net proceeds from the sale of any other property, to < Shareholders in exchange for Shares surrendered (less any fees due to < the Trust Agency Service Provider for the surrender of Shares, any < expenses for the account of Shareholders in accordance with the terms < and conditions of the Trust Agreement, and any applicable taxes or other < governmental charges). < < At any time after the expiration of [ ] days following the date of the < Trust’s termination, the Administrator may sell the Trust assets then < held under the Trust Agreement and may thereafter hold the net proceeds < of any such sale, together with any other cash then held by the < Administrator under the Trust Agreement, without liability for interest, < for the pro rata benefit of Shareholders that have not theretofore < surrendered their Shares. The Administrator will cause bitcoin to be < sold through dealers or by the Administrator directly on a Bitcoin < Exchange (which may include the Gemini Exchange), as directed by the < Sponsor or, in the absence of such direction, with dealers or on Bitcoin < Exchanges through which the Administrator may reasonably expect to < obtain a favorable price and good execution of orders. The Administrator < may consider the market price (relative to the value of a bitcoin as < represented by the Gemini Exchange Spot Price) expected to be obtained < by such dealer or through such Bitcoin Exchange and the ability of the < dealer or Bitcoin Exchange to conduct the sale of bitcoin with a minimal < impact on the market price of bitcoin. The Administrator may offset the < importance of one factor against the remaining factors. The Custodian < may be the purchaser of such bitcoin only if the sale transaction is < made at the next Gemini Exchange Spot Price or such other publicly < available price that the Sponsor deems fair, in each case as set < following the sale order. Neither the Administrator nor the Sponsor is < liable for depreciation or loss incurred by reason of any sale. See < “United States Federal Income Tax Consequences—Taxation of U.S. < Shareholders” for information regarding the tax treatment of bitcoin < sales. After making such sale, the Administrator shall be discharged < from all obligations under the Trust Servicing Agreement, except to < account for such net proceeds and other cash (after deducting, in each < case, any fees, expenses, taxes or other governmental charges payable by < the Trust, any fee to the Administrator for the surrender of the Shares < and any expenses for the account of Shareholders in accordance with the < terms and conditions of the Trust Agreement, and any applicable taxes or < other governmental charges). Upon the termination of the Trust, the < Sponsor shall be discharged from all obligations under the Trust < Agreement except for certain obligations that survive termination of the < Trust Agreement. > necessary to meet those expenses and will (or will cause to) continue to > distribute Trust assets (paid in cash), as well as the net proceeds from > the sale of any other property, to Shareholders in exchange for Shares > surrendered (less any fees due to the Transfer Agent for the surrender > of Shares, any expenses for the account of Shareholders in accordance > with the terms and conditions of the Trust Agreement, and any applicable > taxes or other governmental charges). --- 8105c8373 ----------------------- < Governing law; consent to New York jurisdiction > Governing law; consent to Delaware jurisdiction --- 8110,8118c8378,8440 ----------------------- < State of Delaware. The Trust Servicing Agreement, Trust Agency Service < Provider Agreement, Trust Custody Agreement and Authorized Participant < Agreements are governed by the laws of the State of New York. The < Sponsor, the Trustee and DTC and, by accepting the Shares, each DTC < Participant and each Shareholder, consents to the jurisdiction of the < courts of the State of New York and any federal courts located in the < borough of Manhattan in New York City. Such consent is not required for < any person to assert a claim of New York jurisdiction over the Sponsor < or the Trustee. > State of Delaware. The Trustee, each Shareholder and each Person > beneficially owning an interest in a Share of the Trust irrevocably (i) > consents to the jurisdiction of the Court of Chancery of the State of > Delaware or, if such court does not have subject matter jurisdiction > thereof, any other court in the State of Delaware with subject matter > jurisdiction; (ii) submits to the exclusive jurisdiction of such courts > in connection with any such claim, suit, action or proceeding; (iii) > agrees not to, and waives any right to, assert in any such claim, suit, > action or proceeding that the jurisdiction lacks personal jurisdiction > or is an inconvenient forum or improper venue; (iv) consents to process > being served in any such claim, suit, action or proceeding by mailing, > certified mail, return receipt requested, a copy thereof to such party > at the address in effect for notices hereunder, and agrees that such > service shall constitute good and sufficient service of process and > notice thereof; and (v) waives any and all right to trial by jury in any > such claim, suit, action or proceeding. > > The validity and construction of the Trust Agreement shall be governed > by the laws of the State of Delaware, and the rights of all parties and > the effect of every provision of the Trust Agreement shall be subject to > and construed according to the laws of the State of Delaware without > regard to the conflicts of law provisions thereof; provided, however, > that the provisions of the Trust Agreement shall control over any > contrary or limiting statutory or common law of the State of Delaware > (other than the DSTA) and that, to the maximum extent permitted by > applicable law, there shall not be applicable to the Trust, the Sponsor, > the Trustee, the Shareholders or the Trust Agreement any provision of > the laws (statutory or common) of the State of Delaware (other than the > DSTA) pertaining to trusts which relate to or regulate in a manner > inconsistent with the terms of the Trust Agreement, including, without > limitation, the establishment of fiduciary or other standards or > responsibilities or limitations on the acts or powers of trustees or > beneficial owners that are inconsistent with the limitations on > liability or authorities and powers of the Trustee or the Shareholders > set forth or referenced in the Trust Agreement. > > Derivative and General Direct Actions > > Under the Trust Agreement, no Person who is not a Shareholder shall be > entitled to bring any derivative action, suit or other proceeding on > behalf of the Trust. Additionally, no Shareholder may maintain a > derivative action on behalf of the Trust unless holders of at least ten > percent (10%) of the outstanding Shares join in the bringing of such > action. In addition to the requirements set forth in Section 3816 of the > DSTA, a Shareholder may bring a derivative action on behalf of the Trust > only if the Shareholder or Shareholders make a pre-suit demand upon the > Sponsor to bring the subject action (unless an effort to cause the > Sponsor to bring such an action is not likely to succeed). A demand on > the Sponsor shall only be deemed not likely to succeed and therefore > excused if the Sponsor has a personal financial interest in the > transaction at issue and the fact that the Sponsor receives remuneration > for his service as the Sponsor will not disqualify or deem the Sponsor > to have a personal financial interest. Unless a demand is not required, > the Sponsor must be afforded a reasonable amount of time to consider and > investigate such Shareholder request. > > The Trust Agreement, to the fullest extent permitted by Delaware law, > eliminates the Shareholders’ right to bring a General Direct Action > against the Trust, the Sponsor and/or its Trustee, except for a General > Direct Action to enforce (i) an individual Shareholder right to vote or > (ii) an individual Shareholder’s rights under Sections 3805(e) or 3819 > of the DSTA. To the extent such right cannot be eliminated to this > extent as a --- 8122c8444 ----------------------- < 100 > 106 --- 8126c8448,8485 ----------------------- < DESCRIPTION OF THE TRUST SERVICING AGREEMENT > matter of Delaware law, then the Trust Agreement provides that no > Shareholder may maintain a General Direct Action unless holders of at > least ten percent (10%) of the outstanding Shares join in the bringing > of such action. In addition, a Shareholder may bring a General Direct > Action only if the Shareholder or Shareholders has obtained > authorization from the Sponsor to bring such General Direct Action > (unless an effort to cause the Sponsor to authorize such an action is > not likely to succeed). A demand on the Sponsor shall only be deemed not > likely to succeed and therefore excused if the Sponsor has a personal > financial interest in the transaction at issue and the fact that the > Sponsor receives remuneration for his service as the Sponsor will not > disqualify or deem the Sponsor to have a personal financial interest. > Unless a demand is not required, the Sponsor must be afforded a > reasonable amount of time to consider and investigate such Shareholder > request. > > Hard Fork > > Subject to the terms of the Trust Custody Agreement and this > Registration Statement, in the event of an upcoming modification to the > Bitcoin Network that could potentially result in a hard fork with two > separate and incompatible Bitcoin Networks, the Custodian, in > consultation with the Sponsor, will elect to support the Bitcoin Network > that has the greatest cumulative computational difficulty for the > forty-eight (48) hour period following a given hard fork, in order to > engage in bitcoin transactions and the valuation of bitcoin on behalf of > the Trust. Under the terms of the Trust Custody Agreement, the Trust may > be required to indemnify the Custodian for any losses arising in > connection with its determination to elect the Bitcoin Network with the > greatest computational difficulty in the event of a hard fork. > > > > 107 > > Table of Contents > > DESCRIPTION OF THE ADMINISTRATION AGREEMENT --- 8129,8131c8488,8490 ----------------------- < Trust, and the Trust Servicing Agreement sets forth the rights and < duties of the Administrator on behalf of the Trust. The following is a < description of the material terms of the Trust Servicing Agreement. The > Trust, and the Administration Agreement sets forth the rights and duties > of the Administrator with respect to the Trust. The following is a > description of the material terms of the Administration Agreement. The --- 8137c8496 ----------------------- < Administrator’s role concerning the Trust, see “The Administrator—The > Administrator’s role concerning the Trust, see “The Administrator —The --- 8140,8153d8498 ----------------------- < Qualifications of the Administrator < < The Administrator and any successor administrator must be (i) a bank, < trust company, corporation or national banking association organized and < doing business under the laws of the United States or any of its states, < and authorized under such laws to exercise corporate trust powers, (ii) < a participant in DTC or such other securities depository as shall then < be acting with respect to the Shares and (iii), unless counsel to the < Sponsor, the appointment of which is acceptable to the Administrator, < determines that such requirement is not necessary for the exemption < under section 408(m)(3)(B) of the U.S. Internal Revenue Code of 1986, as < amended (the “Code”), to apply to a banking institution as defined in < the Code. < --- 8156,8162c8501,8506 ----------------------- < The Trust Servicing Agreement will be in effect for an initial term of [ < ] years from the commencement of the Trust’s operation, the first date < on which the Administrator is entitled to receive fees under the Trust < Servicing Agreement. The Trust Servicing Agreement automatically renews < for additional one (1) year periods thereafter, unless terminated by the < Trust or the Administrator on at least ninety (90) days’ prior written < notice. > The Administration Agreement will be in effect for an initial term > ending December 31, 2018. The Administration Agreement automatically > renews for additional one (1) year periods thereafter, unless terminated > by the Trust or the Administrator on delivery of written notice at least > ninety (90) days’ prior to the expiration of the initial term or any > subsequent one-year term. --- 8166,8177c8510,8517 ----------------------- < The Sponsor may terminate the Trust Servicing Agreement without cause < prior to the end of its initial term by giving at least ninety (90) days < prior written notice. The Sponsor or the Administrator may terminate the < Trust Servicing Agreement in whole or in part if the Trust Custody < Agreement is terminated. Either the Sponsor or the Administrator may < terminate the Trust Servicing Agreement for cause for the reasons set < forth in the Trust Servicing Agreement, such as either party’s < bankruptcy or committing a material breach of the Trust Servicing < Agreement. The Administrator also can terminate the Trust Servicing < Agreement if the Sponsor is more than ninety (90) days delinquent in < payments of monthly billings in connection with the Trust Servicing < Agreement. > The Trust or the Administrator may terminate the Administration > Agreement without cause by delivering written notice no later than > ninety (90) days prior to the expiration of the initial term of the > Administration Agreement or any subsequent one-year term. Either the > Trust or the Administrator may terminate the Administration Agreement > for cause for the reasons set forth in the Administration Agreement, > such as either party’s bankruptcy or committing a material breach of the > Administration Agreement. --- 8181,8183c8521,8523 ----------------------- < The Sponsor will pay the Administrator for its services under the Trust < Servicing Agreement, as well as the Administrator’s reimbursable < expenses in connection with its services under the Trust Servicing > The Sponsor will pay the Administrator for its services under the > Administration Agreement, as well as the Administrator’s reimbursable > expenses in connection with its services under the Administration --- 8186c8526 ----------------------- < Limitation on Administrator’s liability > Standard of Care; Limitation on Administrator’s liability --- 8188,8236c8528,8536 ----------------------- < The Administrator will not be liable for the disposition of bitcoin or < moneys, or in respect of any valuation or calculation which it makes < under the Trust Servicing Agreement or otherwise, or for any action < taken or omitted or for any loss or injury resulting from its actions or < its performance or lack of performance of its duties under the Trust < Servicing Agreement in the absence of gross negligence, willful < misconduct or bad faith on its part. In no event will the Administrator < be liable for acting in accordance with or conclusively relying upon any < instruction, notice, demand, certificate or document (i) from the < Sponsor or the Custodian or any entity acting on behalf of either which < the Administrator believes is given as authorized by the Trust Agreement < and under the Trust Servicing Agreement or the Trust Custody Agreement, < respectively; or (ii) from or on behalf of any Authorized Participant < which the Administrator believes is given pursuant to or is authorized < by an Authorized Participant Agreement (provided that the Administrator < has complied with the verification procedures specified in the < Authorized Participant Agreement). In no event will the Administrator be < liable for < < < < 101 < < Table of