[Federal Register Volume 89, Number 114 (Wednesday, June 12, 2024)]
[Notices]
[Pages 49931-49945]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12793]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100290; File No. SR-NYSEARCA-2024-45]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1, To List and 
Trade Shares of the Grayscale Bitcoin Mini Trust Under NYSE Arca Rule 
8.201-E, Commodity-Based Trust Shares

June 6, 2024.
    On May 28, 2024, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares (``Shares'') of the Grayscale Bitcoin Mini Trust 
under NYSE Arca Rule 8.201-E, Commodity-Based Trust Shares. On June 5, 
2024, the Exchange filed Amendment No. 1, as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. 
Amendment No. 1 replaced and superseded the proposed rule change in its 
entirety. The Commission is publishing this notice to solicit comments 
on the proposed rule change, as modified by Amendment No. 1, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the following 
under NYSE Arca Rule 8.201-E: Grayscale Bitcoin Mini Trust (BTC) (the 
``Trust''). This Amendment No. 1 to SR-NYSEARCA-2024-45 replaces SR-
NYSEARCA2024-45 as originally filed and supersedes such filing in its 
entirety. The proposed rule change is available on the Exchange's 
website at www.nyse.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Under NYSE Arca Rule 8.201-E, the Exchange may propose to list and/
or trade pursuant to unlisted trading privileges ``Commodity-Based 
Trust

[[Page 49932]]

