United States securities and exchange commission logo
November 13, 2023
Shannon Ghia
Chief Executive Officer
iShares Bitcoin Trust
c/o iShares Delaware Trust Sponsor LLC
400 Howard Street
San Francisco, CA 94105
Re: iShares Bitcoin
Trust
Amendment No. 1 to
Registration Statement on Form S-1
Filed October 19,
2023
File No. 333-272680
Dear Shannon Ghia:
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 or
Sponsor 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,
Prime Broker or
Custodian may not know a 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. In this regard, we note your disclosure in the third
risk factor on page 49.
3. Please revise to
disclose whether and to what extent the Trust, Sponsor, Prime Broker,
Shannon Ghia
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Bitcoin Custodian or any other entity is permitted to loan, pledge or
rehypothecate any of
the Trust s assets.
Cover Page
4. Please revise your cover page to disclose the termination date of the
offering, if any, and
disclose that you are registering an indeterminate number of Shares.
Prospectus Summary
Trust Objective, page 2
5. We note your disclosure on page 2 that "[t]he Bitcoin Custodian will
keep a substantial
portion of the private keys associated with the Trust's bitcoin in
'cold storage' or similarly
secure technology." Please revise to disclose the percentage of the
private keys held in
cold storage, and, on page 83, disclose the Bitcoin Custodian's
policies regarding whether
the private keys are held in cold or hot storage, and describe the
"similarly secure
technology." Also, we note that the Prime Broker holds the Trading
Balance across a
combination of omnibus hot wallets, cold wallets or in accounts in the
Prime Broker's
name on a trading venue. Please disclose the percentage held in each
or the policies
related to where the Trading Balance is held.
Summary Risk Factors
Risks Factors Related to Digital Assets, page 3
6. Please revise your disclosure here and in the first risk factor on
page 16 to provide
quantitative information that demonstrates the volatility of the price
of bitcoin.
The Offering
Trust expenses, page 8
7. We note your disclosure in the last paragraph on page 9 that fees and
expenses incurred by
the Trust and other Client Accounts will be allocated across the
entities on a pro
rata basis. Please revise here to provide a brief description of and
revise your disclosure
on page 68 to include a detailed description of the "other Client
Accounts," the entities
across which the Sponsor will allocate the costs on a pro rata basis,
the types of expenses
that may be allocated across the entities on a pro rata basis and the
types of expenses that
are specifically attributable to the Trust or another Client Account.
In addition, please
revise your disclosure on page 68 to describe the Sponsor's policies
related to allocating
the costs across the entities. In this regard, we note that the
Sponsor may do so on a pro
rata basis or "on a basis it considers to be equitable." Disclose the
criteria for determining
whether the allocation of costs is equitable.
Dissolution events, page 13
8. We note your disclosure in the fourth bullet point on page 14 that the
Sponsor may
dissolve the Trust if "the value of the Trust is at a level at which
continued operation of
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the Trust is not cost-efficient." Please revise to quantify or
otherwise describe what "cost-
efficient" means.
9. Please clarify whether Shareholders will be entitled to cash or
bitcoin upon the
termination of the Trust. In addition, if Shareholders will be
entitled to cash, please revise
your disclosure on page 74 to explain how the Trust's bitcoin will be
sold in connection
with the termination of the Trust.
If the digital asset award for mining blocks and transaction fees, page 21
10. Please revise the second bullet point in this risk factor to disclose
the current reward and
an estimate of the next reward halving event.
Risk Factors Related to the Digital Asset Markets
The Index has a limited history, page 28
11. Please expand this risk factor to quantify the CF Benchmarks Index's
limited history.
Similarly, please expand the second risk factor on page 35 to describe
the Sponsor's
limited history of operating investment vehicles involving crypto
assets.
Business of the Trust
Net Asset Value, page 62
12. We note your disclosure on page 62 that "[i]f the CF Benchmarks Index
is not available or
the Sponsor determines, in its sole discretion, that the CF Benchmarks
Index should not be
used, the Trust s holdings may be fair valued in accordance with the
policy approved by
the Sponsor." Please revise to disclose here whether the Sponsor has
selected a
methodology to use if the CF Benchmarks Index is not available, and,
if so, please
describe the methodology. In addition, please disclose the "policy
approved by the
Sponsor." To the extent that the Sponsor has not selected an
alternative methodology,
please describe the Sponsor's criteria or policies related to
selecting a different
methodology. Also disclose whether the Sponsor will notify investors
that the CF
Benchmarks Index was not and/or will not be used, and, if so, how the
Sponsor will notify
investors.