Contents < < acting or omitting to act in reliance upon the advice of or information < from legal counsel, accountants or any other person believed by it in < good faith to be competent to give such advice or information. In < addition, the Administrator will not be liable for any delay in < performance or for the non-performance of any of its obligations under < the Trust Agreement and Trust Servicing Agreement by reason of causes < beyond its reasonable control, including acts of God, war or terrorism. < The Administrator will not be liable for any indirect, consequential, < punitive or special damages, regardless of the form of action and < whether or not any such damages were foreseeable or contemplated, or for < an amount in excess of the value of the Trust’s assets. < < The Administrator will not be not be answerable for the default of the < Trustee or the Custodian or any entity acting on behalf of which < Custodian or any successor custodian of the Trust engaged at the < direction of the Sponsor. The Administrator may employ agents, < attorneys, accountants, auditors and other professionals and shall not < be answerable for the default or misconduct of any of them if they were < selected with reasonable care. The fees and expenses charged by any < successor custodians to the Trust, agents, attorneys, accountants, < auditors or other professionals, and expenses reimbursable to any < successor custodian under a custody agreement authorized by the Trust < Agreement, exclusive of fees for services to be performed by the < Administrator, will be expenses of the Sponsor or the Trust. > The Administrator is required under the Administration Agreement at all > times to act in good faith and without negligence and has agreed to > exercise the reasonable level of skill, care and diligence expected of a > professional provider of transfer agency services in carrying out all of > its duties and obligations under the Administration Agreement. The > Administrator assumes no responsibility and is not be liable for loss or > damage due to errors, including encoding and payment processing errors, > unless said errors are caused solely by the Administrator’s negligence, > bad faith, or willful misconduct or that of its employees or agents. --- 8240,8259c8540,8545 ----------------------- < The Administrator may delegate to a reputable agent any of its functions < under the Trust Servicing Agreement, although it will remain responsible < under the Trust Servicing Agreement for its service thereunder. To the < extent reasonably practicable, the Administrator will consult with the < Sponsor before delegating a material portion of such services. < < Taxes < < The Administrator will not be personally liable for any taxes or other < governmental charges imposed upon the Trust’s assets, including bitcoin < held in the Trust Custody Account, moneys or other Trust assets, or on < the income therefrom or the gains or proceeds from the sale thereof, or < upon it as Administrator in respect of the Trust or the Shares, which < taxes or charges it may be required to pay under any present or future < law of the United States of America or of any other taxing authority < having jurisdiction. The Administrator will be reimbursed and < indemnified out of the Trust’s assets for all such taxes and charges and < for any expenses, including counsel’s fees, which the Administrator may < sustain or incur with respect to such taxes or charges, and the payment < of such amounts shall be secured by a lien on the Trust. > The Administrator may employ or contract with other persons to assist it > in performing its duties under the Administration Agreement, although > the Administrator will remain responsible for the compensation of such > other persons and will be as fully responsible to the Trust for the acts > and omissions of any such persons as it is for its own acts and > omissions. --- 8263,8286c8549,8556 ----------------------- < The Administrator, its directors, employees and agents shall be < indemnified from the Trust and held harmless against any loss, liability < or expense (including, but not limited to, the reasonable fees and < expenses of counsel) arising out of or in connection with the < performance of its obligations under the Trust Agreement and the Trust < Servicing Agreement and under each other agreement entered into by the < Administrator in furtherance of the administration of the Trust < (including, without limiting the scope of the foregoing, any Authorized < Participant Agreement) or for any other loss incurred without gross < negligence, willful misconduct or bad faith in connection with the < performance of its obligations under or any actions taken in accordance < with the provisions of the Trust Agreement and Trust Servicing Agreement < or any such other agreement. Such indemnity shall include payment from < the Trust of the costs and expenses incurred by such indemnified party < in defending itself against any claim or liability in its capacity as < Administrator. Any amounts payable to an indemnified party may be < payable in advance or shall be secured by a lien on the Trust. < < Protection for amounts due to Administrator < < As security for all obligations of the Trust, including those owed to < the Administrator under the Trust Agreement and Trust Servicing < Agreement, the Administrator is granted a continuing security interest < in, and a lien on, the Trust’s assets and all Trust distributions. > The Administrator, its directors, officers, employees and agents shall > be indemnified from the Trust and held harmless against any loss, > liability or expense (including, but not limited to, the reasonable fees > and expenses of counsel) arising out of or in connection with the > performance of its obligations under the Trust Agreement and the > Administration Agreement, provided that such losses were not incurred as > a result of actions or omissions of the Administrator, its officers or > employees in cases of their own negligence or willful misconduct. --- 8290c8560 ----------------------- < 102 > 108 --- 8297,8357c8567,8581 ----------------------- < The Administrator may at any time resign as Administrator by written < notice of its election to do so, if such resignation is delivered to the < Sponsor, and such resignation shall take effect upon the appointment of < a successor Administrator and its acceptance of such appointment. < < The Sponsor may remove the Administrator in its discretion by written < notice delivered to the Administrator at least ninety (90) days prior to < the date of removal. < < The Sponsor may also immediately remove the Administrator at any time if < the Administrator (i) ceases to be a Qualified Bank, (ii) is in material < breach of its obligations under the Trust Agreement and Trust Servicing < Agreement and fails to cure such breach within thirty (30) days after < receipt of written notice from the Sponsor or Shareholders acting on < behalf of at least twenty-five (25)% of the outstanding Shares < specifying such default and requiring the Administrator to cure such < default, (iii) fails to consent to the implementation of an amendment to < the Trust’s initial Internal Control Over Financial Reporting deemed < necessary by the Sponsor and, after consultations with the Sponsor, the < Sponsor and the Administrator fail to resolve their differences < regarding such proposed amendment or (iv) fails to consent to the < implementation of future regulatory requirements imposed on Bitcoin or < the Trust by US or other governmental or quasi-governmental regulators. < Under such circumstances, the Sponsor, acting on behalf of Shareholders, < may remove the Administrator by written notice delivered to the < Administrator and such removal shall take effect upon the appointment of < a successor Administrator and its acceptance of such appointment. < < The Sponsor may also immediately remove the Administrator at any time if < the Administrator merges into, consolidates with or is converted into < another corporation or entity in a transaction in which the < Administrator is not the surviving entity. The surviving entity from < such a transaction shall be the successor of the Administrator without < the execution or filing of any document or any further act; however, < during the ninety (90)-day period following the effectiveness of such < transaction, the Sponsor may, by written notice to the Administrator, < remove the Administrator and designate a successor administrator. < < If the Administrator resigns or is removed, the Sponsor, acting on < behalf of Shareholders, shall use its reasonable efforts to appoint a < successor administrator, which shall be a Qualified Bank. Every < successor administrator shall execute and deliver to its predecessor and < to the Sponsor, acting on behalf of Shareholders, an instrument in < writing accepting its appointment hereunder, and thereupon such < successor administrator, without any further act or deed, shall become < fully vested with all the rights, powers, duties and obligations of its < predecessor under the Trust Agreement and Trust Servicing Agreement; but < such predecessor, nevertheless, upon payment of all sums due it and on < the written request of the Sponsor, acting on behalf of Shareholders, < shall execute and deliver an instrument transferring to such successor < all rights and powers of such predecessor hereunder, shall duly assign, < transfer and deliver all right, title and interest in the Trust’s assets < to such successor, and shall deliver to such successor a list of < Shareholders of all outstanding Shares. The Sponsor or any such < successor administrator shall promptly mail notice of the appointment of < such successor administrator to Shareholders. < < If the Administrator resigns and no successor administrator is appointed < within ninety (90) days after the date the Administrator issues its < notice of resignation, the Sponsor will act to terminate and direct its < liquidation and the distribution of its remaining assets. > Either party may terminate the Administration Agreement by written > notice to the other party delivered no later than ninety (90) days prior > to the end of the Administration Agreement’s initial term or any > subsequent one-year term. Either party may terminate the Administration > Agreement: (i) in the event of the other party’s material breach of a > material provision of the Administration Agreement that the other party > has either (a) failed to cure or (b) failed to establish a remedial plan > to cure that is reasonably acceptable, within sixty (60) days’ written > notice of such breach, or (ii) in the event of the appointment of a > conservator or receiver for the other party or upon the happening of a > like event to the other party at the direction of an appropriate agency > or court of competent jurisdiction. Additionally, the Administrator may > terminate the Administration Agreement immediately upon notice to the > Trust in the event it is required to do so by a regulator with authority > over the Administrator. --- 8361,8366c8585,8588 ----------------------- < The Trust Servicing Agreement is governed by New York law. The < Administrator and the Sponsor both consent to the non-exclusive < jurisdiction of the courts of the State of New York and the federal < courts located in the borough of Manhattan in New York City. Such < consent is not required for any person to assert a claim of New York < jurisdiction over the Administrator or the Sponsor. > The Administration Agreement is governed by New York law. The > Administrator and the Sponsor both consent to the exclusive jurisdiction > of the courts of the State of New York and the federal courts located in > the Southern District of New York. --- 8370c8592 ----------------------- < 103 > 109 --- 8374c8596 ----------------------- < DESCRIPTION OF THE TRUST AGENCY SERVICE PROVIDER AGREEMENT > DESCRIPTION OF THE TRANSFER AGENCY AND SERVICES AGREEMENT --- 8376,8404c8598,8620 ----------------------- < The Trust Agreement establishes the role of the Administrator to the < Trust, and the Trust Agency Service Provider Agreement sets forth the < rights and duties of the Administrator on behalf of the Trust acting in < the capacity of the Trust Agency Service Provider (when acting in such < capacity, the Administrator shall be referred to as the “Trust Agency < Service Provider”). The following is a description of the material terms < of the Trust Agency Service Provider Agreement. < < The Trust Agency Service Provider, provides transfer agent and related < services with respect to the issuance and redemption of the Shares < recording the issuance of the Shares and maintaining certain records < therewith. The Trust Agency Service Provider coordinates with the < Custodian to provide services with respect to the processing, clearance < and settlement of creation and redemption orders for the Shares through < the DTC. < < Qualifications of the Trust Agency Service Provider < < The Trust Agency Service Provider and any successor agency service < provider must be (i) a bank, trust company, corporation or national < banking association organized and doing business under the laws of the < United States or any of its states, and authorized under such laws to < exercise corporate trust powers, (ii) a participant in DTC or such other < securities depository as shall then be acting with respect to the Shares < and (iii), unless counsel to the Sponsor, the appointment of which is < acceptable to the Trust Agency Service Provider, determines that such < requirement is not necessary for the exemption under section < 408(m)(3)(B) of the Code, to apply to a banking institution as defined < in the Code. > The Administration Agreement establishes the role of the Administrator > to the Trust, and the Transfer Agency and Services Agreement sets forth > the rights and duties of the Administrator on behalf of the Trust acting > in the capacity of the Transfer Agent (when acting in such capacity, the > Administrator shall be referred to as the “Transfer Agent”). The > following is a description of the material terms of the Transfer Agency > and Services Agreement. > > The Transfer Agent provides transfer agent and related services with > respect to the issuance and redemption of the Shares recording the > issuance of the Shares and maintaining certain records therewith. The > Transfer Agent coordinates with the Custodian to provide services with > respect to the processing, clearance and settlement of creation and > redemption orders for the Shares through the DTC. > > Qualifications of the Transfer Agent > > The Transfer Agent and any successor agency service provider must be (i) > a bank, trust company, corporation or national banking association > organized and doing business under the laws of the United States or any > of its states, and authorized under such laws to exercise corporate > trust powers and (ii) a participant in DTC or such other securities > depository as shall then be acting with respect to the Shares. --- 8408,8415c8624,8629 ----------------------- < The Trust Agency Service Provider Agreement will be in effect for an < initial term of [ ] years from the commencement of the Trust’s < operation, the first date on which the Trust Agency Service Provider is < entitled to receive fees under the Trust Agency Service Provider < Agreement. The Trust Agency Service Provider Agreement automatically < renews for additional one (1) year periods thereafter, unless terminated < by the Trust or the Administrator on at least ninety (90) days’ prior < written notice. > The Transfer Agency and Services Agreement will be in effect for an > initial term ending December 31, 2018. The Transfer Agency and Services > Agreement automatically renews for additional one (1) year periods > thereafter, unless terminated by the Trust or the Transfer