Shares.'' \3\ The Exchange proposes to list and trade shares 
(``Shares'') \4\ of the Trust pursuant to NYSE Arca Rule 8.201-E.\5\
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    \3\ Commodity-Based Trust Shares are securities issued by a 
trust that represent investors' discrete identifiable and undivided 
beneficial ownership interest in the commodities deposited into the 
Trust.
    \4\ The Shares are expected to be listed under the ticker symbol 
``BTC.''
    \5\ On March 12, 2024, the Trust filed a registration statement 
on Form S-1 under the Securities Act (File No. 333-277837) (the 
``Registration Statement''). The descriptions of the Trust and 
Shares contained herein are based, in part, on the Registration 
Statement. The Registration Statement is not yet effective, and the 
Shares will not trade on the Exchange until such time that the 
Registration Statement is effective.
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    The sponsor of the Trust is Grayscale Investments, LLC 
(``Sponsor''), a Delaware limited liability company. The Sponsor is a 
wholly-owned subsidiary of Digital Currency Group, Inc. (``Digital 
Currency Group''). The trustee for the Trust is Delaware Trust Company 
(``Trustee''). The custodian for the Trust's Bitcoin is Coinbase 
Custody Trust Company, LLC (``Custodian'').\6\ The administrator and 
transfer agent of the Trust is BNY Mellon Asset Servicing, a division 
of The Bank of New York Mellon (the ``Transfer Agent''). The 
distribution and marketing agent for the Trust will be Foreside Fund 
Services, LLC (the ``Marketing Agent''). The index provider for the 
Trust is CoinDesk Indices, Inc. (the ``Index Provider'').
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    \6\ According to the Sponsor, Digital Currency Group owns a 
minority interest in Coinbase, Inc., which is the parent company of 
the Custodian, representing less than 1.0% of its equity.
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    The Trust is a Delaware statutory trust, formed on March 12, 2024, 
that operates pursuant to a trust agreement between the Sponsor and the 
Trustee (``Trust Agreement''). The Trust has no fixed termination date.
Operation of the Trust
    According to the Registration Statement, the Trust's assets consist 
solely of Bitcoins.\7\
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    \7\ The Trust will not hold cash or engage a cash custodian 
other than in connection with creations and redemptions. The Trust 
may from time to time come into possession of Incidental Rights and/
or IR Virtual Currency by virtue of its ownership of Bitcoins, 
generally through a fork in the Bitcoin Blockchain, an airdrop 
offered to holders of Bitcoins or other similar event. ``Incidental 
Rights'' are rights to acquire, or otherwise establish dominion and 
control over, any virtual currency or other asset or right, which 
rights are incident to the Trust's ownership of Bitcoins and arise 
without any action of the Trust, or of the Sponsor or Trustee on 
behalf of the Trust. ``IR Virtual Currency'' is any virtual currency 
tokens, or other asset or right, acquired by the Trust through the 
exercise (subject to the applicable provisions of the Trust 
Agreement) of any Incidental Right. Although the Trust is permitted 
to take certain actions with respect to Incidental Rights and IR 
Virtual Currency in accordance with its Trust Agreement, at this 
time the Trust will prospectively irrevocably abandon any Incidental 
Rights and IR Virtual Currency. In the event the Trust seeks to 
change this position, the Exchange would file a subsequent proposed 
rule change with the Commission.
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    Each Share represents a proportional interest, based on the total 
number of Shares outstanding, in the Trust's assets as determined by 
reference to the Index Price,\8\ less the Trust's expenses and other 
liabilities (which include accrued but unpaid fees and expenses). The 
Sponsor expects that the market price of the Shares will fluctuate over 
time in response to the market prices of Bitcoin. In addition, because 
the Shares reflect the estimated accrued but unpaid expenses of the 
Trust, the number of Bitcoins represented by a Share will gradually 
decrease over time as the Trust's Bitcoins are used to pay the Trust's 
expenses.
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    \8\ The ``Index Price'' means the U.S. dollar value of a Bitcoin 
