United States securities and exchange commission logo
November 6, 2023
Cynthia Lo Bessette
President
Wise Origin Bitcoin Trust
c/o FD Funds Management LLC
245 Summer Street V13E
Boston, MA 02210
Re: Wise Origin Bitcoin
Trust
Amendment No. 1 to
Registration Statement on Form S-1
Filed October 17,
2023
File No. 333-254652
Dear Cynthia Lo Bessette:
We have reviewed your amended registration statement and have the
following
comments.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe a comment applies to your
facts and circumstances
or do not believe an amendment is appropriate, please tell us why in
your response.
After reviewing any amendment to your registration statement and
the information you
provide in response to this letter, we may have additional comments.
Unless we note otherwise,
any references to prior comments are to comments in our September 29,
2023 letter.
Amendment No. 1 to Registration Statement on Form S-1
General
1. To the extent that you
intend to use a fact sheet, please provide us a copy for our review.
2. Please describe the
AML, KYC and any other procedures conducted by the Trust, the
Sponsor, the Authorized
Participant and the Custodian to determine, among other things,
whether the
counter-party in any transactions is not a sanctioned entity. To the extent
that
the Trust, Sponsor,
Authorized Participant or Custodian may not know the counter-party,
please add risk factor
disclosure regarding the potential risk of transactions with a
sanctioned entity and
the impact if such a transaction occurs.
Cynthia Lo Bessette
FirstName
Wise OriginLastNameCynthia Lo Bessette
Bitcoin Trust
Comapany 6,
November NameWise
2023 Origin Bitcoin Trust
November
Page 2 6, 2023 Page 2
FirstName LastName
Cover Page
3. Please revise your disclosure here to identify the initial Authorized
Purchaser as an
underwriter, and disclose the initial price per Share.
Prospectus Summary
Overview, page 1
4. We note your disclosure on page 1 that the Trust provides direct
exposure to bitcoin. This
disclosure is inconsistent with disclosure on pages 3 and 27 that an
investment in the
Shares of the Trust is not a direct investment in bitcoin. Please
revise accordingly.
5. Please revise to disclose here that Shareholders do not have voting
rights.
6. Please revise your summary risk factors to disclose that the amount of
the Trust's assets
represented by each Share will decline over time as the Trust's assets
are used to pay the
Sponsor Fee and any other expenses.
Bitcoin and the Bitcoin Network, page 1
7. Please revise to provide quantitative information that demonstrates
the volatility of the
price of bitcoin.
Summary of Risk Factors, page 2
8. Refer to your response to comment 5 and your revised disclosure on
page 32. Please
revise to briefly address here the risks associated with the
competition you will face in
launching and sustaining your product, including the risk that your
timing in reaching the
market and your fee structure relative to other bitcoin ETPs could
have a detrimental
effect on the scale and sustainability of your product.
The Trust's Investment Objective, page 2
9. We note your disclosure on page 2 that "[b]arring the liquidation of
the Trust or
extraordinary circumstances, the Trust will not purchase or sell
bitcoin directly, although
the Trust may transfer bitcoin to pay the Sponsor Fee." Please revise
to clarify what you
mean by "extraordinary circumstances" by providing examples of such
circumstances.
Pricing Information Available on the Exchange and Other Sources, page 4
10. Refer to your response to comment 7. On page 4, you disclose that
"[a]ny adjustments
made to the Index will be published on the Sponsor s website at
www.fidelity.com."
Please revise to describe the adjustments that may be made to the
Index, summarize the
impact that such adjustments could have on the NAV of the Trust and
discuss the
adjustments and potential impact in greater detail in The Trust and
Bitcoin Prices section
that begins on page 51. In addition, please disclose here whether,
and, if so, how the
Trust will notify investors of any material adjustments to the Index
such as a change in
Cynthia Lo Bessette
FirstName
Wise OriginLastNameCynthia Lo Bessette
Bitcoin Trust
Comapany 6,
November NameWise
2023 Origin Bitcoin Trust
November
Page 3 6, 2023 Page 3
FirstName LastName
methodology or a change in exchanges underlying the Index or the
Sponsor's decision to
change the Index. Also disclose here that the Sponsor may, in its sole
discretion change
the Index without Shareholder approval. In the Trust and Bitcoin Price
section or
elsewhere, please revise to disclose how and when the Sponsor will
notify the
Shareholders and revise to disclose the criteria the Sponsor will use
to determine that
another index or standard better reflects the price of bitcoin.