Agent by > written notice delivered no later than ninety (90) days prior to the > expiration of the initial term or any subsequent one year term. --- 8419,8435c8633,8648 ----------------------- < The Sponsor may terminate the Trust Agency Service Provider Agreement < without cause prior to the end of its initial term by giving at least < ninety (90) days prior written notice. The Sponsor or the Trust Agency < Service Provider may terminate the Trust Agency Service Provider < Agreement in whole or in part if the Trust Agency Service Provider < Agreement is terminated. Either the Sponsor or the Administrator may < terminate the Trust Agency Service Provider Agreement for cause for the < reasons set forth in the Trust Agency Service Provider Agreement, such < as either party’s bankruptcy or committing a material breach of the < Trust Agency Service Provider Agreement. If the Trust Custody Agreement < is terminated, the Trust Agency Service Provider may terminate the Trust < Agency Services Provider Agreement in whole or in part simultaneously < with the transition of assets to a successor custodian, if any. The < Trust Agency Service Provider also can terminate the Trust Agency < Service Provider Agreement if the Sponsor is more than ninety (90) days < delinquent in payments of monthly billings in connection with the Trust < Agency Service Provider Agreement. > Either party may terminate the Transfer Agency and Services Agreement by > written notice to the other party delivered no later than ninety (90) > days prior to the end of the Administration Agreement’s initial term or > any subsequent one-year term. Either party may terminate the Transfer > Agency and Services Agreement: (i) in the event of the other party’s > material breach of a material provision of the Transfer Agency and > Services Agreement that the other party has either (a) failed to cure or > (b) failed to establish a remedial plan to cure that is reasonably > acceptable, within sixty (60) days’ written notice of such breach, or > (ii) in the event of the appointment of a conservator or receiver for > the other party or upon the happening of a like event to the other party > at the direction of an appropriate agency or court of competent > jurisdiction. Additionally, the Transfer Agent may terminate the > Transfer Agency and Services Agreement immediately upon notice to the > Trust in the event it is required to do so by a regulator with authority > over the Transfer Agent. --- 8439,8442c8652,8665 ----------------------- < The Sponsor will pay the Trust Agency Service Provider for its services < under the Trust Agency Service Provider Agreement, as well as the Trust < Agency Service Provider’s reimbursable expenses in connection with its < services under the Trust Agency Service Provider Agreement. > The Sponsor will pay the Transfer Agent for its services under the > Transfer Agency and Services Agreement, as well as the Transfer Agent’s > reimbursable expenses in connection with its services under the Transfer > Agency and Services Agreement. > > Standard of Care; Limitation on Transfer Agent’s liability > > The Transfer Agent is required under the Transfer Agency and Services > Agreement at all times to act in good faith and without negligence and > has agreed to exercise the reasonable level of skill, care and diligence > expected of a professional provider of transfer agency services in > carrying out all of its duties and obligations under the Transfer Agency > and Services Agreement. The Transfer Agent assumes no responsibility and > is not be --- 8446c8669 ----------------------- < 104 > 110 --- 8450,8505c8673,8693 ----------------------- < Limitation on Trust Agency Service Provider’s liability < < The Trust Agency Service Provider will not be liable for the disposition < of bitcoin or moneys, or in respect of any calculation which it makes < under the Trust Agency Service Provider Agreement or otherwise, or for < any action taken or omitted or for any loss or injury resulting from its < actions or its performance or lack of performance of its duties under < the Trust Agency Service Provider Agreement in the absence of gross < negligence, willful misconduct or bad faith on its part. In no event < will the Trust Agency Service Provider be liable for acting in < accordance with or conclusively relying upon any instruction, notice, < demand, certificate or document (i) from the Sponsor, the Administrator < or the Custodian or any entity acting on behalf of any of them which the < Trust Agency Service Provider believes is given as authorized by the < Trust Agreement, the Trust Servicing Agreement or the Trust Custody < Agreement, respectively; or (ii) from or on behalf of any Authorized < Participant which the trust Agency Service Provider believes is given < pursuant to or is authorized by an Authorized Participant Agreement < (provided that the Trust Agency Service Provider has complied with the < verification procedures specified in the Authorized Participant < Agreement). In no event will the Trust Agency Service Provider be liable < for acting or omitting to act in reliance upon the advice of or < information from legal counsel, accountants or any other person believed < by it in good faith to be competent to give such advice or information. < In addition, the Trust Agency Service Provider will not be liable for < any delay in performance or for the non-performance of any of its < obligations under the Trust Agency Service Provider Agreement by reason < of causes beyond its reasonable control, including acts of God, war or < terrorism. The Trust Agency Service Provider will not be liable for any < indirect, consequential, punitive or special damages, regardless of the < form of action and whether or not any such damages were foreseeable or < contemplated, or for an amount in excess of the value of the Trust’s < assets. < < The Administrator will not be not be answerable for the default of the < Trustee, the Administrator or the Custodian or any entity acting on < behalf of which Custodian or any successor custodian of the Trust < engaged at the direction of the Sponsor. The Trust Agency Service < provider may employ agents, attorneys, accountants, auditors and other < professionals and shall not be answerable for the default or misconduct < of any of them if they were selected with reasonable care. The fees and < expenses charged by any successor custodians to the Trust, agents, < attorneys, accountants, auditors or other professionals, and expenses < reimbursable to any successor custodian under a custody agreement < authorized by the Trust Agreement, exclusive of fees for services to be < performed by the Trust Agency Service Provider, will be expenses of the < Sponsor or the Trust. < < Trust Agency Service Provider’s liability for agents < < The Trust Agency Service Provider may delegate to a reputable agent any < of its functions under the Trust Agency Service Provider Agreement, < although it will remain responsible under the Trust Agency Service < Provider Agreement for its service thereunder. To the extent reasonably < practicable, the Trust Agency Service Provider will consult with the < Sponsor before delegating a material portion of such services. > liable for loss or damage due to errors, including encoding and payment > processing errors, unless said errors are caused solely by the Transfer > Agent’s negligence, bad faith, or willful misconduct or that of its > employees or agents. > > Transfer Agent’s liability for agents > > The Transfer Agent may employ or contract with other persons to assist > it in performing its duties under the Transfer Agency and Services > Agreement without the consent of the Trust. The Transfer Agent remains > responsible for the compensation of such other persons and for the acts > and omissions of any such person or persons to same extent as it is for > its own acts and omissions under the Trust Agency and Services > Agreement. The Transfer Agent may also, without the consent of the > Trust, subcontract for the performance of its duties under the Transfer > Agency and Services Agreement with a transfer agent which is duly > registered according to the terms of the Transfer Agency and Services > Agreement. The Transfer Agent remains responsible for the compensation > of any such subcontractor and for the acts and omissions of any such > subcontractor to the same extent as it is for its own acts and > omissions. --- 8509,8556c8697,8722 ----------------------- < The Trust Agency Service Provider will not be personally liable for any < taxes or other governmental charges imposed upon the Trust’s assets, < including bitcoin held in the Trust Custody Account, moneys or other < Trust assets, or on the income therefrom or the gains or proceeds from < the sale thereof, or upon it as Trust Agency Service Provider in respect < of the Trust or the Shares, which taxes or charges it may be required to < pay under any present or future law of the United States of America or < of any other taxing authority having jurisdiction. The Trust Agency < Service Provider will be reimbursed and indemnified out of the Trust’s < assets for all such taxes and charges and for any expenses, including < counsel’s fees, which the Trust Agency Service Provider may sustain or < incur with respect to such taxes or charges, and the payment of such < amounts shall be secured by a lien on the Trust. < < < < 105 < < Table of Contents < < Indemnification of the Trust Agency Service Provider < < The Trust Agency Service Provider, its directors, employees and agents < shall be indemnified by the Trust and held harmless against any loss, < liability or expense (including, but not limited to, the reasonable fees < and expenses of counsel) arising out of or in connection with the < performance of its obligations under the Trust Agreement and the Trust < Agency Service Provider Agreement and under each other agreement entered < into by the Trust Agency Service Provider in furtherance of the < administration of the Trust (including, without limiting the scope of < the foregoing, any Authorized Participant Agreement) or for any other < loss incurred without gross negligence, willful misconduct or bad faith < in connection with the performance of its obligations under or any < actions taken in accordance with the provisions of the Trust Agreement < and Trust Agency Service Provider Agreement or any such other agreement. < Such indemnity shall include payment from the Trust of the costs and < expenses incurred by such indemnified party in defending itself against < any claim or liability in its capacity as Trust Agency Service Provider. < Any amounts payable to an indemnified party may be payable in advance or < shall be secured by a lien on the Trust. < < Protection for amounts due to Trust Agency Service Provider < < As security for all obligations of the Trust, including those owed to < the Trust Agency Service Provider under the Trust Agency Service < Provider Agreement, the Trust Agency Service Provider is granted a < continuing security interest in, and a lien on, the Trust’s assets and < all Trust distributions. > The Transfer Agent will not be personally liable for any taxes or other > governmental charges imposed upon the Trust, any Baskets, any Shares, a > beneficial owner thereof, an Authorized Participant, or the Transfer > Agent in connection with the services provided by the Transfer Agent > under the terms of the Transfer Agency and Services Agreement. The > Transfer Agent will be reimbursed and indemnified out of the Trust’s > assets for any tax obligations under the tax laws of any country or of > any state or political subdivision thereof, including taxes, withholding > and reporting requirements, claims for exemption and refund, additions > for late payment, interest, penalties and other expenses (including > reasonable legal expenses) that may be assessed, imposed or charged > against the Transfer Agent in connection with the Transfer Agency and > Services Agreement. > > Indemnification of the Transfer Agent > > The Transfer Agent and its agents and subcontractors shall be > indemnified by the Trust and held harmless against any loss, liability > or expense (including, but not limited to, the reasonable fees of > counsel) arising out of or in connection with the performance of its > obligations under the Trust Agreement and the Transfer Agency and > Services Agreement incurred without negligence, willful misconduct or > bad faith. Such indemnity shall include payment from the Trust of the > costs and expenses incurred by such indemnified party in defending > itself against any lawsuit in which the Transfer Agent or affiliate is a > named party. --- 8560,8565c8726,8729 ----------------------- < The Trust Agency Service Provider Agreement is governed by New York law. < The Trust Agency Service Provider and the Sponsor both consent to the < non-exclusive jurisdiction of the courts of the State of New York and < the federal courts located in the borough of Manhattan in New York City. < Such consent is not required for any person to assert a claim of New < York jurisdiction over the Trust Agency Service Provider or the Sponsor. > The Transfer Agency and Services Agreement is governed by New York law. > The Transfer Agent and the Trust both consent to the exclusive > jurisdiction of the courts of the State of New York and the federal > courts located in the Southern District of New York. --- 8569c8733 ----------------------- < 106 > 111 --- 8575,8581c8739,8745 ----------------------- < The Trust Agreement establishes the role of the Custodian and the Trust < Custody Account, which is maintained and operated by the Custodian on < behalf of the Trust pursuant to the provisions of the Trust Custody < Agreement. For a general description of the Custodian’s obligations, see < “The Custodian —The Custodian’s Role.” The following is a description of < the material terms of the Trust Agreement and the Trust Custody < Agreement as they relate to the custody of the Trust’s bitcoin. > The Trust Custody Agreement establishes the role of the Custodian and > the Trust Custody Account, which is maintained and operated by the > Custodian on behalf of the Trust pursuant to the provisions of the Trust > Custody Agreement. For a general description of the Custodian’s > obligations, see “The Custodian —The Custodian’s Role.” The following is > a description of the material terms of the Trust Agreement and the Trust > Custody Agreement as they relate to the custody of the Trust’s bitcoin. --- 8605,8606c8769,8772 ----------------------- < The Custodian will arrange for its policies and procedures as well as < “proof of control” to be audited periodically by an external auditor. > The Custodian will arrange for all data, materials and information, > including records, books, accounts, memoranda, files and any other > documents, reasonably related to the Custodian’s Cold Storage System > protocols and internal controls to be audited by an independent auditor. --- 8633,8643c8799,8807 ----------------------- < Participant Agreements and the Administrator’s written instructions. The < bitcoin held by the Custodian on behalf of the Trust will only be < transferred out of the Trust Custody Account in the following < circumstances: (i) if the bitcoin is to be distributed to an Authorized < Participant in connection with a redemption of one or more Baskets; (ii) < if the bitcoin is to be transferred to the Sponsor’s Custody Account to < pay the Sponsor’s Fee; or (iii) if the bitcoin is to be transferred to < the Trust Expense Account in connection with the payment of expenses not < assumed by the Sponsor, or other transfers permitted under the Trust < Agreement. Transfers made pursuant to clause (iii) are expected to < include transfers > Participant Agreements and the Custodian Agreement. The bitcoin held by > the Custodian