derived from the Digital Asset Trading Platforms that are reflected 
in the CoinDesk Bitcoin Price Index (XBX) (the ``Index''), 
calculated at 4:00 p.m., New York time, each day. For purposes of 
the Trust Agreement, the term Bitcoin Index Price has the same 
meaning as the Index Price as defined herein.
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    The activities of the Trust will be limited to (i) issuing 
``Baskets'' (as defined below) in exchange for Bitcoins transferred to 
the Trust as consideration in connection with creations, (ii) 
transferring or selling Bitcoins as necessary to cover the Sponsor's 
Fee \9\ and/or certain Trust expenses, (iii) transferring Bitcoins in 
exchange for Baskets surrendered for redemption (subject to obtaining 
regulatory approval from the Commission and approval of the Sponsor), 
(iv) causing the Sponsor to sell Bitcoins on the termination of the 
Trust, and (v) engaging in all administrative and security procedures 
necessary to accomplish such activities in accordance with the 
provisions of the Trust Agreement, the Custodian Agreement, the Index 
License Agreement and the Participant Agreements (each as defined 
below).
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    \9\ The Sponsor's Fee means a fee, payable in Bitcoins, which 
accrues daily in U.S. dollars at an annual rate that is a percentage 
of the NAV Fee Basis Amount of the Trust as of 4:00 p.m., New York 
time, on each day; provided that for a day that is not a business 
day, the calculation of the Sponsor's Fee will be based on the NAV 
Fee Basis Amount from the most recent business day, reduced by the 
accrued and unpaid Sponsor's Fee for such most recent business day 
and for each day after such most recent business day and prior to 
the relevant calculation date. The Sponsor's Fee will be determined 
upon listing on the Exchange. The ``NAV Fee Basis Amount'' is 
calculated in the manner set forth under ``Valuation of Bitcoin and 
Determination of NAV'' below.
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    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 Bitcoins.
Investment Objective
    According to the Registration Statement, the Trust's investment 
objective is for the value of the Shares (based on Bitcoin per Share) 
to reflect the value of the Bitcoins held by the Trust, determined by 
reference to the Index Price, less the Trust's expenses and other 
liabilities.
    While an investment in the Shares is not a direct investment in 
Bitcoin, the Shares are designed to provide investors with a cost-
effective and convenient way to gain investment exposure to Bitcoin. 
Generally speaking, 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. Because 
the value of the Shares is correlated with the value of Bitcoin held by 
the Trust, it is important to understand the investment attributes of, 
and the market for, Bitcoin.
    The Trust uses the Index Price to calculate its ``NAV,'' which is 
the aggregate value, expressed in U.S. dollars, of the Trust's assets 
(other than U.S. dollars or other fiat currency), less the U.S. dollar 
value of the Trust's expenses and other liabilities calculated in the 
manner set forth under ``Valuation of Bitcoin and Determination of 
NAV.'' ``NAV per Share'' is calculated by dividing NAV by the number of 
Shares then outstanding.
Valuation of Bitcoin and Determination of NAV
    The following is a description of the material terms of the Trust 
Agreement as it relates to valuation of the Trust's Bitcoin and the NAV 
calculations.\10\
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    \10\ While the Sponsor uses the terminology ``NAV'' in this 
filing, the term used in the Trust Agreement is ``Digital Asset 
Holdings.''
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    On each business day at 4:00 p.m., New York time, or as soon 
thereafter as practicable (the ``Evaluation Time''), the Sponsor will 
evaluate the Bitcoins held by the Trust and calculate and publish the 
NAV of the Trust. To calculate the NAV, the Sponsor will:
    1. Determine the Index Price as of such business day.
    2. Multiply the Index Price by the Trust's aggregate number of 
Bitcoins owned by the Trust as of 4:00 p.m., New York time, on the 
immediately preceding day, less the aggregate number of Bitcoins 
payable as the accrued and unpaid Sponsor's Fee as of

