United States securities and exchange commission logo
December 14, 2023
Hunter Horsley
Chief Executive Officer
Bitwise Bitcoin ETF
c/o Bitwise Investment Advisers, LLC
250 Montgomery Street, Suite 200
San Francisco, CA 94104
Re: Bitwise Bitcoin ETF
Amendment No. 2 to
Registration Statement on Form S-1
Filed December 4,
2023
File No. 333-260235
Dear Hunter Horsley:
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 November 14,
2023 letter.
Amendment No. 2 to Registration Statement on Form S-1
Cover Page
1. Refer to your response
to comment 4. Please revise your cover page to identify the initial
Authorized Participant,
state that the initial Authorized Participant is an underwriter,
disclose the initial
price per Share, disclose that you are offering an indeterminate number
of Shares, and disclose
the termination date of the offering, if any.
Prospectus Summary
Overview of the Trust, page 1
2. Please revise to
disclose in your Prospectus Summary, if true, that:
The Trust, the
Sponsor and the service providers will not loan or pledge the Trust's
assets, nor will
the Trust's assets serve as collateral for any loan or similar
Hunter Horsley
FirstName LastNameHunter Horsley
Bitwise Bitcoin ETF
Comapany14,
December NameBitwise
2023 Bitcoin ETF
December
Page 2 14, 2023 Page 2
FirstName LastName
arrangement; and
The Trust will not utilize leverage or any similar arrangements
in seeking to meet its
investment objective.
3. Refer to your response to comment 6. Please revise your disclosure in
the Prospectus
Summary to state that Shareholders have no voting rights under the
Trust Agreement.
Custody of the Trust's Assets, page 5
4. Refer to your response to comment 8. On page 6, you disclose that
"[i]n connection with
creations or redemptions, the Trust will, under most circumstances,
process creations and
redemptions by selling bitcoin from its Cold Vault Balance." Please
revise to clarify why
the trust will sell bitcoin in connection with creations. In addition,
please substantiate or
remove your revised disclosure on page 4 that "[t]he Bitcoin Custodian
is subject to
extensive regulation."
The Trust's Fees and Expenses, page 5
5. Refer to your response to comment 7. Please disclose whether or not
any of the expenses
paid by the Sponsor Fee are capped. In addition, we note your
disclosure on pages 4 and
59 that "[t]o pay expenses not assumed by the Sponsor . . ., the
Trustee may directly
sell or transfer to an agent of the Shareholders to sell the bitcoin
of the Trust as necessary
to pay such expenses." Please revise to clarify what you mean by "sell
directly" and
"transfer to an agent of the Shareholders to sell."
Risk Factors, page 8
6. Please add a risk factor that addresses the risks related to your
Bitcoin Custodian acting in
the same capacity for several competing products to the extent
material.
Risk Associated with Investing in the Trust
The development and commercialization of the Trust is subject to competitive
pressures, page 31
7. Refer to your response to comment 11. Please expand this risk factor
to address the risks
associated with the timing of your product reaching the market and
your fee structure
relative to other bitcoin ETPs.
The amount of bitcoin represented by a Share will decline over time, page 33
8. Refer to your response to comment 10. On page 33, you refer to "Shares
that are issued in
exchange for additional deposits of bitcoin" and to the "Authorized
Participants' ability
to purchase and sell bitcoin in an efficient manner to effectuate
creation and redemption
orders." Please revise here and throughout to clarify that creations
of Shares will be cash
transactions. In this regard, we note your disclosure on page 6 that
"[i]t is currently
anticipated that all sales and redemptions of Shares will be done in
exchange for U.S.
dollars and only in transactions with Authorized Participants."