on behalf of the Trust will only be transferred out of the > Trust Custody Account in the following circumstances: (i) if the bitcoin > is to be distributed to an Authorized Participant in connection with a > redemption of one or more Baskets; (ii) if the bitcoin is to be > transferred to the Sponsor’s Custody Account to pay the Sponsor’s Fee; > or (iii) if the bitcoin is to be transferred to the Trust Expense > Account in connection with the payment of expenses not assumed by the > Sponsor, or other transfers permitted under the Trust Agreement. --- 8647c8811 ----------------------- < 107 > 112 --- 8651,8653c8815,8818 ----------------------- < made in connection with a sale of bitcoin to pay expenses of the Trust < not assumed by the Sponsor or with the liquidation of the Trust. On days < in which there are both deposits into and withdrawals from the Trust > Transfers made pursuant to clause (iii) may include transfers made in > connection with a sale of bitcoin to pay expenses of the Trust not > assumed by the Sponsor or with the liquidation of the Trust. On days in > which there are both deposits into and withdrawals from the Trust --- 8662c8827 ----------------------- < the Administrator, such instructions are in improper form, or such > the Custodian, such instructions are not in proper form, or such --- 8672c8837 ----------------------- < protocols or systems relating to bitcoin that the Custodian, > protocols or systems relating to bitcoin that the Custodian, the --- 8677a8843,8868 ----------------------- > Hard Fork > > In the event of an upcoming modification to the Bitcoin Network that > could potentially result in a hard fork with two separate and > incompatible Bitcoin Networks, the Custodian, in consultation with the > Sponsor, will elect to support the Bitcoin Network that has the greatest > cumulative computational difficulty for the forty-eight (48) hour period > following a given hard fork, in order to engage in bitcoin transactions > and the valuation of bitcoin. Creation and redemption of baskets will be > halted during this forty-eight (48) hour period and for the twenty-four > (24) hour period prior to the anticipated hard fork. The greatest > cumulative computational difficulty is defined as the total threshold > number of hash attempts required to mine all existing blocks in the > respective Blockchain, accounting for potential differences in relative > hash difficulty. If the Custodian, in consultation with the Sponsor, is > unable to make a conclusive determination about which Bitcoin Network > has the greatest cumulative computational difficulty after forty-eight > hours, or determines in good faith that this is not a reasonable > criterion upon which to make an election, the Custodian will support the > Bitcoin Network which it deems in good faith is most likely to be > supported by a majority of users and miners. Under the terms of the > Trust Custody Agreement, the Trust may be required to indemnify the > Custodian for any losses arising in connection with its determination to > elect the Bitcoin Network with the greatest computational difficulty in > the event of a hard fork. > --- 8680,8684c8871,8876 ----------------------- < The Custodian will maintain daily reports for each Business Day < identifying the transfers of bitcoin into and out of the Trust Custody < Account and containing sufficient information to account for the bitcoin < held in the Trust Custody Account and provide such reports to the < Administrator each Business Day. The Custodian will also produce monthly > The Custodian will produce and transmit to the Administrator sufficient > information to account for the bitcoin held in the Trust Custody Account > and calculate the Trust’s net asset value per Share, including the end > of Business Day balance of the Trust Custody Account and the movement of > bitcoin into and out of the Trust Custody Account, identifying > separately each transaction. The Custodian will also produce monthly --- 8691c8883,8884 ----------------------- < stated as of [ ], Eastern time on such Business Day. > stated as of the completion of all creation and redemption transactions > on such Business Day. --- 8696,8705c8889,8906 ----------------------- < custodial duties under the Trust Custody Agreement and the Authorized < Participant Agreements and will only be responsible for any loss or < damage suffered by the Trust as a direct result of any gross negligence, < willful misconduct or bad faith in the performance of its duties. The < Custodian’s liability for custodial operations under the Trust Custody < Agreement and the Authorized Participant Agreements is further limited < to the market value of the bitcoin lost or damaged at the time such < gross negligence, willful misconduct or bad faith is discovered by the < Custodian, provided that the Custodian promptly notifies the < Administrator and the Sponsor of its discovery. > custodial duties under the Trust Custody Agreement and will only be > responsible for any loss or damage suffered by the Trust as a direct > result of > > > > 113 > > Table of Contents > > any fraud, gross negligence, willful misconduct, or bad faith in the > performance of its duties. The Custodian’s liability for custodial > operations under the Trust Custody Agreement is further limited to the > market value of the bitcoin lost or damaged at the time such fraud, > gross negligence, willful misconduct, or bad faith is discovered by the > Custodian, the Sponsor or the Administrator, provided that the Custodian > notifies, as soon as reasonably practicable after obtaining knowledge of > such matter, the Sponsor of its discovery. --- 8714,8723c8915,8918 ----------------------- < in connection with its custodial operations under the Trust Agreement, < the Trust Custody Agreement and the Authorized Participant Agreements, < except to the extent that such sums are due directly to the Custodian’s < gross negligence, willful misconduct or bad faith. < < < < 108 < < Table of Contents > in connection with its custodial operations under the Trust Agreement > and the Trust Custody Agreement, except to the extent that such sums are > due directly to the Custodian’s fraud, gross negligence, willful > misconduct, or bad faith. --- 8729,8730c8924,8925 ----------------------- < Custody Agreement by reason of any cause beyond its reasonable control, < including acts of God, war or terrorism. > Custody Agreement as a result of any cause beyond its reasonable > control, including acts of God, war or terrorism. --- 8734,8749c8929,8942 ----------------------- < The Trust Custody Agreement has an initial term of [ ] years, subject to < certain termination provisions discussed in “Description of the Trust < Custody Agreement.” The Custodian or the Sponsor may, upon ninety (90) < business days’ prior notice, terminate the custodial relationship of the < Custodian to the Trust for any reason, including if the Custodian ceases < to offer the services contemplated by the custodial arrangements set < forth in the Trust Custody Agreement to its clients or proposes to < withdraw from the Digital Asset storage business. The custody < arrangements set forth in the Trust Custody Agreement may also be < terminated with immediate effect as follows: (i) by the Sponsor, if the < Custodian ceased to offer the services contemplated by the custodial < arrangements set forth in the Trust Custody Agreement; (ii) by the < Custodian or the Sponsor, if it becomes unlawful for the Custodian to < have entered into the agreement or to provide or receive the services < thereunder; (iii) by the Sponsor, if the Sponsor determines in its < reasonable view that the Trust is insolvent or faces impending > The Trust Custody Agreement has an initial term of two years, subject to > certain termination provisions discussed below. The Custodian or the > Sponsor may, upon ninety (90) business days’ prior notice, terminate the > custodial relationship of the Custodian to the Trust for any reason, > including if the Custodian ceases to offer the services contemplated by > the custodial arrangements set forth in the Trust Custody Agreement to > its clients or proposes to withdraw from the Digital Asset storage > business. The custody arrangements set forth in the Trust Custody > Agreement may also be terminated with immediate effect as follows: (i) > by the Sponsor, if the Custodian ceased to offer the services > contemplated by the custodial arrangements set forth in the Trust > Custody Agreement; (ii) by the Custodian or the Sponsor, if required to > do so by applicable law; (iii) by the Sponsor, if the Sponsor determines > in its reasonable view that the Trust is insolvent or faces impending --- 8751,8756c8944,8957 ----------------------- < view that the Custodian is insolvent or faces impending insolvency; or < (iv) by the Custodian or the Sponsor, if the Trust Custody Agreement < ceases to be in full force and effect. The Custodian also can terminate < the Trust Custody Agreement if the Sponsor is more than ninety (90) < delinquent in payments of monthly billings in connection with the Trust < Custody Agreement. > view that the Custodian is insolvent or faces impending insolvency; (iv) > by the Custodian or the Sponsor, if the Trust Custody Agreement ceases > to be in full force and effect; (v) by the Sponsor, if the Custodian is > not the surviving entity following any merger, consolidation or > conversion of the Custodian; (vi) by the Sponsor, if the Sponsor, in its > sole discretion, determines to terminate the Trust; (vii) by the > Sponsor, if the Custodian fails to maintain adequate capital requirement > in accordance with the terms of the Trust Custody Agreement or (viii) by > the Custodian or the Sponsor, if, having received notice of a material > breach of the other party’s obligations under the Trust Custody > Agreement, if the other party has not cured the breach within sixty (60) > days. The Custodian also can terminate the Trust Custody Agreement if > the Sponsor is more than ninety (90) delinquent in payments of monthly > billings in connection with the Trust Custody Agreement. --- 8772,8780d8972 ----------------------- < In the event that the Sponsor determines that the maintenance of all or < some of the Trust’s bitcoin with a particular custodian is not in the < best interests of Shareholders, the Sponsor will direct the < Administrator to initiate action to remove such bitcoin from the custody < of such custodian or take such other action as the Administrator < determines appropriate to safeguard the interests of Shareholders. The < Administrator shall have no liability for any such action taken at the < direction of the Sponsor or, in the absence of such direction, any < action taken by it in good faith. --- 8782c8974,8979 ----------------------- < Governing Law; consent to New York jurisdiction > > 114 > > Table of Contents > > Governing law; consent to New York jurisdiction --- 8787,8789c8984 ----------------------- < borough of Manhattan in New York City. Such consent is not required for < any person to assert a claim of New York jurisdiction over the Custodian < or the Sponsor. > borough of Manhattan in New York City. --- 8793c8988 ----------------------- < 109 > 115 --- 8878c9073 ----------------------- < is an individual, corporation, estate or trust and that is not a U.S. > is an individual, corporation, estate, or trust and that is not a U.S. --- 8883,8884c9078,9079 ----------------------- < federal income tax purposes, will generally depend upon the status of < the partner and upon the activities of the partnership. Partnerships and > federal income tax purposes will generally depend upon the status of the > partner and upon the activities of the partnership. Partnerships and --- 8889c9084 ----------------------- < 110 > 116 --- 8902,8908c9097,9103 ----------------------- < “flow through” to Shareholders, and the Administrator will report the < Trust’s income, gains, losses and deductions to the IRS on that basis. < However, there is no direct authority governing the U.S. federal income < tax classification of the Trust, and there can be no assurance that the < IRS will not assert a contrary position or that a court would not < sustain such assertion. The balance of this discussion assumes that the < Trust will be treated as a “grantor trust” for U.S. federal income tax > “flow through” to Shareholders, and the Trust’s income, gains, losses > and deductions will be reported to the IRS on that basis. However, there > is no direct authority governing the U.S. federal income tax > classification of the Trust, and there can be no assurance that the IRS > will not assert a contrary position or that a court would not sustain > such assertion. The balance of this discussion assumes that the Trust > will be treated as a “grantor trust” for U.S. federal income tax --- 8922c9117,9120 ----------------------- < or transfer. > or transfer. The IRS also clarified that bitcoin received as payment > (e.g., as wages or, in the case of a miner, as a reward for solving a > block) is included in the recipient’s taxable income based on the fair > market value of bitcoin when received. --- 8967,8971c9165 ----------------------- < bitcoin immediately prior to the sale or transfer by a fraction, the < numerator of which is the number of bitcoin sold or transferred, and the < denominator of which is the total number of the bitcoin held by the < Trust immediately prior to the sale or transfer. After any such sale or < transfer, a > bitcoin immediately prior to the sale or transfer by a fraction, --- 8975c9169 ----------------------- < 111 > 117 --- 8979,8982c9173,9179 ----------------------- < Shareholder’s tax basis for its pro rata share of the remaining bitcoin < held by the Trust will be equal to its tax basis for its Shares < immediately prior to the sale or transfer, less the portion of such < basis allocable to its share of the bitcoin sold or transferred. > the numerator of which is the number of bitcoin sold or transferred, and > the denominator of which is the total number of the bitcoin held by the > Trust immediately prior to the sale or transfer. After any such sale or > transfer, a Shareholder’s tax basis for its pro rata share of the > remaining bitcoin held by the Trust will be equal to its tax basis for > its Shares immediately prior to the sale or transfer, less the portion > of such basis allocable to its share of the bitcoin sold or transferred. --- 8993c9190 ----------------------- < time that is attributable to the Shares sold, exchanged or disposed of. > time that is attributable to the Shares sold, exchanged, or disposed of. --- 9030c9227 ----------------------- < transferred by the Administrator to pay Trust expenses. Shareholders may > transferred by the Sponsor to pay Trust expenses. Shareholders may --- 9044,9049c9241,9246 ----------------------- < The Administrator, Trust Agency Service Provider or the appropriate < broker will file certain information returns with the IRS, and provide < certain tax-related information to Shareholders, in accordance with < applicable Treasury Regulations. Each Shareholder will be provided < annually with information regarding its allocable portion of the Trust’s < income (if any) and expenses. > The Administrator, Transfer Agent, or the appropriate broker will file > certain information returns with the IRS, and provide certain > tax-related information to Shareholders, in accordance with applicable > Treasury Regulations. Each Shareholder will be provided annually with > information regarding its allocable portion of the Trust’s income (if > any) and expenses. --- 9053c9250 ----------------------- < 112 > 118 --- 9095c9292 ----------------------- < 113 > 119 --- 9120c9317 ----------------------- < investment under the appropriate governing plan instrument, (ii) whether > investment under the appropriate governing plan