[[Page 49933]]

4:00 p.m., New York time, on the immediately preceding day.
    3. Add the U.S. dollar value of Bitcoins, calculated using the 
Index Price, receivable under pending creation orders, if any, 
determined by multiplying the number of the Baskets represented by such 
creation orders by the Basket Amount and then multiplying such product 
by the Index Price.\11\
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    \11\ ``Baskets'' and ``Basket Amount'' have the meanings set 
forth in ``Creation and Redemption of Shares'' below.
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    4. Subtract the U.S. dollar amount of accrued and unpaid Additional 
Trust Expenses,\12\ if any.
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    \12\ ``Additional Trust Expenses'' are any expenses incurred by 
the Trust in addition to the Sponsor's Fee that are not Sponsor-paid 
expenses, including, but not limited to, (i) taxes and governmental 
charges, (ii) expenses and costs of any extraordinary services 
performed by the Sponsor (or any other service provider) on behalf 
of the Trust to protect the Trust or the interests of shareholders, 
(iii) any indemnification of the Custodian or other agents, service 
providers or counterparties of the Trust, (iv) the fees and expenses 
related to the listing, quotation or trading of the Shares on any 
marketplace or other alternative trading system, as determined by 
the Sponsor, on which the Shares may then be listed, quoted or 
traded, including but not limited to, NYSE Arca, Inc. (including 
legal, marketing and audit fees and expenses) to the extent 
exceeding $600,000 in any given fiscal year and (v) extraordinary 
legal fees and expenses, including any legal fees and expenses 
incurred in connection with litigation, regulatory enforcement or 
investigation matters.
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    5. Subtract the U.S. dollar value of the Bitcoins, calculated using 
the Index Price, to be distributed under pending redemption orders, if 
any, determined by multiplying the number of Baskets to be redeemed 
represented by such redemption orders by the Basket Amount and then 
multiplying such product by the Index Price (the amount derived from 
steps 1 through 5 above, the ``NAV Fee Basis Amount'').
    6. Subtract the U.S. dollar amount of the Sponsor's Fee that 
accrues for such business day, as calculated based on the NAV Fee Basis 
Amount for such business day.
    In the event that the Sponsor determines that the primary 
methodology used to determine the Index Price is not an appropriate 
basis for valuation of the Trust's Bitcoins, the Sponsor will utilize 
the cascading set of rules as described in ``Determination of the Index 
Price When Index Price is Unavailable'' below.
Bitcoin and the Bitcoin Network
    According to the Registration Statement, Bitcoin is a digital asset 
that is created and transmitted through the operations of the peer-to-
peer ``Bitcoin Network,'' a decentralized network of computers that 
operates on cryptographic protocols. No single entity owns or operates 
the Bitcoin Network, the infrastructure of which is collectively 
maintained by a decentralized user base. The Bitcoin Network allows 
people to exchange tokens of value, called Bitcoin, which are recorded 
on a public transaction ledger known as a Blockchain. Bitcoin can be 
used to pay for goods and services, or it can be converted to fiat 
currencies, such as the U.S. dollar, at rates determined on ``Digital 
Asset Markets'' \13\ that trade Bitcoin or in individual end-user-to-
end-user transactions under a barter system.
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    \13\ A ``Digital Asset Market'' is a ``Brokered Market,'' 
``Dealer Market,'' ``Principal-to-Principal Market'' or ``Exchange 
Market,'' as each such term is defined in the Financial Accounting 
Standards Board Accounting Standards Codification Master Glossary. 
The ``Digital Asset Trading Platform Market'' is the global trading 
platform market for the trading of Bitcoins, which consists of 
transactions on electronic Digital Asset Trading Platforms. A 
``Digital Asset Trading Platform'' is an electronic marketplace 
where participants may trade, buy and sell Bitcoins based on bid-ask 
trading. The largest Digital Asset Trading Platforms are online and 
typically trade on a 24-hour basis, publishing transaction price and 
volume data.
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    The Bitcoin Network is decentralized in that it does not require 
governmental authorities or financial institution intermediaries to 
create, transmit or determine the value of Bitcoin. Rather, Bitcoin is 
created and allocated by the Bitcoin Network protocol through a 
``mining'' process. The value of Bitcoin is determined by the supply of 
and demand for Bitcoin on the Digital Asset Markets or in private end-
user-to-end-user transactions.
    New Bitcoin are created and rewarded to the miners of a block in 
the Blockchain for verifying transactions. The Blockchain is 
effectively a decentralized database that includes all blocks that have 
been mined by miners and it is updated to include new blocks as they 
are solved. Each Bitcoin transaction is broadcast to the Bitcoin 
Network and, when included in a block, recorded in the Blockchain. As 
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.
Overview of the Bitcoin Network's Operations
    In order to own, transfer or use Bitcoin directly on the Bitcoin 
Network (as opposed to through an intermediary, such as a custodian), a 
person generally must have internet access to connect to the Bitcoin 
Network. Bitcoin transactions may be made directly between end-users 
without the need for a third-party intermediary. To prevent the 
possibility of double-spending Bitcoin, a user must notify the Bitcoin 
Network of the transaction by broadcasting the transaction data to its 
network peers. The Bitcoin Network provides confirmation against 
double-spending by memorializing every transaction in the Blockchain, 
which is publicly accessible and transparent. This memorialization and 
verification against double-spending is accomplished through the 
Bitcoin Network mining process, which adds ``blocks'' of data, 
including recent transaction information, to the Blockchain.
Summary of a Bitcoin Transaction
    Prior to engaging in Bitcoin transactions directly on the Bitcoin 
Network, a user generally must first install on its computer or mobile 
device a Bitcoin Network software program that will allow the user to 
generate a private and public key pair associated with a Bitcoin 
address, commonly referred to as a ``wallet.'' The Bitcoin Network 
software program and the Bitcoin address also enable the user to 
connect to the Bitcoin Network and transfer Bitcoin to, and receive 
Bitcoin from, other users.
    Each Bitcoin Network address, or wallet, is associated with a 
unique ``public key'' and ``private key'' pair. To receive Bitcoin, the 
Bitcoin recipient must provide its public key to the party initiating 
the transfer. This activity is analogous to a recipient for a 
transaction in U.S. dollars providing a routing address in wire 
instructions to the payor so that cash may be wired to the recipient's 
account. The payor approves the transfer to the address provided by the 
recipient by ``signing'' a transaction that consists of the recipient's 
public key with the private key of the address from where the payor is 
transferring the Bitcoin. The recipient, however, does not make public 
or provide to the sender its related private key.
    Neither the recipient nor the sender reveal their private keys in a 
transaction, because the private key authorizes transfer of the funds 
in that address to other users. Therefore, if a user loses his private 
key, the user may permanently lose access to the Bitcoin contained in 
the associated address. Likewise, Bitcoin is irretrievably lost if the 
private key associated with them is deleted and no backup has been 
made. When sending Bitcoin, a user's Bitcoin Network software program 
must validate the transaction with the associated private key. In 
addition, since every computation on the Bitcoin Network requires 
processing power,