Custody of the Trust's Assets, page 6
11. Refer to your response to comment 9. We note your disclosure on page 6
that the Trust's
bitcoin will be stored in omnibus wallets. Please disclose whether
these are hot or cold
wallets. We also note your disclosure that the "Custodian will ensure
that private keys
stored in 'cold storage' are associated with a substantial portion of
the Trust s bitcoin."
Please revise to clarify what you mean by "substantial portion" by
providing quantitative
information, and disclose the geographic location where the private
keys will be stored.
In addition, please summarize the impact that the Custodian's
bankruptcy could have on
the Trust's assets. We also note that the Custodian may be directed to
transfer bitcoin to
pay the Sponsor Fee and other expenses and that the Custodian
transfers bitcoin to the
Authorized Participants and receives bitcoin from the Authorized
Participants in
connection with creations and redemptions. Please disclose on page 59
how and when the
Custodian transfers the bitcoin for such purposes, including whether
and when it
moves bitcoin to a hot wallet and when it transfers the bitcoin it
receives to cold storage.
12. Please revise to disclose here and on page 59 that "[t]he Trust may
change the custodial
arrangements described in this prospectus at any time without notice
to Shareholders." In
addition, please disclose how and when the Trust will notify the
Shareholders that such a
change has occurred.
The Trust's Fees and Expenses, page 6
13. We note your disclosure on page 6 that "[t]he Administrator will
calculate the Sponsor
Fee in respect of each day by reference to the Trust s NAV as of
that day" but that "[t]he
amount of bitcoin transferred or sold may vary from time to time
depending on the market
price of bitcoin relative to the Trust's expenses and liabilities."
Please revise to disclose
how you calculate the "market price of bitcoin." In addition, please
disclose whether the
Trust is responsible for paying any costs associated with the transfer
of bitcoin to the
Sponsor or the sale of the bitcoin or if these expenses are included
in the Sponsor Fee. In
addition, we note your disclosure that "the Sponsor has agreed to pay
all operating
expenses (except for litigation expenses and other extraordinary
expenses) out of the
Sponsor Fee." Please revise to clarify what you mean by "other
extraordinary expenses"
by providing examples of such expenses, and disclose whether any of
the Trust's expenses
payable by the Sponsor from the Sponsor Fee are capped.
14. Please expand this section to describe the mechanics of how the Trust
s bitcoin will be
exchanged for U.S. dollars to pay the Trust s expenses and
liabilities, including whether
Cynthia Lo Bessette
FirstName
Wise OriginLastNameCynthia Lo Bessette
Bitcoin Trust
Comapany 6,
November NameWise
2023 Origin Bitcoin Trust
November
Page 4 6, 2023 Page 4
FirstName LastName
the Custodian will use a third party or affiliate to assist in the
sale of the Trust s bitcoins,
and, if so, disclose any risks or conflicts of interests that may
exist in connection with how
the Custodian arranges for the sale of the Trust s bitcoin.
Risk Factors
Risks Associated with Bitcoin and the Bitcoin Network
Operational cost may exceed the award for solving blocks or transaction fees,
page 23
15. Please expand this risk factor to address the maximum number of
bitcoins that may be
released into circulation and the number of bitcoin currently in
circulation.
Bitcoin mining activities are energy-intensive, page 25
16. Please expand this risk factor to address the reasons why bitcoin
mining may implicate
different risks than other crypto asset mining such as the differences
in proof-of-work and
proof-of-stake, and revise to discuss in greater detail regulations
that states have passed or
are currently considering that impact crypto asset mining.
Risks Associated with Investing in the Trust
The development and commercialization of the Trust, page 32
17. Refer to your response to comment 5. We note your disclosure on page
32 that "the
Sponsor s competitors may commercialize a product involving bitcoin
more rapidly or
effectively than the Sponsor is able to, which could adversely affect
the Sponsor s
competitive position, the likelihood that the Trust will achieve
initial market acceptance
and the Sponsor s ability to generate meaningful revenues from the
Trust, which in turn
could cause the Sponsor to dissolve and terminate the Trust." Please
revise to quantify or
otherwise describe what "meaningful revenues" means.
The Trust and Bitcoin Prices
Description of Index Construction and Maintenance, page 51
18. Refer to your response to comment 7. We note your disclosure that
"[t]he Committee may
from time to time add or remove other digital asset trading platforms
from the Index
calculation without prior notice to the Trust or the Shareholders, and
the Trust will not
notify Shareholders of any such addition or removal." Please tell us
why you believe that
it is not necessary to notify Shareholders regarding a change to the
Index to satisfy your
Exchange Act reporting obligations. In addition, please disclose, if
true, that the
Committee reviews the Index every six months for potential updates,
and please disclose
how you will notify Shareholders of material changes to the Index. In
this regard, we note
the June 2021 Index Methodology Document on the Index Provider's
website.