instrument; (ii) whether --- 9122,9123c9319,9320 ----------------------- < prohibited transaction with a party in interest, (iii) the Plan’s < funding objectives, and (iv) whether under the general fiduciary > prohibited transaction with a party in interest; (iii) the Plan’s > funding objectives;, and (iv) whether under the general fiduciary --- 9138,9152c9335,9349 ----------------------- < registered under section 12(b) or 12(g) of the Exchange Act, or (ii) < sold to the plan as part of an offering of securities to the public < pursuant to an effective registration statement under the Securities Act < and the class of securities of which such security is a part is < registered under the Exchange Act within one hundred and twenty (120) < days (or such later time as may be allowed by the Securities and < Exchange Commission) after the end of the fiscal year of the issuer < during which the offering of such securities to the public occurred. < Whether a security is “freely transferable” is a factual question < determined on the basis of facts and circumstances. A class of < securities is “widely-held” if it is a class of securities that is owned < by one hundred (100) or more investors independent of the issuer and of < one another. The issuer expects that the above requirements will be < satisfied and the Shares will be “publicly traded securities” within the < meaning of the Plan Asset Regulations. > registered under section 12(b) or 12(g) of the Exchange Act or (ii) sold > to the plan as part of an offering of securities to the public pursuant > to an effective registration statement under the Securities Act and the > class of securities of which such security is a part is registered under > the Exchange Act within one hundred and twenty (120) days (or such later > time as may be allowed by the Securities and Exchange Commission) after > the end of the fiscal year of the issuer during which the offering of > such securities to the public occurred. Whether a security is “freely > transferable” is a factual question determined on the basis of facts and > circumstances. A class of securities is “widely-held” if it is a class > of securities that is owned by one hundred (100) or more investors > independent of the issuer and of one another. The issuer expects that > the above requirements will be satisfied and the Shares will be > “publicly traded securities” within the meaning of the Plan Asset > Regulations. --- 9165c9362 ----------------------- < 114 > 120 --- 9195c9392 ----------------------- < Shares by selling such Shares on BATS. As a result, in the context of > Shares by selling such Shares on Bats. As a result, in the context of --- 9199,9202c9396,9399 ----------------------- < Investors that purchase the Shares through a commission/fee-based < brokerage account may pay commissions/fees charged by the brokerage < account. Investors should review the terms of their brokerage accounts < for details on applicable charges. > Investors who purchase Shares through a commission/fee-based brokerage > account may pay commissions/fees charged by the brokerage account. > Investors should review the terms of their brokerage accounts for > details on applicable charges. --- 9211,9218c9408,9414 ----------------------- < The Sponsor intends to qualify the Shares in states selected by the < Sponsor and that sales be made through broker-dealers who are members of < FINRA. Investors intending to create or redeem Baskets through < Authorized Participants in transactions not involving a broker-dealer < registered in such investor’s state of domicile or residence should < consult their legal advisor regarding applicable broker-dealer or < securities regulatory requirements under the state securities laws prior < to such creation or redemption. > The Sponsor intends that sales be made through broker-dealers who are > members of FINRA. Investors intending to create or redeem Baskets > through Authorized Participants in transactions not involving a > broker-dealer registered in such investor’s state of domicile or > residence should consult their legal advisor regarding applicable > broker-dealer or securities regulatory requirements under the state > securities laws prior to such creation or redemption. --- 9220c9416 ----------------------- < On [ ], 2016, the Initial Purchaser purchased [ ] Shares which comprised > On [ ], 2017, the Initial Purchaser purchased [ ] Shares which comprised --- 9223,9224c9419,9420 ----------------------- < among other factors, the Gemini Exchange Spot Price and the trading < price of the Shares on BATS. The Initial Purchaser will not receive a > among other factors, the Gemini Exchange Auction Price and the trading > price of the Shares on Bats. The Initial Purchaser will not receive a --- 9245c9441 ----------------------- < 115 > 121 --- 9254c9450,9452 ----------------------- < The Shares will be listed and trade on BATS under the symbol “COIN.” > The Shares will be listed on Bats under the symbol “COIN.” Additional > information about the Shares may be found on the Trust’s website, > www.coin-etf.com. --- 9258c9456 ----------------------- < 116 > 122 --- 9264,9267c9462,9466 ----------------------- < The validity of the Shares will be passed upon for the Sponsor by Ropes < & Gray LLP, Boston, Massachusetts, who will also render an opinion, < subject to certain limitations and qualifications, regarding the < material U.S. federal income tax consequences relating to the Shares. > The validity of the Shares will be passed upon for the Sponsor by > Richards, Layton & Finger, P.A., Wilmington, Delaware. Ropes & Gray LLP, > Boston, Massachusetts, will render an opinion, subject to certain > limitations and qualifications, regarding the material U.S. federal > income tax consequences relating to the Shares. --- 9272,9275c9471,9474 ----------------------- < [AUDITOR], an independent registered public accounting firm, as stated < in their report appearing herein. Such financial statement is included < in reliance upon the report of such firm given upon their authority as < experts in accounting and auditing. > BPM LLP (the “Auditor”), an independent registered public accounting > firm, as stated in their report appearing herein. Such financial > statement is included in reliance upon the report of such firm given > upon their authority as experts in accounting and auditing. --- 9290c9489 ----------------------- < The internet address of the Trust’s website is www.[ ].com. This > The internet address of the Trust’s website is www.coin-etf.com. This --- 9311c9510 ----------------------- < 117 > 123 --- 9320,9321c9519,9526 ----------------------- < “Administrator”—[ ], a [ ], serves as the Administrator to the Trust < under the Trust Servicing Agreement. > “Administration Agreement”—The Agreement between Sponsor and the > Administrator which sets forth the obligations and responsibilities of > the Administrator with respect to the operation and administration of > the Trust. > > “Administrator” —State Street Bank and Trust Company, a trust company > organized under the laws of the Commonwealth of Massachusetts, serves as > the Administrator to the Trust under the Administration Agreement. --- 9326,9332c9531,9538 ----------------------- < broker-dealer to engage in securities transactions, (ii) is a direct < participant in the DTC, and (iii) has entered into an Authorized < Participant Agreement with the Administrator and the Sponsor. To < facilitate the creation and redemption of Baskets, Authorized < Participants may, but are not required to, establish a bitcoin custody < account with the Custodian. Only Authorized Participants may place < orders to create or redeem one or more Baskets. > broker-dealer to engage in securities transactions; (ii) is a direct > participant in the DTC; and (iii) has entered into an Authorized > Participant Agreement with the Sponsor on behalf of the Trust, subject > to acceptance by the Transfer Agent. To facilitate the creation and > redemption of Baskets, Authorized Participants may, but are not required > to, establish a bitcoin custody account with the Custodian. Only > Authorized Participants may place orders to create or redeem one or more > Baskets. --- 9335,9338c9541,9544 ----------------------- < Authorized Participant, the Sponsor and the Administrator which provides < the procedures for the creation and redemption of Baskets and for the < delivery of the bitcoin and distribution of the Shares required for such < creations and redemptions. > Authorized Participant, and the Sponsor on behalf of the Trust which > provides the procedures for the creation and redemption of Baskets and > for the delivery of the bitcoin and distribution of the Shares required > for such creations and redemptions. --- 9340c9546,9547 ----------------------- < “Basket”—A block of 50,000 Shares. > “Basket”—A block of 100,000 Shares (or such other number of Shares that > the Trust shall determine from time to time). --- 9342c9549 ----------------------- < “BATS”—The Bats BZX Exchange, Inc. > “Bats”—The Bats BZX Exchange, Inc. --- 9375c9582,9588 ----------------------- < “Business Day” means any day that BATS is open for regular trading. > “Business Day” means any day that Bats is open for regular trading. > > > > 124 > > Table of Contents --- 9386,9391d9598 ----------------------- < < < 118 < < Table of Contents < --- 9396,9398c9603 ----------------------- < Trust Custody Account. The Sponsor will license the Cold Storage System < for use by the Trust and its service providers in management and custody < of the Trust’s bitcoin. > Trust Custody Account. --- 9406,9407c9611,9612 ----------------------- < “Creation Basket”— An order placed by an Authorized Participant with the < Administrator to create one or more Baskets. The number of bitcoin > “Creation Basket”—An order placed by an Authorized Participant with the > Transfer Agent to create one or more Baskets. The number of bitcoin --- 9409c9614,9615 ----------------------- < of the net asset value of 50,000 Shares. > of the net asset value of 100,000 Shares (or such other amount as > determined by the Trust from time to time). --- 9411c9617 ----------------------- < “Custodian”— Gemini Trust Company, LLC, a New York State-chartered > “Custodian”—Gemini Trust Company, LLC, a New York State-chartered --- 9439c9645 ----------------------- < “Exchange Act”—The Securities Exchange Act of 1934, as amended. > “Exchange Act” —The Securities Exchange Act of 1934, as amended. --- 9443c9649 ----------------------- < time is as of 4:00 p.m., Eastern time, on each Business Day. > time is as of 4:00 p.m. Eastern Time, on each Business Day. --- 9450,9452d9655 ----------------------- < “FINRA”—The Financial Industry Regulatory Authority, Inc., which is the < primary regulator in the United States for broker-dealers, including < Authorized Participants. --- 9454,9455d9656 ----------------------- < “Gemini Exchange Spot Price”—The price of a bitcoin on the Gemini < Exchange as of 4:00 p.m. Eastern time on each Business Day. --- 9456a9658 ----------------------- > 125 --- 9457a9660 ----------------------- > Table of Contents --- 9459c9662,9664 ----------------------- < 119 > “FINRA”—The Financial Industry Regulatory Authority, Inc., which is the > primary regulator in the United States for broker-dealers, including > Authorized Participants. --- 9461c9666,9677 ----------------------- < Table of Contents > “General Direct Action”’—An action, suit or other proceeding asserting a > direct claim of any nature whatsoever (regardless of whether such claim > (i) sounds in contract, tort, fraud or otherwise or (ii) is based on > common law, statutory, equitable, legal or other grounds) where the harm > alleged falls upon all Shareholders (and not an individual harm only to > the Shareholder or Shareholders bringing such action, suit or other > proceeding) on a pro rata basis and/or proportionally based on their > interests in the Trust. > > “Gemini Exchange Auction Price”—The price of one (1) bitcoin on the > Gemini Exchange as of 4:00 p.m. Eastern Time on each Business Day as > determined by the daily two-sided auction. --- 9489,9491c9705,9708 ----------------------- < of 4:00 p.m. Eastern time each Business Day. The Administrator will < calculate the NAV using the Gemini Exchange Spot Price. See “Description < of the Trust Agreement—Valuation of Bitcoin and Definition of NAV.” > of 4:00 p.m. Eastern Time each Business Day. The Administrator will > calculate the NAV using the Gemini Exchange Auction Price, which will be > provided to the Administrator by the Sponsor. See “Description of the > Trust Agreement—Valuation of Bitcoin and Definition of NAV.” --- 9496c9713 ----------------------- < the Administrator to redeem one or more Baskets. The bitcoin required > the Transfer Agent to redeem one or more Baskets. The bitcoin required --- 9498,9499c9715,9717 ----------------------- < Basket is equivalent to the net asset value for 50,000 Shares on a given < day. > Basket is equivalent to the net asset value for 100,000 Shares on a > given day (or such other amount as determined by the Trust from time to > time). --- 9505c9723 ----------------------- < “Seed Baskets”—The [ ] Baskets issued and sold to the Initial Purchaser > “Seed Baskets”—The [_] Baskets issued and sold to the Initial Purchaser --- 9514a9733,9738 ----------------------- > > > 126 > > Table of Contents > --- 9528,9542c9752,9759 ----------------------- < expected to incur. The Sponsor’s Fee will accrue daily in U.S. Dollars < and will be payable in kind (in bitcoin) according to the Gemini < Exchange Spot Price monthly in arrears by the transfer of bitcoin from < the Trust Custody Account to the Sponsor Custody Account. < < < < 120 < < Table of Contents < < “Transaction Fee”—The non-refundable transaction fee that may be < required to be paid by Authorized Participants to the Trust Agency < Service Provider when placing a Creation Basket order or a Redemption < Basket order. > expected to incur. The Sponsor’s Fee will accrue daily in bitcoin and > will be payable in kind (in bitcoin) according to the Gemini Exchange > Auction Price monthly in arrears by the transfer of bitcoin from the > Trust Custody Account to the Sponsor Custody Account. > > “Transaction Fee”—The nonrefundable transaction fee that may be required > to be paid by Authorized Participants to the Transfer Agent when placing > a Creation Basket order or a Redemption Basket order. --- 9548,9549c9765,9767 ----------------------- < “Trust Agency Service Provider—[ ], a [ ], serves as Trust Agency < Service Provider to the Trust under the Trust Agency Service Provider > “Transfer Agent—State Street Bank and Trust Company, a trust company > organized under the laws of the Commonwealth of Massachusetts, serves as > Transfer Agent to the Trust under the Transfer Agency and Services --- 9552,9560c9770,9778 ----------------------- < “Trust Agency Service Provider Agreement—The agreement between the < Sponsor and the Trust Agency Service Provider which sets forth the < obligations and responsibilities of the Trust Agency Service Provider < with respect to transfer agency services and related matters. < < “Trust Agreement”—The Trust Agreement between the Sponsor and the < Trustee under which the Trust is formed and which sets forth the < respective rights and duties of the Sponsor and the Trustee in its < capacity as trustee of the Trust. > “Transfer Agency and Services Agreement— The agreement between the > Sponsor and the Transfer Agent which sets forth the obligations and > responsibilities of the Transfer Agent with respect to transfer agency > services and related matters. > > “Trust Agreement”—The Amended and Restated Declaration of Trust and > Trust Agreement between the Sponsor and the Trustee under which the > Trust is formed and which sets forth the respective rights and duties of > the Sponsor and the