[[Page 49934]]

there is a transaction fee involved with the transfer that is paid by 
the payor. The resulting digitally validated transaction is sent by the 
user's Bitcoin Network software program to the Bitcoin Network miners 
to allow transaction confirmation.
    Bitcoin Network miners record and confirm transactions when they 
mine and add blocks of information to the Blockchain. When a miner 
mines a block, it creates that block, which includes data relating to 
(i) newly submitted and accepted transactions; (ii) a reference to the 
prior block in the Bitcoin Blockchain; and (iii) the satisfaction of 
the consensus mechanism to mine the block. The miner becomes aware of 
outstanding, unrecorded transactions through the data packet 
transmission and distribution discussed above.
    Upon the addition of a block included in the Blockchain, the 
Bitcoin Network software program of both the spending party and the 
receiving party will show confirmation of the transaction on the 
Blockchain and reflect an adjustment to the Bitcoin balance in each 
party's Bitcoin Network public key, completing the Bitcoin transaction. 
Once a transaction is confirmed on the Blockchain, it is irreversible.
    Some Bitcoin transactions are conducted ``off-blockchain'' and are 
therefore not recorded in the Blockchain. Some ``off-blockchain 
transactions'' involve the transfer of control over, or ownership of, a 
specific digital wallet holding Bitcoin or the reallocation of 
ownership of certain Bitcoin in a pooled-ownership digital wallet, such 
as a digital wallet owned by a Digital Asset Trading Platform. In 
contrast to on-blockchain transactions, which are publicly recorded on 
the Blockchain, information and data regarding off-blockchain 
transactions are generally not publicly available. Therefore, off-
blockchain transactions are not truly Bitcoin transactions in that they 
do not involve the transfer of transaction data on the Bitcoin Network 
and do not reflect a movement of Bitcoin between addresses recorded in 
the Blockchain. For these reasons, off-blockchain transactions are 
subject to risks, as any such transfer of Bitcoin ownership is not 
protected by the protocol behind the Bitcoin Network or recorded in, 
and validated through, the blockchain mechanism.
Limits on Bitcoin Supply
    The supply of new Bitcoin is mathematically controlled so that the 
number of Bitcoin grows at a limited rate pursuant to a pre-set 
schedule. The number of Bitcoin awarded for solving a new block is 
automatically halved after every 210,000 blocks are added to the 
Blockchain. Currently, the fixed reward for solving a new block is 
3.125 Bitcoin per block and this is expected to decrease by half to 
become 1.5625 Bitcoin after the next 210,000 blocks have entered the 
Bitcoin Network, which is expected to be mid-2028. This deliberately 
controlled rate of Bitcoin creation means that the number of Bitcoin in 
existence will increase at a controlled rate until the number of 
Bitcoin in existence reaches the pre-determined 21 million Bitcoin. As 
of March 31, 2024, approximately 19.7 million Bitcoins were outstanding 
and the date when the 21 million Bitcoin limitation will be reached is 
estimated to be the year 2140.
Custody of the Trust's Bitcoins
    Digital assets and digital asset transactions are recorded and 
validated on blockchains, the public transaction ledgers of a digital 
asset network. Each digital asset blockchain serves as a record of 
ownership for all of the units of such digital asset, even in the case 
of certain privacy-preserving digital assets, where the transactions 
themselves are not publicly viewable. All digital assets recorded on a 
blockchain are associated with a public blockchain address, also 
referred to as a digital wallet. Digital assets held at a particular 
public blockchain address may be accessed and transferred using a 
corresponding private key.
Key Generation
    Public addresses and their corresponding private keys are generated 
by the Custodian in secret key generation ceremonies at secure 
locations inside faraday cages, which are enclosures used to block 
electromagnetic fields and thus mitigate against attacks. The Custodian 
uses quantum random number generators to generate the public and 
private key pairs.
    Once generated, private keys are encrypted, separated into 
``shards,'' and then further encrypted. After the key generation 
ceremony, all materials used to generate private keys, including 
computers, are destroyed. All key generation ceremonies are performed 
offline. No party other than the Custodian has access to the private 
key shards of the Trust.
Key Storage
    Private key shards are distributed geographically in secure vaults 
around the world, including in the United States. The locations of the 
secure vaults may change regularly and are kept confidential by the 
Custodian for security purposes.
    The ``Digital Asset Account'' is a segregated custody account 
controlled and secured by the Custodian to store private keys, which 
allows for the transfer of ownership or control of the Trust's Bitcoins 
on the Trust's behalf. The Digital Asset Account uses offline storage, 
or ``cold'' storage, mechanisms to secure the Trust's private keys. The 
term cold storage refers to a safeguarding method by which the private 
keys corresponding to digital assets are disconnected and/or deleted 
entirely from the internet. Cold storage of private keys may involve 
keeping such keys on a non-networked (or ``air-gapped'') computer or 
electronic device or storing the private keys on a storage device (for 
example, a USB thumb drive) or printed medium (for example, papyrus, 
paper or a metallic object). A digital wallet may receive deposits of 
digital assets but may not send digital assets without use of the 
digital assets' corresponding private keys. In order to send digital 
assets from a digital wallet in which the private keys are kept in cold 
storage, either the private keys must be retrieved from cold storage 
and entered into an online, or ``hot,'' digital asset software program 
to sign the transaction, or the unsigned transaction must be 
transferred to the cold server in which the private keys are held for 
signature by the private keys and then transferred back to the online 
digital asset software program. At that point, the user of the digital 
wallet can transfer its digital assets.
Security Procedures
    The Custodian is the custodian of the Trust's private keys (which, 
as noted above, facilitate the transfer of ownership or control of the 
Trust's Bitcoins) in accordance with the terms and provisions of the 
custodian agreement by and between the Custodian, the Sponsor and the 
Trust (the ``Custodian Agreement''). Transfers from the Digital Asset 
Account require certain security procedures, including, but not limited 
to, multiple encrypted private key shards, usernames, passwords and 2-
step verification. Multiple private key shards held by the Custodian 
must be combined to reconstitute the private key to sign any 
transaction in order to transfer the Trust's assets. Private key shards 
are distributed geographically in secure vaults around the world, 
including in the United States.
    As a result, if any one secure vault is ever compromised, this 
event will have no impact on the ability of the Trust to access its 
assets, other than a possible