Hunter Horsley
FirstName LastNameHunter Horsley
Bitwise Bitcoin ETF
Comapany14,
December NameBitwise
2023 Bitcoin ETF
December
Page 3 14, 2023 Page 3
FirstName LastName
Other Risks
Shareholders' limited rights of legal recourse against the Trust, Trustee,
Sponsor, page 41
9. Refer to your response to comment 21. We note your disclosure on page
41 that "[t]he
Bitcoin Custodian maintains an annual renewed insurance policy in the
amount of $320
million," that "[t]his insurance policy covers the loss of client
assets held in cold storage at
the Bitcoin Custodian," and that "[t]his insurance program, which has
continuously run
since 2013, provides the Bitcoin Custodian and its clients with some
of the broadest and
deepest insurance coverage in the crypto industry, with coverage
designed to be
comprehensive, including losses from employee collusion or fraud,
physical loss
(including theft), or damage of key material, security breach or hack,
and fraudulent
transfer." However, on page 5, you state that "[t]he Bitcoin Custodian
has insurance
coverage as a subsidiary under its parent company, Coinbase Global,
Inc., which procures
fidelity (e.g., crime) insurance to protect the organization from
risks such as theft of
funds." Please revise to clarify whether the insurance policy
described on page 41 is in
addition to the policy held by the parent company, which covers
several subsidiaries and
not just the Bitcoin Custodian.
The Trust and Bitcoin Prices
The CME CF Bitcoin Reference Rate - New York Variant, page 53
10. Refer to your response to comments 18 and 22. We note your disclosure
on pages 29 and
57 that "[i]f the BRRNY is not available, or if the Sponsor
determines, in its sole
discretion, that the BRRNY does not reflect an accurate bitcoin price,
the Trust s holdings
may be 'fair valued' in accordance with the valuation policies
approved by the Sponsor."
Please revise your disclosure on page 52 to describe the valuation
policies approved by
the Sponsor.
BRRNY Methodology, page 54
11. Refer to your response to comment 24. Please revise to briefly
describe the contingency
calculations if, for example, a Relevant Transaction or Constituent
Platform is unavailable
or if there is a calculation failure.
12. Please revise to disclose how the Trust will notify Shareholders if
there is a material
change in the Constituent Platforms used to calculate the BRRNY or if
there is a material
change to the BRRNY Methodology.
Calculation of NAV, page 57
13. We continue to evaluate your response to prior comment 26 and may have
further
comment.
14. Refer to your response to comments 27 and 28. Please revise your
disclosure on page 57
to state who is responsible for calculating the ITV and how the ITV is
calculated.
Hunter Horsley
FirstName LastNameHunter Horsley
Bitwise Bitcoin ETF
Comapany14,
December NameBitwise
2023 Bitcoin ETF
December
Page 4 14, 2023 Page 4
FirstName LastName
Additional Information About the Trust
The Trust's Fees and Expenses, page 59
15. Refer to your response to comments 32 and 39. Your disclosure on page
59 that "[t]o pay
for expenses not assumed by the Sponsor (including, without
limitation, litigation
expenses and any indemnification obligations under the Trust s
service provider
agreements), the Trustee may directly sell or transfer to an agent of
the Shareholders to
sell the bitcoin of the Trust as necessary to pay such expenses" is
inconsistent with your
disclosure on page 60 that "[t]he Administrator and/or the Sponsor
will direct the Bitcoin
Custodian to transfer bitcoin from the Trust Bitcoin Account, as
needed, to pay the
Sponsor Fee and any other Trust expenses not assumed by the Sponsor."
Please revise for
clarity and consistency. In addition, please revise to expand your
disclosure regarding the
sale of bitcoin in connection with the Trust's fees and expenses to
describe the mechanics
of how the bitcoin is sold, including where and when the Bitcoin
Custodian transfers the
bitcoin in connection with a sale of the Trust's bitcoin, whether the
transfers of the Trust's
bitcoin are on-chain or off-chain and who is responsible for paying
the transaction costs,
the identity of the Bitcoin Trading Counterparty, whether the Trust
uses a liquidity
provider such as a prime broker and, if so, the portion of the Trust
s assets that are held
with the liquidity provider, and whether the Bitcoin Trading
Counterparty transfers the
proceeds of the sale to the Trust's Cash Custodian. In addition,
please revise your
disclosure on page 74 to disclose how the Sponsor selects a Bitcoin
Trading Counterparty
and disclose the Bitwise Portfolio Oversight Committee's policies
related to the criteria of
Bitcoin Trading Counterparties. Further clarify which of the Trust
expenses are not
assumed by the Sponsor's Fee by clarifying what you mean on page 59
that the Sponsor
pays for the "Trust's regular service providers."