Trustee in its capacity as trustee of the Trust. --- 9571,9581c9789,9792 ----------------------- < “Trust Expense Account”—The segregated bitcoin account of the < Administrator to which the Custodian will transfer bitcoin from the < Trust Custody Account in order to permit the Administrator pay expenses < of the Trust not assumed by the Sponsor. The Trust Expense Account is < established pursuant to the Trust Agreement and the Trust Servicing < Agreement. < < “Trust Servicing Agreement”—The Agreement between Sponsor and the < Administrator which sets forth the obligations and responsibilities of < the Administrator with respect to the operation and administration of < the Trust. > “Trust Expense Account”-–The segregated bitcoin account of the Trust to > which the Custodian will transfer bitcoin from the Trust Custody Account > in order to pay extraordinary expenses of the Trust not assumed by the > Sponsor. --- 9587c9798 ----------------------- < 121 > 127 --- 9605c9816 ----------------------- < STATEMENT OF FINANCIAL CONDITION > STATEMENT OF ASSETS AND LIABILITIES --- 9607c9818 ----------------------- < [ ], 2016 > [ ], 2017 --- 9615c9826 ----------------------- < Bitcoin inventory (fair value $[ ]) $ [ ] > Investment in Bitcoin, at fair value (See Note 2(C)) (cost $[ ]) $ [ ] --- 9616a9828 ----------------------- > Total Assets $ [ ] --- 9617a9830 ----------------------- > Liabilities: --- 9619a9833 ----------------------- > Total Liabilities $ [ ] --- 9620a9835 ----------------------- > Net Assets: $ [ ] --- 9621a9837 ----------------------- > Shares issued and outstanding(1) $ [ ] --- 9622a9839 ----------------------- > Net asset value per Share $ [ ] --- 9624d9840 ----------------------- < Total Assets $ [ ] --- 9625a9842,9843 ----------------------- > (1) Authorized Share capital is unlimited, and the par value of the > Shares is $0.00. --- 9626a9845,9846 ----------------------- > The accompanying notes are an integral part of these financial > statements. --- 9629a9850,9859 ----------------------- > F-2 > > Table of Contents > > WINKLEVOSS BITCOIN TRUST > > SCHEDULE OF INVESTMENT > > [ ], 2017 > --- 9631a9862,9863 ----------------------- > Units of Bitcoin Cost Fair Value (See Note 2(C)) % of > Net Assets --- 9633c9865 ----------------------- < Liabilities and Shareholder’s Equity Liabilities: > Investment in Bitcoin [ ] $ [ ] $ [ ] [ ]% --- 9634a9867 ----------------------- > Total Investment $ [ ] $ [ ] [ ]% --- 9636c9869,9875 ----------------------- < Total Liabilities — > Other assets in excess of liabilities / (Liabilities in excess of other > assets) > $ > [ > ] > [ > ]% --- 9637a9877 ----------------------- > Net Assets $ [ ] [ ]% --- 9638a9879,9880 ----------------------- > The accompanying notes are an integral part of these financial > statements. --- 9641a9884 ----------------------- > F-3 --- 9642a9886 ----------------------- > Table of Contents --- 9643a9888 ----------------------- > WINKLEVOSS BITCOIN TRUST --- 9645c9890 ----------------------- < Commitments and Contingent Liabilities (Note 6) — > STATEMENT OF OPERATIONS --- 9646a9892 ----------------------- > [ ], 2017 --- 9650a9897 ----------------------- > Expenses: --- 9652a9900 ----------------------- > Net expenses $ [ ] --- 9654c9902 ----------------------- < Redeemable Shares: > Net investment loss $ [ ] --- 9655a9904,9905 ----------------------- > Realized and Change in Unrealized Gain / (Loss) on Investment in > Bitcoin: --- 9657,9658d9906 ----------------------- < Redeemable capital Shares, no par value, unlimited amount authorized, [ < ] outstanding (at redemption value) $ [ ] --- 9659a9908,9909 ----------------------- > Net realized gain / (loss) from investment in bitcoin sold to pay > expenses $ [ ] --- 9660a9911,9912 ----------------------- > Net realized gain / (loss) from bitcoin distributed for the redemption > of shares $ [ ] --- 9661a9914,9915 ----------------------- > Net change in unrealized appreciation / (depreciation) on investment in > bitcoin $ [ ] --- 9662a9917,9918 ----------------------- > Net realized and change in unrealized gain / (loss) on investment in > bitcoin $ [ ] --- 9663a9920 ----------------------- > Net Income / (Loss): $ [ ] --- 9664a9922 ----------------------- > Net income / (loss) per Share $ [ ] --- 9665a9924 ----------------------- > Weighted average number of Shares [ ] --- 9667c9926,9927 ----------------------- < Shareholder’s Equity: > The accompanying notes are an integral part of these financial > statements. --- 9670d9929 ----------------------- < Retained earnings — --- 9671a9931 ----------------------- > F-4 --- 9672a9933 ----------------------- > Table of Contents --- 9673a9935 ----------------------- > WINKLEVOSS BITCOIN TRUST --- 9674a9937 ----------------------- > STATEMENT OF CHANGES IN NET ASSETS --- 9675a9939 ----------------------- > [ ], 2017 --- 9679d9942 ----------------------- < Total Liabilities and Shareholder’s Equity $ [ ] --- 9680a9944 ----------------------- > Net Assets—Opening Balance, fair value (See Note 2(C)): $ [ ] --- 9681a9946 ----------------------- > Creations [ ] --- 9682a9948 ----------------------- > Redemptions [ ] --- 9683a9950 ----------------------- > Net investment loss $ [ ] --- 9684a9952,9953 ----------------------- > Net realized gain / (loss) from investment in bitcoin sold to pay > expenses $ [ ] --- 9685a9955,9956 ----------------------- > Net realized gain / (loss) from bitcoin distributed for the redemption > of shares $ [ ] --- 9686a9958,9959 ----------------------- > Net change in unrealized appreciation / (depreciation) on investment in > bitcoin $ [ ] --- 9688c9961 ----------------------- < The accompanying notes are an integral part of this financial statement. > Net Assets—Closing Balance, fair value (See Note 2(C)): $ [ ] --- 9689a9963,9964 ----------------------- > The accompanying notes are an integral part of these financial > statements. --- 9692c9967,10030 ----------------------- < F-2 > > F-5 > > Table of Contents > > WINKLEVOSS BITCOIN TRUST > > STATEMENT OF CASH FLOWS > > [ ], 2017 > > > > > Increase / (Decrease) in Cash from Operations > > > Proceeds received from sales of bitcoin $ [ ] > > Expenses paid $ [ ] > > Increase / (Decrease) in cash resulting from operations $ [ ] > > Cash and cash equivalents at beginning of period $ [ ] > > Cash and cash equivalents at end of period $ [ ] > > Supplemental Disclosure of Non-Cash Financing Activities > > > Value of bitcoin received for creation of Shares $ [ ] > > Value of bitcoin distributed for redemption of Shares $ [ ] > > Reconciliation of Net Income / (Loss) to Net Cash Provided by Operating > Activities > > > Net income / (loss) $ [ ] > > Adjustments to reconcile net income / (loss) to net cash provided by > operating activities $ [ ] > > Proceeds from sales of bitcoin to pay expenses $ [ ] > > Net realized gain / (loss) from investment in bitcoin sold to pay > expenses $ [ ] > > Net realized gain / (loss) from bitcoin distributed for the redemption > of shares $ [ ] > > Net change in unrealized appreciation / (depreciation) on investment in > bitcoin $ [ ] > > Increase / (Decrease) in liabilities $ [ ] > > Net cash provided / (used) by operating activities $ [ ] > > The accompanying notes are an integral part of these financial > statements. > > > > F-6 --- 9700c10038 ----------------------- < [ ], 2016 > [ ], 2017 --- 9705,9706c10043,10047 ----------------------- < formed on December 30, 2014, pursuant to a trust agreement (the “Trust < Agreement”). The Trust will issue Winklevoss Bitcoin Shares (the > formed on December 30, 2014 and operates pursuant to the Amended and > Restated Declaration of Trust and Trust Agreement (the “Trust > Agreement”) between Digital Asset Services, LLC, formerly Math-Based > Asset Services, LLC (the “Sponsor”), and Delaware Trust Company (the > “Trustee”). The Trust will issue Winklevoss Bitcoin Shares (the --- 9710,9734c10051,10076 ----------------------- < expected to issue or redeem Shares from time to time only in one or more < whole blocks of 50,000] Shares (each block of 50,000 Shares is a < “Basket”). The Trust will issue and redeem the Shares in Baskets only to < certain authorized firms (“Authorized Participants” or “APs”) on an < ongoing basis as described in the “Plan of Distribution” section below. < On a creation, Baskets will be distributed to the Authorized < Participants by the Trust in exchange for the delivery to the Trust of < the appropriate number of bitcoin (i.e., bitcoin equal in value to the < value of the Shares being purchased). On a redemption, the Trust will < distribute bitcoin equal in value to the value of the Shares being < redeemed to the redeeming Authorized Participant in exchange for the < delivery to the Trust of one or more Baskets. On each Business Day, the < value of each Basket accepted by the Administrator in a creation or < redemption transaction will be the same (i.e., each Basket will consist < of 50,000 Shares and the value of the Basket will be equal to the value < of 50,000 Shares at their net asset value per Share on that day). The < Trust will not issue or redeem fractions of a Basket. < < Digital Asset Services, LLC, formerly Math-Based Asset Services, LLC, is < the sponsor of the Trust (the “Sponsor”), a Delaware limited liability < company whose sole member is Winklevoss Capital Management, LLC. The < Sponsor is responsible for, among other things, overseeing the < performance of Delaware Trust Company (the “Trustee”) and the Trust’s < principal service providers. The Trustee is responsible for the < day-to-day administration of the Trust. > initially expected to issue or redeem Shares from time to time only in > one or more whole blocks of 100,000 Shares (each block of 100,000 Shares > is a “Basket”). The Trust will issue and redeem the Shares in Baskets > only to certain authorized firms (“Authorized Participants” or “APs”) on > an ongoing basis. On a creation, Baskets will be distributed to the > Authorized Participants by the Trust in exchange for the delivery to the > Trust of the appropriate number of bitcoin (i.e., bitcoin equal in value > to the net asset value per Share of the Trust (“NAV”) multiplied by the > number of Shares in the Basket). On a redemption, the Trust will > distribute bitcoin equal in value to the NAV multiplied by the number of > Shares in the Basket to the redeeming Authorized Participant in exchange > for the delivery to the Trust of one or more Baskets. On each Business > Day, the value of each Basket accepted by the Transfer Agent in a > creation or redemption transaction will be the same (i.e., each Basket > will initially consist of 100,000 Shares and the value of the Basket > will be equal to the value of 100,000 Shares (or such other amount as > determined by the Trust from time to time) at their net asset value per > Share on that day). The Trust will not issue or redeem fractions of a > Basket. > > The Sponsor is a Delaware limited liability company whose sole member is > Winklevoss Capital Fund, LLC. The Sponsor is responsible for, among > other things, overseeing the performance of the Trustee and the Trust’s > principal service providers. State Street Bank and Trust Company (the > “Administrator”) performs certain day-to-day administrative functions > for the Trust. --- 9738,9739c10080,10081 ----------------------- < ], 2016. At contribution, the value of the bitcoin deposited with the < Trust was based on the Gemini Exchange Spot Price (as defined in the > ], 2017. At contribution, the value of the bitcoin deposited with the > Trust was based on the Gemini Exchange Auction Price (as defined in the --- 9741,9742c10083,10084 ----------------------- < Purchaser owns one hundred (100) percent of the outstanding Shares. [The < Initial Purchaser is not affiliated with the Sponsor or the Trustee.] > Purchaser owns one hundred (100) percent of the outstanding Shares. The > Initial Purchaser is not affiliated with the Sponsor or the Trustee. --- 9745,9750c10087,10091 ----------------------- < price of bitcoin as measured at 4:00 p.m. Eastern time using the Gemini < Exchange Spot Price on each Business Day, less the Trust’s liabilities < (which include accrued but unpaid fees and expenses). The Shares are < designed for investors seeking a cost-effective and convenient means of < gaining investment exposure to bitcoin similar to a direct investment in < bitcoin. > price of bitcoin using the Gemini Exchange Auction Price on each > Business Day, less the Trust’s liabilities (which include accrued but > unpaid fees and expenses). The Shares are designed for investors seeking > a cost-effective and convenient means of gaining investment exposure to > bitcoin similar to a direct investment in bitcoin. --- 9756,9758d10096 ----------------------- < The following is a summary of significant accounting policies followed < by the Trust. < --- 9760,9770c10098,10244 ----------------------- < principles generally accepted in the United States (“GAAP”) requires < those responsible for preparing financial statements to make estimates < and assumptions that affect the reported amounts and disclosures. Actual < results could differ from those estimates. < < A. Valuation of Bitcoin < < The Trust’s bitcoin is held on a segregated basis by the Custodian using < the Custodian’s Cold Storage System, on behalf of the Trust, in unique < Bitcoin addresses with balances that can be directly verified on the < > principles generally accepted in the United States requires those > responsible for preparing financial statements to make estimates and > assumptions that affect the reported amounts and disclosures. Actual > results could differ from those estimates. The following is a summary of > significant accounting policies followed by the Trust > > A. Basis of Accounting > > The financial statements have been prepared in conformity with U.S. > generally accepted accounting principles (“U.S. GAAP”) as detailed in > the Financial Accounting Standards Board’s (“FASB”) Codification of > > > > F-7 > > Table of Contents > > Accounting Standards (“ASC”), which requires management to make > estimates and assumptions that affect the amounts reported in the > financial statements and accompanying notes. These estimates are based > on information available as of the date of the financial statements; > therefore, actual results could differ materially from those estimates. > > The Trust is considered an investment company under U.S. GAAP for > financial statement purposes and follows the accounting and reporting > guidance applicable to investment companies in FASB ASC Topic 946, > Financial Services—Investment Companies (“Topic 946”), but is not > registered, and is not required to be registered, under the Investment > Company Act of 1940, as amended. > > Additionally, U.S. GAAP contains no authoritative guidance related to > the accounting for bitcoins, digital assets, or virtual currencies. As a > result, transactions involving bitcoin have been accounted for > analogizing to existing accounting standards that management believes > are appropriate to the circumstances. There can be no certainty as to > when the FASB or other standard setter will issue accounting standards > for bitcoin, digital assets, or virtual currencies, if at all. > > B. Bitcoin Asset Class > > The Sponsor has concluded that the Trust’s bitcoin assets are most > analogous to commodities and the U.S. Commodity Futures Trading > Commission (“CFTC”) has recently determined that bitcoin is a commodity > as defined in Section 1a(9) of the Commodity Exchange Act. 7 U.S.C. § > 1a(9); see also In re Coinflip, Inc., No. 15-29 (CFTC Sept. 17, 2015); > In re BFXNA Inc., Case No. 16-19 (CFTC June 2, 2016). > > The important features of bitcoin (and other Digital Assets) are those > that are characteristics of commodities and that distinguish commodities > from other asset classes. Like