United States securities and exchange commission logo
September 8, 2021
Michael Sonnenshein
Chief Executive Officer
Grayscale Bitcoin Cash Trust
290 Harbor Drive, 4th Floor
Stamford, CT 06902
Re: Grayscale Bitcoin
Cash Trust
Registration
Statement on Form 10
Filed July 12, 2021
File No. 000-56308
Dear Mr. Sonnenshein:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Exhibit 99.1
General
1. Please disclose the
process you conducted to determine whether BCH is a security for
purposes of the federal
securities laws, including the determination you made under that
process. In addition,
please revise to disclose that any determination you made is not a
legal standard and does
not preclude legal or regulatory action based on the presence of a
security.
2. Please provide us with
an opinion of counsel that BCH is not a security under Section
2(a)(1) of the
Securities Act. In addition, please include a detailed legal analysis
explaining whether
Grayscale Bitcoin Cash Trust is an investment company as defined
in Section 3 of the
Investment Company Act of 1940.
3. We note your disclosure
that Continental Stock Transfer & Trust Company is the
administrator of the
Trust. Please disclose the material terms related to the administrator's
Michael Sonnenshein
FirstName LastNameMichael
Grayscale Bitcoin Cash Trust Sonnenshein
Comapany 8,
September NameGrayscale
2021 Bitcoin Cash Trust
September
Page 2 8, 2021 Page 2
FirstName LastName
agreement and file the agreement as an exhibit to your registration
statement.
Overview
The Trust and the Shares, page 4
4. We note your disclosure on page 17 that BCH is the result of a hard
fork of Bitcoin.
Please revise to summarize the material differences between Bitcoin
and BCH, including
the reasons for the fork, differences in functionality and the
aggregate value, trading
volume and circulating supply of each.
5. Please revise to include a summary of the historical discrepancy,
including quantitative
disclosure, between the 4:00pm New York time spot prices of the
Digital Asset
Exchanges included in the Index and the Index Price. In this regard we
note your
disclosure on page 22.
Valuation of BTC and Digital Asset Holdings, page 6
6. We note your disclosure on page 6 that on March 31, 2021, the Digital
Asset Holdings per
Share was $4.83. Please also disclose the price per Share on the OTCQX
on March 31,
2021.
Trust Expenses, page 7
7. We note your disclosure on page 7 that the Sponsor may, from time to
time, waive all or a
portion of its fee in its sole discretion. Please describe the
circumstances under which the
Sponsor would consider waiving the management fee.
Risk Factors
Risk Factors Related to Digital Assets, page 12
8. Please revise to disclose the material risks associated with the
significant amount of
electricity consumed in connection with digital asset mining.
A temporary or permanent "fork" could adversely affect, page 17
9. Please revise to discuss the potential impact on the price of BCH at
the time of the
announcement or adoption of a hard fork, including a specific example
if possible.
Risk Factors Related to the Trust and the Shares
The Trust Agreement includes provisions that limit shareholders' voting rights,
page 31
10. We note your disclosure on page 31 that the derivative actions
provision in the Trust
Agreement does not apply to claims under the federal securities laws
and the rules and
regulations thereunder, but Section 7.4 of your Trust Agreement in
Exhibit 4.1 is silent as
to whether the provision applies to claims under the Securities Act or
Exchange Act.
Please tell us how you will inform investors in future filings that
the provision does not
Michael Sonnenshein
FirstName LastNameMichael
Grayscale Bitcoin Cash Trust Sonnenshein
Comapany 8,
September NameGrayscale
2021 Bitcoin Cash Trust
September
Page 3 8, 2021 Page 3
FirstName LastName
apply to any actions arising under the Securities Act or Exchange Act.
Overview of Bitcoin Cash, page 44
11. Please ensure that you have included a materially complete and up to
date description of
BCH, including the differences between Bitcoin and BCH. We note, by
way of example,
the reference to BCH having a block size limit of 8MB, which appears
to be out of date.
BCH Value, page 47
12. Please disclose the reasons why the Index Provider removed Bittrex and
Poloniex and
added LMAX Digital to the Digital Asset Exchanges included in the
Index.
The Index and the Index Price, page 49
13. Please clarify your disclosure regarding how the Index Provider
selects the Constituent
Digital Asset Exchanges. For example, disclose how the Index Provider
determines
whether a Digital Asset Exchange is a U.S. Compliant Exchange. Also
clarify whether
the "[d]iscretion" of the Index Provider means the discretion to
include and/or exclude
possible exchanges, and whether and why that discretion has been
exercised to date.
14. Please disclose whether the Sponsor will notify investors of changes
to the selected
Digital Asset Exchange used to calculate the Index Price, and, if so,
how the Sponsor will
notify the investor of such changes. In this regard, we note your
disclosure on page
50 regarding the communication of changes to the methodology of
calculating the Index
Price.
15. We note your disclosure on page 50 that the Index does not currently
utilize data from
over-the-counter markets or derivatives platforms but that it may
decide to do so in the
future. Please disclose the factors that the Index Provider will
considers in determining
whether to utilize data from the over-the-counter markets or
derivative platforms
16. Please define the term "major Digital Asset Exchanges," and clarify
what you mean by a
"third party's public data feed that is 'reasonably reliable'" in the
second and third rules on
page 51.
Weighting and Adjustments, page 50
17. We note your disclosure on page 51 that the Sponsor uses a cascading
set of rules to
calculate the Index Price if a specific rule fails and that, if the
Sponsor makes a good faith
determination that each sequential rule does not reflect an accurate
BCH price, it will
employ the next rule to determine the Index Price. Please revise to
disclose the criteria the
Sponsor considers to make its determination that the rule reflects an
accurate BCH price.
To the extent that such determination will not be based on predefined
criteria, state so
here, and add a risk factor addressing the attendant risks to
investors. Also, please
disclose the ways in which the Sponsor may use its best judgment to
determine a good
faith estimate of the Index Price in the fifth rule on page 52.
Michael Sonnenshein
Grayscale Bitcoin Cash Trust
September 8, 2021
Page 4
18. Please provide a representative example that demonstrates the
weighting of the applicable
exchanges and illustrates how the Index Price is calculated. Please
also confirm that you
have provided a materially complete description of the Index Price
methodology.
The Sponsor, page 77
19. Please disclose the extent to which the Sponsor has discretion to
select a different index
Index License Agreement, page 78
20. Please disclose the term of the Index License Agreement and describe
its termination
provision.
Description of Creation of Shares, page 92
21. Please clarify where, whether on your website or otherwise, investors
who subscribe to
purchase Shares from the Authorized Participant are able to identify
the amount of BCH
or cash required per Share at the time they make their investment.
Description of the Trust Documents
The Sponsor, page 101
22. Please disclose here, if true, that the Sponsor and the Trust do not
directly insure the
Trust's assets.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Ben Phippen at 202-551-3697 or Amit Pande at
202-551-3423 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Sonia Bednarowski at 202-551-3666 or Justin Dobbie at 202-551-3469 with
any other
questions.
FirstName LastNameMichael Sonnenshein Sincerely,
Comapany NameGrayscale Bitcoin Cash Trust
Division of
Corporation Finance
September 8, 2021 Page 4 Office of
Finance
FirstName LastName