13. Please disclose whether an intra-day indicative value per Share is
calculated throughout
the day, and, if so, please disclose the methodology of the
calculation and where the
calculation is published. Similarly, please disclose where the net
asset value of the Trust
is published.
Valuation of Bitcoin; CF Benchmark Index, page 62
14. We note your response to prior comment 6. Please address the following
with respect to
your application of ASC Topic 820:
Provide us with your accounting policy for determining the fair
value of bitcoin in
accordance with ASC Topic 820.
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2023 Bitcoin Trust
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As the trust is expected to primarily transact with the bitcoin
markets through the
Authorized Participant, confirm for us that your determination of
the principal market
will be from the perspective of the Authorized Participant.
Tell us if you and/or your Authorized Participant plan to
transact in multiple markets.
If so, please ensure that your accounting policy reflects that
fact and describe the
types of markets in which you and/or your Authorized Participant
expect to transact.
In that regard, we note that ASC 820-10-35- 36A includes
definitions of four types of
markets (e.g. brokered market, dealer market, exchange market,
and principal to
principal market).
Clarify for us whether you anticipate your principal market
will be one which you or
your Authorized Participant will be able to access and in which
you or your
Authorized Participant will normally transact. Refer to ASC
Topics 820-10-35-6A
and 820-10-35-5A respectively.
In your disclosure on page 62 you disclose your intention to
engage a third party to
obtain a price from a principal market for bitcoin, and that
price will form the basis
for you determination of fair value in accordance with GAAP.
Please explain how
your determination of a principal market for bitcoin is
consistent with the guidance
in ASC Topic 820-10-35-6A which states the principal market shall
be considered
from the perspective of the reporting entity.
15. Please tell us what you mean by your disclosure that "[t]he selection
of exchanges for use
in the CF Benchmarks Index is based on the accessible venues on which
the Trust will
primarily execute transactions" and that "[t]he list of exchanges on
which the Trust
executes transactions may evolve from time to time." Also disclose the
characteristics of
a trading venue that is eligible to be a Constituent Exchange for the
CF Benchmarks
Index.
16. Please revise to describe the oversight procedures to ensure that the
Index is administered
through the Index Administrator's codified policies for Index
integrity, and provide a brief
description of the material codified policies for Index integrity.
17. Please disclose whether the Trustee, the Trust Administrator or the
Sponsor monitors for
unusual pricing such that the price may be corrected after 4:00 p.m.
Trust Expenses, page 68
18. We note your disclosure that "[t]he Sponsor may, at its discretion and
from time to time,
waive all or a portion of the Sponsor s Fee for stated periods of
time." Please revise to
disclose the criteria the Sponsor will consider or the reasons the
Sponsor may choose to
waive the fee. Also disclose whether, and, if so, how the Sponsor will
notify the
Shareholders of the "stated periods of time" for the waiver.
19. We note your disclosure that "[t]o cover the Sponsor s Fee and
expenses not assumed by
the Sponsor, the Sponsor or its delegate will cause the Trust (or its
delegate) to convert
bitcoin into U.S. dollars or other fiat currencies at the prevailing
exchange rate (less
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2023 Bitcoin Trust
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applicable fees) which the Sponsor is able to obtain using
commercially reasonable
efforts." Please revise to expand your disclosure to discuss how the
Sponsor will
determine the "prevailing exchange rate" and disclose the "other fiat
currencies."
Description of the Shares and the Trust Agreement, page 69
20. Please revise to disclose whether and, if so, how you will notify
Shareholders if the Trust
has suspended creations and redemptions, and describe the potential
impact of suspending
creations and redemptions. In addition, please revise to provide
examples of periods in
which the Sponsor may determine that delivery, disposal or evaluation
of bitcoin is not
reasonably practicable and reasons why the Sponsor may think it is
advisable to suspend
creation and redemptions.
Deposit of Bitcoin; Issuance of Baskets, page 70
21. Please disclose why and under what circumstances the Authorized
Participants will utilize
designated third parties to deliver bitcoin to the Trust's Trading
Balance with the Prime
Broker. Please also disclose when the bitcoin will be transferred to
the account with the
Bitcoin Custodian, whether that is a condition to issuing a Basket to
the Authorized
Participant, and who will be responsible for the cost of the on-chain
transaction.