commodities, bitcoin are units of > commerce that are interchangeable, traded in markets where customers are > not readily identifiable, and are immediately marketable at quoted > prices. Further, like gold bullion and other commodities, bitcoin come > into supply only when they are mined or extracted and are a limited > resource. > > C. Fair Value Measurement > > As an investment company following Topic 946, the Trust accounts for its > investment in bitcoin at the current fair value. In determining fair > value, the Trust follows the guidance of FASB ASC Topic 820, Fair Value > Measurement (“ASC Topic 820”). > > U.S. GAAP defines fair value as the price the Trust would receive to > sell an asset or pay to transfer a liability in an orderly transaction > between market participants at the measurement date. > > ASC Topic 820 establishes a fair value hierarchy: > > Level 1—Quoted prices in active markets that are accessible at the > measurement date for identical, unrestricted assets or liabilities, > without adjustments. > > Level 2—Quoted prices in markets that are not considered to be active > for identical or similar assets or liabilities, quoted prices in active > markets of similar assets or liabilities, and inputs other than quoted > prices that are observable or can be corroborated by observable market > data. > > Level 3—Pricing inputs are unobservable and include situations where > there is little, if any, market activity for the investment. > > > > F-8 > > Table of Contents > > The investment in bitcoin is classified as a Level 1 asset, as the > Trust’s investment in bitcoin is calculated using quoted prices in > active markets for identical assets that the Trust has the ability to > access. The following table summarizes the Trust’s investments at fair > value: > > > > > [ ], 2017 Level 1 Level 2 Level 3 > > Investment in Bitcoin $ [ ] $ — $ — > > Total $ [ ] $ — $ — > > The Trust accounts for bitcoin at its initial cost and subsequently > re-measures the carrying amounts at the end of each reporting period > based on the current fair value in accordance with ASC Topic 946. The > changes in fair value of bitcoin are reflected as realized and > unrealized gains (losses) in the statement of operations. In accordance > with FASB ASC rule 820-35-5, the Trust has determined that the Gemini > Exchange is the most advantageous market for the Trust based on a > variety of criteria following ASC Topic 820: (i) the licensing status of > the marketplace or operator in its operating jurisdiction, including its > BSA/AML program; (ii) the risk to the Trust and its Shareholders of > transmitting bitcoin to (and funds away from) the marketplace; (iii) the > liquidity available on the marketplace, particularly at the scale > required for the Creation and Redemption Baskets; and (iv) the overall > daily volume of the marketplace. These criteria are evaluated from the > perspective of the Trust, and it is expected that other key market > participants, such as the Trust’s Authorized Participants (as enumerated > in the most recent Registration Statement or other filing), would reach > a similar determination. The Trust intends to periodically reevaluate > its determination of its most advantageous market as the Bitcoin > ecosystem and Bitcoin Exchange Marketplace continue to evolve. > > As an investment company following Topic 946, the Trust accounts for its > investment in bitcoin at the current fair value in accordance with FASB > ASC rule 820-35-10-9A. The fair value of bitcoin is measured based on > the Gemini Exchange Auction Price (as defined in the most recent > Registration Statement), which results from the two-sided auction which > occurs daily at 4:00 p.m. Eastern Time on the Gemini Exchange, which has > been determined to be the most advantageous market. If, due to > extraordinary circumstances such as the unavailability of the Gemini > Exchange, that price is unavailable, fair value would be measured based > on another publicly available price as the Sponsor may in good faith > deem represents the fair value of the Trust’s bitcoin. > > D. Custody of Bitcoin > > The Trust’s bitcoin is held on a segregated basis by Gemini Trust > Company, LLC (the “Custodian”) using the Custodian’s Cold Storage > System, on behalf of the Trust, in unique Bitcoin addresses with > balances that can be directly verified on the Bitcoin Blockchain. The > cost of bitcoin is determined according to the average cost method. > Realized gains and losses on sales of bitcoin, or bitcoin distributed in > the redemption of a Basket, is calculated on a trade date basis using > average cost. --- 9771a10246 ----------------------- > E. Creation and Redemption of Shares --- 9773c10248,10264 ----------------------- < F-3 > The Trust is expected to issue or redeem Shares from time to time only > in one or more whole Baskets. The Trust will issue and redeem the Shares > in Baskets only to certain Authorized Participants on an ongoing basis. > On a creation, Baskets will be distributed to the Authorized > Participants by the Trust in exchange for the delivery to the Trust of > the appropriate number of bitcoin (i.e., bitcoin equal in value to the > NAV multiplied by the number of Shares in the Basket). On a redemption, > the Trust will distribute bitcoin equal in value to the NAV multiplied > by the number of Shares in the Basket to the redeeming Authorized > Participant in exchange for the delivery to the Trust of one or more > Baskets. On each Business Day, the value of each Basket accepted by the > Transfer Agent in a creation or redemption transaction will be the same > (i.e., each Basket will initially consist of 100,000 Shares and the > value of the Basket will be equal to the value of 100,000 Shares (or > such other amount as determined by the Trust from time to time) at their > net asset value per Share on that day). The Trust will not issue or > redeem fractions of a Basket. --- 9775d10265 ----------------------- < Table of Contents --- 9777,9785d10266 ----------------------- < Bitcoin Blockchain. The Trust’s bitcoin is valued, for financial < statement purposes, at the lower of cost or market. The cost of bitcoin < is determined according to the average cost method and the market value < is based on the Gemini Exchange Spot Price of the bitcoin being valued, < or such other publicly available price as the Sponsor may in good faith < deem represents the fair market value of the Trust’s bitcoin. Realized < gains and losses on sales of bitcoin, or bitcoin distributed in the < redemption of a Basket, is calculated on a trade date basis using < average cost. --- 9787c10268 ----------------------- < B. Creation and Redemption of Shares > F-9 --- 9789,9804c10270 ----------------------- < The Trust is expected to issue or redeem Shares from time to time only < in one or more whole Baskets. The Trust will issue and redeem the Shares < in Baskets only to certain Authorized Participants on an ongoing basis < as described in the “Plan of Distribution” section below. On a creation, < Baskets will be distributed to the Authorized Participants by the Trust < in exchange for the delivery to the Trust of the appropriate number of < bitcoin (i.e., bitcoin equal in value to the value of the Shares being < purchased). On a redemption, the Trust will distribute bitcoin equal in < value to the value of the Shares being redeemed to the redeeming < Authorized Participant in exchange for the delivery to the Trust of one < or more Baskets. On each Business Day, the value of each Basket accepted < by the Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value of < the Basket will be equal to the value of 50,000 Shares at their net < asset value per Share on that day). The Trust will not issue or redeem < fractions of a Basket. > Table of Contents --- 9812,9827c10278,10291 ----------------------- < arrangement with the Trust Agency Service Provider and the Sponsor < governing, among other matters, the creation and redemption processes. < Holders of the Shares of the Trust may redeem their Shares at any time < acting through an Authorized Participant and in the prescribed Basket < form; provided, however, that redemptions of Baskets may be suspended < during any period in which regular trading on BATS is suspended or < restricted, or in which an emergency exists as a result of which < delivery, disposal or evaluation of bitcoin is not reasonably < practicable. < < The Shares are classified as “Redeemable Capital Shares” for financial < statement purposes, since they are subject to redemption at the option < of Authorized Participants. Outstanding Shares are reflected at < redemption value, which represents the maximum obligation (based on net < asset value per Share), with the difference from historical cost < recorded as an offsetting amount to Retained Earnings. > arrangement with the Transfer Agent and the Sponsor governing, among > other matters, the creation and redemption processes. Holders of the > Shares of the Trust may redeem their Shares at any time acting through > an Authorized Participant and in the prescribed Basket form; provided, > however, that redemptions of Baskets may be suspended during any period > in which regular trading on Bats is suspended or restricted, or in which > an emergency exists as a result of which delivery, disposal or > evaluation of bitcoin is not reasonably practicable. > > The Shares are classified as “Net Assets” for financial statement > purposes, since they are subject to redemption at the option of > Authorized Participants. Outstanding Shares are reflected at redemption > value, which represents the maximum obligation (based on net asset value > per Share). --- 9829c10293 ----------------------- < At [ ], 2016, there are no Shares whose redemption value exceeds their > At [ ], 2017, there are no Shares whose redemption value exceeds their --- 9832c10296 ----------------------- < At [ ], 2016, [ ] Shares are outstanding. > At [ ], 2017, [ ] Shares are outstanding. --- 9837c10301,10303 ----------------------- < recorded. > recorded, rather than a contra equity, due to the expected continuing > sales and redemption of Shares and the three-day settlement period for > Shares. --- 9841c10307 ----------------------- < Exchange Spot Price, or such other publicly available price as the > Exchange Auction Price, or such other publicly available price as the --- 9846c10312 ----------------------- < generally not considered a taxable event for Shareholders but [is > generally not considered a taxable event for Shareholders but is --- 9848,9852c10314,10317 ----------------------- < gain or loss recognized currently]. For the purposes of creations and < redemptions of Baskets, net asset value per Share is computed by < deducting all accrued fees, expenses and other liabilities of the Trust, < including the Sponsor’s Fee, from the fair value of the bitcoin held by < the Trust. > gain or loss recognized currently. For the purposes of creations and > redemptions of Baskets, NAV is computed by deducting all accrued fees, > expenses and other liabilities of the Trust, including the Sponsor’s Fee > discussed below, from the fair value of the bitcoin held by the Trust. --- 9853a10319 ----------------------- > F. Calculation of Net Asset Value --- 9854a10321,10334 ----------------------- > On each Business Day, the Administrator will calculate the NAV of the > Trust as measured at 4:00 p.m. Eastern Time (the “Evaluation Time”) > using the Gemini Exchange Auction Price on each Business Day. The > Sponsor will provide the Gemini Exchange Auction Price, which is > publicly available, to the Administrator each day. The NAV of the Trust > is the asset value of the Trust less its liabilities (which include > accrued but unpaid fees and expenses) divided by the number of > outstanding Shares as of 4:00 p.m. Eastern Time each Business Day. > > G. Expenses and Realized Gains / (Losses) > > The primary expense of the Trust is the remuneration due to the Sponsor > (the “Sponsor’s Fee”), which is paid by the Trust through in-kind > transfers of bitcoin to the Sponsor. --- 9856c10336,10344 ----------------------- < F-4 > The Sponsor’s Fee shall be calculated by the Administrator and paid by > transfer of bitcoin from the segregated bitcoin account of the Trust to > the account maintained by the Custodian for the Sponsor. The Sponsor’s > Fee will accrue daily at an annualized rate equal to [ ] percent of the > bitcoin held by the Trust, paid monthly in arrears. > > The Sponsor has agreed to assume the following administrative and > marketing expenses incurred by the Trust: (i) the Trustee’s monthly fee > and reimbursable expenses (including indemnification amounts) under the --- 9858d10345 ----------------------- < Table of Contents --- 9860d10346 ----------------------- < C. Investment in Bitcoin --- 9862,9863c10348 ----------------------- < At [ ], 2016, the Trust owned [ ] bitcoin, with a carrying value (lower < of cost or market basis) of $[ ]. > F-10 --- 9865c10350 ----------------------- < D. Expenses > Table of Contents --- 9867,9869c10352,10389 ----------------------- < The Trust will pay to the Sponsor a fee that will accrue daily at an < annualized rate equal to 0. [ ] percent of the bitcoin held by the < Trust, paid monthly in arrears (the “Sponsor’s Fee”). > Trust Agreement; (ii) the Administrator’s monthly fees and reimbursable > expenses under the Administration Agreement; (iii) the Transfer Agent’s > monthly fees and reimbursable expenses under the Transfer Agency and > Services Agreement; (iv) the Custodian’s monthly fees and reimbursable > expenses under the Trust Custody Agreement; (v) Exchange listing fees; > (vi) Securities and Exchange Commission (“SEC”) registration fees; (vii) > printing and mailing costs; (viii) costs of maintaining the Trust’s > website; (ix) audit fees; (x) marketing expenses; and (xi) up to > $100,000 per annum in legal expenses. > > With respect to expenses not otherwise assumed by the Sponsor, the > Sponsor will instruct the Custodian to sell, or otherwise cause the sale > of that quantity of bitcoin as may be necessary to pay these expenses of > the Trust pursuant to the following procedures. The Sponsor will > instruct the Custodian to transfer bitcoin from the Trust Custody > Account to the Trust Expense Account. > > The Sponsor will cause bitcoin to be sold through dealers or by the > Custodian or Sponsor directly on a Bitcoin Exchange (which may include > the Gemini Exchange). The Sponsor may consider the market price > (relative to the value of a bitcoin as represented by the Gemini > Exchange Auction Price) expected to be obtained by such dealer or > through such Bitcoin Exchange and the ability of the dealer or Bitcoin > Exchange to conduct the sale of bitcoin with a minimal impact on the > market price of bitcoin. The Sponsor may offset the importance of one > factor against the remaining factors. The Custodian may be the purchaser > of such bitcoin only if the transaction is the result of a separate > arm’s-length transaction and the sale transaction is made at the Gemini > Exchange Auction Price or such other publicly available price that the > Sponsor in good faith deems fair and reasonable with respect to the > Trust, in each case as set following the sale order. Neither the Sponsor > nor the Administrator is liable for depreciation or loss incurred by > reason of any sale. > > Realized gains or losses result from the transfer of bitcoin for Share > redemptions and / or the payment of expenses and are recognized on a > trade date basis and are determined as the difference between the fair > value and cost of bitcoin transferred. --- 9871c10391 ----------------------- < E. Income Taxes > H. Income Taxes --- 9876,9878c10396,10407 ----------------------- < through” to Shareholders, and the Administrator will report the Trust’s < proceeds, income, deductions, gains, and