16. Please revise to disclose the impact of the use of cash creations and
redemptions on the
efficiency of the arbitrage mechanism and how this compares to the use
of in-kind
creations and redemptions.
Distributions, page 60
17. Refer to your response to comment 31. Please revise to disclose how
the Trust's bitcoin
will be sold in connection with the termination and liquidation of the
Trust.
Custody of the Trust's Assets, page 66
18. Refer to your response to comment 34. Please revise to disclose the
term of the Bitcoin
Custody Agreement, the notification required to terminate the Bitcoin
Custody
Agreement, the amount of coverage provided by the Bitcoin Custodian's
commercial
crime insurance policy and whether the Sponsor has given the Bitcoin
Custodian any
instructions regarding airdrops, Incidental Rights and IR Assets. In
addition, please add
risk factors that address the risks associated with having to replace
the Bitcoin Custodian
or the Cash Custodian as well as the risks associated with insolvency,
business failure or
interruption, default, failure to perform, security breach or other
problems affecting the
Hunter Horsley
FirstName LastNameHunter Horsley
Bitwise Bitcoin ETF
Comapany14,
December NameBitwise
2023 Bitcoin ETF
December
Page 5 14, 2023 Page 5
FirstName LastName
Bitcoin Custodian or the Cash Custodian. Also please revise to
disclose the material
terms of the Cash Custodian Agreement, and please revise your
disclosure in the Material
Contracts section to provide the term and termination provision of
each contract.
Plan of Distribution
Authorized Participants, page 69
19. Refer to your response to comment 36. Please revise to 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 70
20. Please revise to add disclosure clarifying whether the Authorized
Participant bears the risk
of bitcoin price movements with respect to cash creations and
redemptions.
Creation Procedures, page 71
21. Refer to your response to comment 37. Please revise to disclose
whether the Bitcoin
Trading Counterparty must have an account with the Bitcoin custodian
and whether the
transfer from the Bitcoin Trading Counterparty is on-chain or
off-chain in connection with
creations and the transfer of bitcoin from the Bitcoin Custodian to
the Bitcoin Trading
Counterparty in connection with redemptions is on-chain or off-chain,
and, if on-chain,
who pays for the transfer fee. In addition, please disclose whether
excess cash not needed
for the purchase of bitcoin is returned to the Authorized Participant
if the price of bitcoin
has dropped since the Purchase Order Date. Also please disclose how
the Sponsor
"seek[s] to purchase bitcoin at [a] commercially reasonable price" by
explaining how the
Sponsor determines the "commercially reasonable price."
Governing Law; Consent to Delaware Jurisdiction, page 81
22. Refer to your response to comment 42. We note that the forum selection
provision applies
to claims under the Securities Act such that the federal district
courts of the United States
of America shall be the exclusive forum for the resolution of any
complaint asserting a
cause of action arising under the Securities Act, or the rules and
regulations promulgated
thereunder. Please revise to state that investors cannot waive
compliance with the federal
securities laws and the rules and regulations thereunder. In this
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.
Financial Statement
Note 1. Organization, page 96
23. We note from the cover page of your filing that you changed the name
of the registrant to
Bitwise Bitcoin ETF. Tell us why the financial statements continue to
refer to the
Hunter Horsley
Bitwise Bitcoin ETF
December 14, 2023
Page 6
registrant as Bitwise Bitcoin ETP Trust and why and when the name
changed.
Note 2. Significant Accounting Policies, page 96
24. Please include accounting policies for creations and redemptions and
calculating the net
asset value.
Exhibits
25. With respect to Exhibit 23.1, we note that KPMG LLP refers to the
reference to their firm
under the heading Fund Service Providers" and Independent
Registered Public
Accounting Firm in the Registration Statement on Form S-1. Please
ask them to tell us
why they do not refer to the Experts section on page 82. Also, tell us
where the Fund
Service Providers disclosure is included in the Form S-1.
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.
FirstName LastNameHunter Horsley Sincerely,
Comapany NameBitwise Bitcoin ETF
Division of
Corporation Finance
December 14, 2023 Page 6 Office of Crypto
Assets
FirstName LastName