The Custodians, page 83
22. Please disclose the percentage of the private keys held in cold
storage, the geographic
location of where the Trust's assets will be stored, the Custodian's
policies related to
comingling assets, the limit on the amount that can be held in each
wallet, the amount to
which the Bitcoin Custodian's insurance policies, including its
commercial crime
insurance policy, cover the Trust's assets held by the Custodian,
whether the insurance
provider or any other entity will be responsible for verifying the
existence of the bitcoin,
the instructions that the Sponsor has provided to the Custodian
regarding airdrops or forks
and the term of the agreement with the Bitcoin Custodian. In this
regard, we note that you
have provided a summary of your custody procedures on page 2 but you
should discuss
your custody procedures in greater detail here or include
cross-references to where
investors can find such disclosure.
The Prime Broker and the Trade Credit Lender
The Prime Broker, page 84
23. Please disclose the Prime Broker's policies related to whether the
Trust's assets are held in
hot wallets, cold wallets or accounts in the Prime Broker's name on a
trading venue. In
this regard, we note your disclosure on page 84 that "[t]he Prime
Broker is not required to
hold any of the bitcoin in the Trust s Trading Balance in cold
storage or to hold any such
bitcoin in segregation, and neither the Trust nor the Sponsor can
control the method by
which the Prime Broker holds the bitcoin credited to the Trust s
Trading Balance." Also
identify the Connected Trading Venues, how the Prime Broker selects
the Connected
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2023 Bitcoin Trust
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Trading Venues and, whether the Trust may direct the Prime Broker to
use a specific
Connected Trading Venue. In addition, we note your disclosure that
"[t]he Trust s
Trading Balance represents an entitlement to a pro rata share of the
bitcoin the Prime
Broker has allocated to the omnibus hot wallets, omnibus cold wallets,
and the accounts in
the Prime Broker s name that the Prime Broker maintains at Connected
Trading Venues
(which are typically held on an omnibus, rather than segregated,
basis)." Please clarify
what you mean by "a pro rata share of the bitcoin."
24. Please disclose the termination provisions and term of the Prime
Broker Agreement. In
this regard, we note your disclosure that the "Sponsor may, in its
sole discretion, add or
terminate prime brokers at any time" and that the "Prime Broker is
permitted to suspend or
terminate the Prime Broker Agreement under certain circumstances." In
addition, disclose
the policies and procedures that the Prime Broker has in place to
mitigate conflicts of
interest when executing the Trust's orders.
25. Please disclose the insurance coverage of the Prime Broker and the
degree to which the
insurance policy protects the Trust's assets held by the Prime Broker.
26. You state here that "the Trust may engage in purchases or sales of
bitcoin by placing
orders with the Prime Broker." Please revise to explain under what
circumstances the
Trust would need to engage in purchases of bitcoin.
The Trade Credit Lender, page 86
27. Please revise to disclose the maximum amount of Trade Credit that the
Trade Financing
Agreement permits to be outstanding at any one time. In addition,
please disclose the
Trade Credit interest rate. Also disclose the Sponsor's policy
regarding whether it
generally intends to fund the Trading Balance at the Prime Broker with
sufficient cash or
bitcoin to pay fees and expenses or whether it regularly expects to
utilize the Trade
Financing Agreement for such fees and expenses.
Seed Capital Investor, page 92
28. Please describe how the proceeds from the sale of the Seed Creation
Baskets will be
converted to bitcoin, including any costs or transaction fees payable
by the Trust
associated with such conversion.
Conflicts of Interest, page 94
29. Please revise your disclosure to briefly summarize the Sponsor's
policies and procedures
designed to eliminate or mitigate conflicts of interest, including the
Compliance Manual,
the Code of Ethics and the pre-clearance requirements for personnel
trading activity.
Exhibits
Amended and Restated Trust Agreement, page 104
30. We note the forum, damages and jury provisions in Section 7.5 of the
Amended and
Shannon Ghia
iShares Bitcoin Trust
November 13, 2023
Page 7
Restated Trust Agreement. Please tell us whether Section 7.5 applies
to actions arising
under the Securities Act or Exchange Act. To the extent that it does
not apply to actions
arising under the Securities Act or Exchange Act, please amend the
agreement so that it
clearly states that it does not or tell us how you will make investors
aware of the
provisions' limited applicability. In addition, please add risk
factors related to these
provisions.
Please contact David Irving at 202-551-3321 or Robert Telewicz at
202-551-3438 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 LastNameShannon Ghia Sincerely,
Comapany NameiShares Bitcoin Trust
Division of
Corporation Finance
November 13, 2023 Page 7 Office of Crypto
Assets
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