losses to the Internal Revenue < Service on that basis. > through” to Shareholders, and the Trust’s proceeds, income, deductions, > gains, and losses will be reported to the Internal Revenue Service on > that basis. > > The Trust has adopted FASB ASC Topic 740-10, Income Taxes. The Sponsor > has evaluated the application of ASC Topic 740-10 to the Trust, to > determine whether or not there are uncertain tax positions in its major > jurisdictions that require financial statement recognition. Based on > this evaluation, the Sponsor has determined no reserves for uncertain > tax positions are required to be recorded as a result of the application > of ASC Topic 740. As a result, no income tax liability or expense has > been recorded in the accompanying financial statements. --- 9887c10416 ----------------------- < 4. Related Parties—Sponsor and Trustee Fees > 4. Related Parties --- 9889,9905c10418,10419 ----------------------- < Fees are paid to the Sponsor as compensation for services performed < under the Trust Agreement and for assuming the following administrative < and marketing expenses incurred by the Trust: (i) the Trustee’s monthly < fee and reimbursable expenses (including indemnification amounts) under < the Trust Agreement, (ii) the Administrator’s monthly fees and < reimbursable expenses under the Trust Servicing Agreement, (iii) the < Trust Agency Service Provider’s monthly fees and reimbursable expenses < under the Trust Agency Service Provider Agreement, (iv) the Custodian’s < monthly fees and reimbursable expenses under the Trust Custody < Agreement, (v) Exchange listing fees, (vi) SEC registration fees, (vii) < printing and mailing costs, (viii) costs of maintaining the Trust’s < website, (ix) audit fees, (x) up to $[ ] per annum in marketing expenses < and (xi) up to $[100,000] per annum in legal expenses. The Sponsor will < also pay up to $[ ] per annum in costs relating to the engagement of the < technology security consultant and any repairs or upgrades to the Cold < Storage System. Any such amounts in excess of $[ ] per annum will be < borne by the Trust as extraordinary expenses. > The Sponsor and the Custodian are considered to be related parties to > the Trust. --- 9907,9912c10421,10423 ----------------------- < The Sponsor’s Fee will accrue daily in bitcoin at an annualized rate < equal to [ ] percent of the bitcoin held by the Trust and will be < payable monthly in bitcoin, in arrears. The Sponsor, from time to time, < may temporarily waive all or a portion of the Sponsor’s Fee at its < discretion for a stated period of time. Presently, the Sponsor does not < intend to waive any of its fees. > Under the Trust Agreement, all management functions of the Trust have > been delegated to and are conducted by the Sponsor, its agents, and its > affiliates, including without limitation, the Custodian, and its agents. --- 9914,9917d10424 ----------------------- < Affiliates of the Trustee or the Sponsor may from time to time act as < Authorized Participants or purchase or sell bitcoin or the Shares for < their own account, as agent for their customers and for accounts over < which they exercise investment discretion. --- 9919,9928d10425 ----------------------- < The Custodian is responsible for the safekeeping of the Trust’s bitcoin < delivered by Authorized Participants in connection with the creation of < Baskets. The Custodian also facilitates the transfer of bitcoin into and < out of the Trust. The general role, responsibilities and regulation of < the Custodian are further described in “The Custodian” and “Custody of < the Trust’s Bitcoin.” < < The Custodian and its affiliates may from time to time act as Authorized < Participants or purchase or sell bitcoin or the Shares for their own < account or as agent for their customers. --- 9929a10427 ----------------------- > F-11 --- 9930a10429 ----------------------- > Table of Contents --- 9932c10431,10438 ----------------------- < F-5 > In their capacities as officers of the Sponsor, the principal executive > officer and principal financial officer of the Sponsor may take certain > actions and execute certain agreements and certifications for the > Sponsor in its capacity as Sponsor of the Trust. Additionally, the > Sponsor and/or its affiliates or agents provide access to the > intellectual property related to and monitor the Cold Storage System > used by the Custodian. The Sponsor and the Custodian are under common > management control. --- 9934c10440,10447 ----------------------- < Table of Contents > The Custodian is responsible for the safekeeping of the Trust’s bitcoin > delivered by Authorized Participants in connection with the creation of > Baskets. The Custodian also facilitates the transfer of bitcoin into and > out of the Trust. > > The Custodian and its affiliates may from time to time purchase or sell > bitcoin or the Shares for their own account or as agent for their > customers. --- 9975,9981c10488,10496 ----------------------- < Under the Trust Agreement, each of the Trustee (and its directors, < employees and agents) and the Sponsor (and its members, managers, < directors, officers, employees, affiliates) is indemnified against any < liability, cost or expense it incurs without gross negligence, willful < misconduct or bad faith on its part. The Trust’s maximum exposure under < these arrangements is unknown as this would involve future claims that < may be made against the Trust that have not yet occurred. > Under the Trust Agreement, the Trustee (and its officers, directors, > employees, affiliates and agents) is indemnified against any liability, > cost or expense it incurs with respect to the performance of the Trust > Agreement, the creation, operation or termination of the Trust or the > transactions contemplated under the Trust Agreement without gross > negligence, willful misconduct or bad faith on its part. The Trust’s > maximum exposure under these arrangements is unknown as this would > involve future claims that may be made against the Trust that have not > yet occurred. --- 9987c10502 ----------------------- < date, [ ], 2016. > date, [ ], 2017. --- 9991c10506 ----------------------- < F-6 > F-12 --- 10009c10516 ----------------------- < Until [ ], 2016 (twenty-five (25) calendar days after the date of this > Until [_], 2017 (twenty-five (25) calendar days after the date of this --- 10016c10523 ----------------------- < [ ], 2016 > [ ], 2017 --- 10037,10060c10544,10571 ----------------------- < Section [ ] of the Trust Agreement (“Trust Agreement”) between Delaware < Trust Company, the Registrant’s Trustee (“Trustee”), and the Sponsor < provides that the Trustee, its directors, employees and agents (each a < “Trustee Indemnified Party”) shall be indemnified and defended by the < Trust and the Sponsor, jointly and severally, and held harmless against < any and all losses, claims, damages, liabilities, joint or several, < expenses (including legal fees and expenses), judgments, fines, < penalties, interest, settlements or other amounts arising from any and < all threatened, pending or completed claims, demands, actions, suits or < proceedings, whether civil, criminal, administrative or investigative, < and whether formal or informal and including appeals, in which any < indemnitee may be involved, or is threatened to be involved, as a party < or otherwise, by reason of its status as an indemnitee whether arising < from acts or omissions to act occurring before or after the date of the < Trust Agreement, including the Trustee’s indemnification obligations < under these agreements) or by reason of the Trustee’s acceptance of the < Trust Agreement incurred without gross negligence, willful misconduct or < bad faith on the part of such indemnified party in connection with the < performance of its obligations under the Trust Agreement or any such < other agreement or any actions taken in accordance with the provisions < of the Trust Agreement or any such other agreement. Such indemnity shall < include payment from the Trust or the Sponsor of the costs and expenses < incurred by such indemnified party in defending itself against any claim < or liability in its capacity as Trustee. Any amounts payable to an > Article VIII of the Amended and Restated Declaration of Trust and Trust > Agreement (“Trust Agreement”) between Delaware Trust Company, the > Registrant’s Trustee (“Trustee”), and the Sponsor provides that the > Trust, as primary obligor, shall indemnify, defend and hold harmless the > Trustee and any of the officers, directors, employees, affiliates and > agents of the Trustee (the “Indemnified Persons”) from and against any > and all losses, damages, liabilities, claims, actions, suits, costs, > expenses, disbursements (including reasonable legal fees and expenses in > connection with enforcement of its rights to indemnity under the Trust > Agreement and including the reasonable fees and expenses of counsel), > taxes and penalties of any kind and nature whatsoever (collectively, > “Indemnified Expenses”), to the extent that such Indemnified Expenses > arise out of or are imposed upon or asserted at any time against such > Indemnified Persons with respect to the performance of the Trust > Agreement, the creation, operation or termination of the Trust or the > transactions contemplated under the Trust Agreement; provided, however, > that the Trust shall not be required to indemnify any Indemnified Person > for any Indemnified Expenses which are a result of the willful > misconduct, bad faith or gross negligence of an Indemnified Person. If > the Trust shall have insufficient assets or improperly refuses to pay an > Indemnified Person within sixty (60) days of a request for payment owed > under the Trust Agreement, the Sponsor shall, as secondary obligor, > compensate or reimburse the Trustee or indemnify, defend and hold > harmless an Indemnified Person as if it were the primary obligor under > the Trust Agreement; provided, however, that the Sponsor shall not be > required to indemnify any Indemnified Person for any Indemnified > Expenses which are a result of the willful misconduct, bad faith or > gross negligence of an Indemnified Person. Any amounts payable to an --- 10062c10573,10582 ----------------------- < lien on the Trust. > lien on the Trust. In addition, the Sponsor shall (i) compensate the > Trustee in accordance with a separate fee agreement with the Trustee and > (ii) reimburse the Trustee for all reasonable expenses (including > reasonable fees and expenses of counsel and other experts). > Notwithstanding the foregoing, the Trust may incur certain > extraordinary, nonrecurring expenses of the Trust that are not borne by > the Sponsor, including the cost of indemnifying the Custodian in the > event of losses resulting from a Digital Asset Network Fork pursuant to > the terms of the Trust Custody Agreement among the Sponsor, the Trust > and the Custodian. --- 10064,10090c10584,10585 ----------------------- < Section [ ] of the Trust Agreement provides that the Sponsor and its < members, managers, directors, officers, employees, affiliates (as such < term is defined under the Securities Act of 1933, as amended (the < “Securities Act”)) and subsidiaries shall be indemnified by the Trust < and held harmless against any loss, liability or expense incurred < without gross negligence, willful misconduct or bad faith on the part of < such indemnified party arising out of or in connection with the < performance of its obligations under the Trust Agreement and under each < other agreement entered into by the Sponsor in furtherance of the < administration of the Trust (including, without limiting the scope of < the foregoing, any Authorized Participant Agreement) or any actions < taken in accordance with the provisions of the Trust Agreement. Such < indemnity shall include payment from the Trust of the costs and expenses < incurred by such indemnified party in defending itself against any claim < or liability in its capacity as Sponsor. Any amounts payable to an < indemnified party may be payable in advance or shall be secured by a < lien on the Trust. The Sponsor may, in its discretion, undertake any < action that it may deem necessary or desirable in respect of the Trust < Agreement and the interests of Shareholders and, in such event, the < legal expenses and costs of any such actions shall be expenses and costs < of the Trust and the Sponsor shall be entitled to be reimbursed therefor < by the Trust. < < The indemnities provided by Section [ ] of the Trust Agreement shall < survive notwithstanding any termination of the Trust Agreement and the < Trust or the resignation or removal of the Trustee or the Sponsor, < respectively. > The indemnities provided by Article VIII of the Trust Agreement shall > survive notwithstanding any termination of the Trust Agreement. --- 10110,10120c10606,10616 ----------------------- < Description 4.1 Trust Agreement (the “Trust Agreement”)* 4.2 Form of < Authorized Participant Agreement* 4.3 Form of Global Certificate < (attached as Exhibit A to the Trust Agreement) 5.1 Form of Opinion of < Ropes & Gray LLP as to legality* 8.1 Form of Opinion of Ropes & Gray LLP < as to tax matters* 10.1 Trust Custody Agreement* 10.2 Trust Servicing < Agreement* 10.3 Trust Agency Service Provider Agreement* 10.4 Depository < Agreement* 10.6 Amended and Restated License Agreement* 23.1 Consent of < [AUDITOR]* 23.2 Consents of Ropes & Gray LLP are included in Exhibits < 5.1 and 8.1 24.1 Powers of attorney are included on the signature page < to the Trust’s registration statement filed with the Securities and < Exchange Commission on July 1, 2013. > > Description 4.1 Trust Agreement—filed herewith 4.1.1 Amended and > Restated Trust Agreement—filed herewith 4.2 Form of Authorized > Participant Agreement—filed herewith 4.3 Form of Global Certificate* 5.1 > Form of Opinion of Richards, Layton & Finger, P.A. as to legality* 8.1 > Form of Opinion of Ropes & Gray LLP as to tax matters* 10.1 Trust > Custody Agreement—filed herewith 10.2 Administration Agreement—filed > herewith 10.3 Transfer Agency and Services Agreement—filed herewith 10.4 > Depository Agreement* 23.1 Consent of BPM LLP* 23.2 Consent of Richards, > Layton & Finger, P.A. is included in Exhibit 5.1 23.3 Consent of Ropes & > Gray LLP is included in Exhibit 8.1 --- 10196c10692 ----------------------- < prospectus. As provided in Rule 430B, for liability proposes of the > prospectus. As provided in Rule 430B, for liability purposes of the --- 10285a10782,10783 ----------------------- > (6) > --- 10291c10789 ----------------------- < authorized, in the City of New York, New York, on June 29, 2016. > authorized, in the City of New York, New York, on February 8, 2017. --- 10300c10798,10800 ----------------------- < By: /s/ Cameron Winklevoss Cameron Winklevoss Chief Executive Officer > By: > > /s/ Cameron Winklevoss Cameron Winklevoss Chief Executive Officer --- 10318c10818,10820 ----------------------- < /s/ Cameron Winklevoss > /s/ Cameron Winklevoss > > Cameron Winklevoss --- 10323c10825 ----------------------- < (principal executive officer) June 29, 2016 Cameron Winklevoss > (principal executive officer) February 8, 2017 --- 10326c10828 ----------------------- < /s/ Tyler Winklevoss > /s/ Tyler Winklevoss --- 10333,10335c10835,10836 ----------------------- < (principal financial officer and principal accounting officer) June 29, < 2016 < > (principal financial officer and principal accounting officer) February > 8, 2017 --- 10344a10846,10866 ----------------------- > > Table of Contents > > EXHIBIT INDEX > > Winklevoss Bitcoin Trust > > > > > Exhibit Number > > > Description 4.1 Trust Agreement 4.1.1 Amended and Restated Trust > Agreement 4.2 Form of Authorized Participant Agreement 10.1 Trust > Custody Agreement 10.2 Administration Agreement 10.3 Transfer Agency and > Services Agreement > > > > 1