[[Page 49935]]

delay in operations, while one or more of the other secure vaults is 
used instead. These security procedures are intended to remove single 
points of failure in the protection of the Trust's assets.
    Transfers of Bitcoins to the Digital Asset Account will be 
available to the Trust once processed on the Blockchain.
    Subject to obtaining regulatory approval to operate a redemption 
program and authorization of the Sponsor, the process of accessing and 
withdrawing Bitcoins from the Trust to redeem a Basket by an Authorized 
Participant \14\ will follow the same general procedure as transferring 
Bitcoins to the Trust to create a Basket by an Authorized Participant, 
only in reverse.
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    \14\ ``Authorized Participant'' has the meaning set forth in 
``Creation and Redemption of Shares'' below.
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    The Sponsor will maintain ownership and control of the Trust's 
Bitcoin in a manner consistent with good delivery requirements for spot 
commodity transactions.
Bitcoin Value
Digital Asset Trading Platform Valuation
    According to the Registration Statement, the value of Bitcoin is 
determined by the value that various market participants place on 
Bitcoin through their transactions. The most common means of 
determining the value of a Bitcoin is by surveying one or more Digital 
Asset Trading Platforms where Bitcoin is traded publicly (e.g., 
Coinbase, Bitstamp, Crypto.com, Kraken, and LMAX Digital). 
Additionally, there are over-the-counter dealers or market makers that 
transact in Bitcoin.
Digital Asset Trading Platforms Public Market Data
    On each online Digital Asset Trading Platforms, Bitcoin is traded 
with publicly disclosed valuations for each executed trade, measured by 
one or more fiat currencies such as the U.S. dollar or Euro. Over-the-
counter dealers or market makers do not typically disclose their trade 
data.
    As of March 31, 2024, the Digital Asset Trading Platforms included 
in the Index are Coinbase, Bitstamp, Kraken, LMAX Digital and 
Crypto.com. As further described below, the Sponsor and the Trust 
reasonably believe each of these Digital Asset Trading Platforms are in 
material compliance with applicable U.S. federal and state licensing 
requirements and maintain practices and policies designed to comply 
with know-your-customer (``KYC''), anti-money-laundering (``AML'') 
regulations.
    Coinbase: A U.S.-based trading platform registered as a money 
services business (``MSB'') with the U.S. Department of Treasury's 
Financial Crimes Enforcement Network (``FinCEN'') and licensed as a 
virtual currency business under the New York State Department of 
Financial Services (``NYDFS'') BitLicense and as a money transmitter in 
various U.S. states.
    Bitstamp: A U.K.-based trading platform registered as an MSB with 
FinCen and licensed as a virtual currency business under the NYDFS 
BitLicense and as a money transmitter in various U.S. states.
    Kraken: A U.S.-based trading platform registered as an MSB with 
FinCEN and licensed as a money transmitter in various U.S. states. 
Kraken does not hold a BitLicense.
    LMAX Digital: A U.K.-based trading platform registered as a broker 
with the Financial Conduct Authority. LMAX Digital does not hold a 
BitLicense.
    Crypto.com: A Singapore-based trading platform registered as an MSB 
with FinCEN and licensed as a money transmitter in various U.S. states. 
Crypto.com does not hold a BitLicense.
    Currently, there are several Digital Asset Trading Platforms 
operating worldwide, and online Digital Asset Trading Platforms 
represent a substantial percentage of Bitcoin buying and selling 
activity and provide the most data with respect to prevailing 
valuations of Bitcoins. These trading platforms include established 
trading platforms such as trading platforms included in the Index, 
which provide a number of options for buying and selling Bitcoins. The 
below table reflects the trading volume in Bitcoins and market share 
\15\ of the BTC-U.S. dollar trading pairs of each of the Digital Asset 
Trading Platforms included in the Index as of March 31, 2024 \16\ using 
data reported by the Index Provider from May 1, 2015 to March 31, 2024:
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    \15\ Market share is calculated using trading volume (in 
Bitcoins) for certain Digital Asset Trading Platforms, including 
Coinbase, Bitstamp, Kraken, LMAX Digital and Crypto.com, as well as 
certain other large U.S.-dollar denominated Digital Asset Trading 
Platforms that were not included in the Index as of March 31, 2024, 
including Binance.US (data included from April 1, 2020), Bitfinex, 
Bitflyer (data included from December 24, 2018), Bittrex (data 
included from July 31, 2018 to December 3, 2023), Cboe Digital (data 
included from October 1, 2020 to December 31, 2023), FTX.US (data 
included from April 1, 2022 to November 12, 2022), Gemini, itBit, 
LakeBTC (data included from May 1, 2015 to June 1, 2018 and from 
January 27, 2019 to May 6, 2021), HitBTC (data included from April 
1, 2019 to March 31, 2020) and OKCoin (data included since inception 
to December 31, 2022).
    \16\ On June 17, 2023, the Index Provider removed Binance.US 
from the Index due to Binance.US's announcement that the trading 
platform is suspending U.S. dollar (``USD'') deposits and 
withdrawals and plans to delist its USD trading pairs, and did not 
add any Constituent Trading Platforms as part of its review. On July 
29, 2023, the Index Provider added Bitstamp to the Index due to the 
trading platform meeting the minimum liquidity requirement, and did 
not remove any Constituent Trading Platforms as part of its 
scheduled quarterly review. On October 28, 2023, the Index Provider 
added Crypto.com to the Index due to the trading platform meeting 
the minimum liquidity requirement, and did not remove any 
Constituent Trading Platforms as part of its scheduled quarterly 
review.