19. Refer to your response to comment 7. Please revise to disclose the
pricing window that is
used to determine the composite bitcoin price.
20. Please include a brief description of each of the crypto asset
exchanges used in the
Cynthia Lo Bessette
FirstName
Wise OriginLastNameCynthia Lo Bessette
Bitcoin Trust
Comapany 6,
November NameWise
2023 Origin Bitcoin Trust
November
Page 5 6, 2023 Page 5
FirstName LastName
calculation of the Index, including where they are located and how
they are licensed or
regulated.
21. Please disclose what policies or procedures you have in place if the
Index becomes
unavailable or if the Sponsor determines that the Index does not
reflect the accurate
bitcoin price.
Calculation of NAV, page 53
22. We acknowledge your response to comment 8 and that for purposes of
your financial
statements, you will utilize a pricing source that is consistent with
GAAP, as of the
financial statement measurement date. Please tell us and revise your
next amendment to
address the following:
Include a description of how you will identify and determine
the pricing source based
on your consideration of the fair value measurement framework in
ASC 820-10 and
the principal or most advantageous market for GAAP purposes.
The specific markets in which you and your Authorized
Participants expect to
transact and identify them by type. In that regard, we note that
ASC 820-10-235-36A
includes definitions of four types of markets (e.g. brokered,
dealer, exchange, and
principal to principal markets).
If you and your Authorized Participants plan to transact in
any, or all, of the specific
exchanges listed on page 51 of the amendment that are used by the
Index Provider.
How your determination of a principal market and or index
for bitcoin is consistent
with your principal market that you will have access to and
will normally transact
in. Refer to ASC 820-10-35-5A and ASC 820-10-35-6A.
23. We note your disclosure on page 54 regarding the pause between 4:00pm
EST and
5:30pm EST (or later) to algorithmically detect, flag, investigate and
correct unusual
pricing should it occur. Please revise to clarify who is responsible
for monitoring for
unusual pricing, who can correct the price, and how any such
correction would impact the
Index Price and/or NAV.
Amendments, page 57
24. Please revise to disclose how Shareholders will be notified of
material changes to the
Trust Agreement.
The Trust's Service Providers
The Sponsor, page 57
25. Please discuss here the Sponsor's experience sponsoring exchange
traded funds and
specifically its experience related to crypto asset markets.
Custody of the Trust's Assets, page 59
26. Please revise your disclosure here or on page 75 to include a
materially complete
Cynthia Lo Bessette
FirstName
Wise OriginLastNameCynthia Lo Bessette
Bitcoin Trust
Comapany 6,
November NameWise
2023 Origin Bitcoin Trust
November
Page 6 6, 2023 Page 6
FirstName LastName
discussion of your custody arrangements. For example, disclose the
term and termination
provisions of the Custodial Services Agreement, the "multi-person and
multi-
organizational access controls" that the Custodian uses for the
Trust's private keys, the
procedures for moving the Trust's assets out of cold storage in
connection with
redemptions and the payment of the Trust's expenses, the procedures
for moving bitcoin
into cold storage in connection with creations, the percentage of the
Trust's assets and
private keys held in cold storage, the geographic location of where
the Trust's assets will
be stored, the instructions that the Sponsor has provided to the
Custodian regarding
airdrops or forks. In this regard, we note that you have provided a
summary of your
custody procedures on page 6 but you should discuss your custody
procedures in greater
detail here or on page 75 or include cross-references to where
investors can find such
disclosure.
Plan of Distribution, page 61
27. Please identify by name all of the Authorized Participants with which
you have an
agreement at the time of effectiveness of the registration statement.
Creation and Redemption of Shares, page 62
28. Refer to your response to comment 10. We note your disclosure on page
62 that Baskets
"generally" are only made in exchange for delivery to the Trust or the
distribution by the
Trust of the amount of Bitcoin represented by the Baskets being
created or redeemed.
Please disclose the situations in which the Baskets will be made for
another purpose.
29. Refer to your response to comment 10. We note your disclosure that the
delivery of
bitcoin to the Custodian or to an Authorized Participant "may" settle
on the Bitcoin
network. Please revise to clarify whether all creation and redemption
transactions will be
settled on-chain.
30. Please provide a detailed discussion of the mechanics of the creation
and redemption
transactions, including whether your Authorized Participants will be
required to maintain
an account with your Custodian, whether and how the Authorized
Participants are able to
participate directly in the acquisition, transfer or receipt of
bitcoin and whether and to
what extent creation and redemption transactions will be settled
on-chain or off-chain and
any risks associated with the settlement process. Please describe the
specifics of how an
Authorized Participant will "facilitate the deposit of bitcoin with
the Trust," including the
various steps necessary to transfer the bitcoin to its ultimate
storage location with the
Custodian, and whether and under what circumstances the Authorized
Participant will
utilize an affiliate or third-party to transfer the bitcoin to the
Custodian.