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                                                                  Market
Digital trading platforms included in the index as     Volume     share
                 of March 31, 2024                     (BTC)       (%)
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Coinbase..........................................   46,909,311    25.24
Bitstamp..........................................   23,776,144    12.79
Kraken............................................   13,702,667     7.37
LMAX Digital......................................    9,621,915     5.18
Crypto.com........................................      991,845     0.53
                                                   ---------------------
  Total BTC-U.S. dollar trading pair..............   95,001,882    51.11
------------------------------------------------------------------------

    The domicile, regulation, and legal compliance of the Digital Asset 
Trading Platforms included in the Index varies. Information regarding 
each Digital Asset Trading Platform may be found, where available, on 
the websites for such Digital Asset Trading Platforms, among other 
places.
The Index and the Index Price
    The Index is a U.S. dollar-denominated composite reference rate for 
the price of Bitcoin. The Index is designed to (i) mitigate the effects 
of fraud, manipulation and other anomalous trading activity from 
impacting the Bitcoin reference rate, (ii) provide a real-time, volume-
weighted fair value of Bitcoin and (iii) appropriately handle and 
adjust for non-market related events.
    The Index Price is determined by the Index Provider through a 
process in which trade data is cleansed and compiled in such a manner 
as to algorithmically reduce the impact of anomalistic or manipulative 
trading. This is accomplished by adjusting the weight of each data 
input based on price deviation relative to the observable set, as well 
as recent and long-term trading volume at each venue relative to the 
observable set.
    The value of the Index is calculated and disseminated on a 24-hour 
basis and will be available on a continuous basis at https://www.coindesk.com/indices.

[[Page 49936]]