Creation Procedures, page 63
31. Refer to your response to comment 10. We note your disclosure on page
64 that
"[b]itcoin held in the Trust s Custodian account is the property of
the Trust and is not
traded, leased, or loaned except as may be necessary to pay the
Sponsor Fee or the Trust s
Cynthia Lo Bessette
FirstName
Wise OriginLastNameCynthia Lo Bessette
Bitcoin Trust
Comapany 6,
November NameWise
2023 Origin Bitcoin Trust
November
Page 7 6, 2023 Page 7
FirstName LastName
expenses and liabilities." Please revise to clarify if the Trust's
assets are leased or loaned
in connection with the Sponsor Fee or the Trust expenses and
liabilities or used as
collateral for any loan, margin, rehypothecation or similar activities
to which you or your
affiliates are a party.
32. Refer to your response to comment 10. Please revise to discuss the
Sponsor's ability to
suspend creations. In addition, disclose whether and how you will
notify Shareholders if
the Trust has suspended creations and redemptions, and discuss the
potential impact of
suspending creations and redemptions.
Rejection of Purchase Orders, page 64
33. Refer to your response to comment 10. Please revise to provide an
example of when the
acceptance of the Basket Deposit would have an adverse tax consequence
to the Trust
and an example of when the acceptance of the Basket Deposits would
have an adverse
effect on the rights of the beneficial owners of the Trust. In
addition, we note your
disclosure on page 65 that references the "purchase authorization
limit afforded to the
Participant by the Trust" and the Participant's failure to deposit an
amount in excess of the
purchase authorization with the Trust's Custodian prior to 3:00pm EST
on Transmittal
Day. Please revise to discuss the purchase authorization limits for
Authorized Participants
and the need to deposit an amount in excess of the purchase
authorization. Also please
revise to include a definition of the term "Transmittal Day."
Conflicts of Interest, page 68
34. Refer to your response to comment 12. We note your disclosure on page
68 that "there
may be less expensive service providers or parties with greater
experience or expertise
than the affiliates selected by the Sponsor" and that, "[b]ecause of
the Sponsor s affiliated
status, it may be disincentivized from replacing affiliated service
providers in connection
with this conflict of interest, Shareholders should understand that
affiliated service
providers will be compensated for providing services to the Trust."
Please add a risk
factor that addresses these risks. In addition, we note that the
Sponsor and its affiliates do
not have policies and procedures for the pre-clearance of
bitcoin-related transactions.
Please revise to add a risk factor that addresses the potential risk
to Shareholders. Also we
note that Fidelity Product Services LLC is the Index Provider for the
Fidelity Bitcoin
Index PR and an affiliate of the Sponsor and that "[p]rocedures have
been implemented to
manage any conflicts of interest adversely affecting the interests of
Shareholders." Please
revise to describe these procedures.
Governing Law; Consent to Delaware Jurisdiction, page 75
35. We note your disclosure on page 75 that each Shareholder consents to
the exclusive
jurisdiction of the courts of the State of Delaware. Please disclose
whether this provision
applies to actions arising under the Securities Act or Exchange Act.
If so, please also state
that there is uncertainty as to whether a court would enforce such
provision. If the
Cynthia Lo Bessette
Wise Origin Bitcoin Trust
November 6, 2023
Page 8
provision applies to Securities Act claims, please also state that
investors cannot waive
compliance with the federal securities laws and the rules and regulations
thereunder. In
that regard, we note that Section 22 of the Securities Act creates
concurrent jurisdiction
for federal and state courts over all suits brought to enforce any duty
or liability created by
the Securities Act or the rules and regulations thereunder. If this
provision does not apply
to actions arising under the Securities Act or Exchange Act, please also
ensure that the
exclusive forum provision in the governing documents states this clearly,
or tell us how
you will inform investors in future filings that the provision does not
apply to any actions
arising under the Securities Act or Exchange Act.
Please contact Kate Tillan at 202-551-3604 or Michelle Miller at
202-551-3368 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Sonia Bednarowski at 202-551-3666 or Sandra Hunter Berkheimer at
202-551-3758 with
any other questions.
Sincerely,
FirstName LastNameCynthia Lo Bessette
Division of
Corporation Finance
Comapany NameWise Origin Bitcoin Trust
Office of Crypto
Assets
November 6, 2023 Page 8
cc: Morrison C. Warren
FirstName LastName