Constituent Trading Platform Selection
    According to the Registration Statement, the Digital Asset Trading 
Platforms that are included in the Index are selected by the Index 
Provider utilizing a methodology that is guided by the International 
Organization of Securities Commissions (``IOSCO'') principles for 
financial benchmarks. For a trading platform to become a Digital Asset 
Trading Platform included in the Index (a ``Constituent Trading 
Platform''), it must satisfy the criteria listed below (the ``Inclusion 
Criteria''):
     Sufficient USD liquidity relative to the size of the 
listed assets;
     No evidence in the past 12 months of trading restrictions 
on individuals or entities that would otherwise meet the trading 
platform's eligibility requirements to trade;
     No evidence in the past 12 months of undisclosed 
restrictions on deposits or withdrawals from user accounts;
     Real-time price discovery;
     Limited or no capital controls; \17\
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    \17\ ``Capital controls'' in this context means governmental 
sanctions that would limit the movement of capital into, or out of, 
the jurisdiction in which such Digital Asset Trading Platforms 
operate.
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     Transparent ownership including a publicly-owned ownership 
entity;
     Publicly available language and policies addressing legal 
and regulatory compliance in the U.S., including KYC (Know Your 
Customer), AML (Anti-Money Laundering) and other policies designed to 
comply with relevant regulations that might apply to it;
     Be a U.S.-domiciled trading platform or a non-U.S. 
domiciled trading platform that is able to service U.S. investors;
     Offer programmatic spot trading of the trading pair,\18\ 
and reliably publish trade prices and volumes on a real-time basis 
through Rest and Websocket APIs.
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    \18\ Trading platforms with programmatic trading offer traders 
an application programming interface that permits trading by sending 
programmed commands to the trading platform.
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    A Digital Asset Trading Platform is removed from the Constituent 
Trading Platforms when it no longer satisfies the Inclusion Criteria. 
The Index Provider does not currently include data from non-Digital 
Asset Trading Platforms (or over-the-counter markets) or derivatives 
platforms among the Constituent Trading Platforms. According to the 
Registration Statement, over-the-counter data is not currently included 
because of the potential for trades to include a significant premium or 
discount paid for larger liquidity, which creates an uneven comparison 
relative to more active markets. There is also a higher potential for 
over-the-counter transactions to not be arms-length, and thus not be 
representative of a true market price. Bitcoin derivative markets data, 
including Bitcoin futures markets and perpetuals markets data, are also 
not currently included as the markets remain relatively thin. The Index 
Provider will consider IOSCO principles for financial benchmarks and 
the management of trading venues of Bitcoin derivatives and the 
aforementioned Inclusion Criteria when considering inclusion of over-
the-counter or derivative platform data in the future.
    The Index Provider and the Sponsor have entered into the index 
license agreement (as amended, the ``Index License Agreement''), 
governing the Sponsor's use of the Index Price.\19\ Pursuant to the 
terms of the Index License Agreement, the Index Provider may adjust the 
calculation methodology for the Index Price without notice to, or 
consent of, the Trust or its shareholders. The Index Provider may 
decide to change the calculation methodology to maintain the integrity 
of the Index Price calculation should it identify or become aware of 
previously unknown variables or issues with the existing methodology 
that it believes could materially impact its performance and/or 
reliability. The Index Provider has sole discretion over the 
determination of Index Price and may change the methodologies for 
determining the Index Price from time to time. Shareholders will be 
notified of any material changes to the calculation methodology or the 
Index Price in the Trust's current reports and will be notified of all 
other changes that the Sponsor considers significant in the Trust's 
periodic or current reports. The Trust will determine the materiality 
of any changes to the Index Price on a case-by-case basis, in 
consultation with external counsel.
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    \19\ Upon entering into the Index License Agreement, the Sponsor 
and the Index Provider terminated the license agreement between the 
parties dated as of February 28, 2019.
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    The Index Provider may change the trading venues that are used to 
calculate the Index or otherwise change the way in which the Index is 
calculated at any time. For example, the Index Provider has scheduled 
quarterly reviews in which it may add or remove Constituent Trading 
Platforms that satisfy or fail the Inclusion Criteria. The Index 
Provider does not have any obligation to consider the interests of the 
Sponsor, the Trust, the shareholders, or anyone else in connection with 
such changes. Although the Index Provider is not required to publicize 
or explain the changes or to alert the Sponsor to such changes, it has 
historically notified the Trust (and other subscribers to the Index) of 
any material changes to the Constituent Trading Platforms, including 
any additions or removals, contemporaneous with its issuance of press 
releases in connection with the same. The Sponsor will notify investors 
of any such material event by filing a current report on Form 8-K. 
Although the Index methodology is designed to operate without any 
manual intervention, rare events would justify manual intervention. 
Intervention of this kind would be in response to non-market-related 
events, such as the halting of deposits or withdrawals of funds on a 
Digital Asset Trading Platform, the unannounced closure of operations 
on a Digital Asset Trading Platform, insolvency or the compromise of 
user funds. In the event that such an intervention is necessary, the 
Index Provider would issue a public announcement through its website, 
API and other established communication channels with its clients.
Determination of the Index Price
    The Index applies an algorithm to the price of Bitcoin on the 
Constituent Trading Platforms calculated on a per second basis over a 
24-hour period. The Index's algorithm is expected to reflect a four-
pronged methodology to calculate the Index Price from the Constituent 
Trading Platforms:
     Volume Weighting: Constituent Trading Platforms with 
greater liquidity receive a higher weighting in the Index, increasing 
the ability to execute against (i.e., replicate) the Index in the 
underlying spot markets.
     Price-Variance Weighting: The Index Price reflects data 
points that are discretely weighted in proportion to their variance 
from the rest of the Constituent Trading Platforms. As the price at a 
particular trading platform diverges from the prices at the rest of the 
Constituent Trading Platforms, its weight in the Index Price 
consequently decreases.
     Inactivity Adjustment: The Index Price algorithm penalizes 
stale activity from any given Constituent Trading Platform. When a 
Constituent Trading Platform does not have recent trading data, its 
weighting in the Index Price is gradually reduced until it is de-
weighted entirely. Similarly, once trading activity at a Constituent 
Trading Platform resumes, the corresponding weighting for that 
Constituent Trading Platform is gradually increased until it reaches 
the appropriate level.
     Manipulation Resistance: In order to mitigate the effects 
of wash trading and order book spoofing, the Index only

[[Page 49937]]

includes executed trades in its calculation. Additionally, the Index 
only includes Constituent Trading Platforms that charge trading fees to 
its users in order to attach a real, quantifiable cost to any 
manipulation attempts.
    The Index Provider re-evaluates the weighting algorithm on a 
periodic basis, but maintains discretion to change the way in which an 
Index Price is calculated based on its periodic review or in extreme 
circumstances and does not make the exact methodology to calculate the 
Index Price publicly available. Nonetheless, the Sponsor believes that, 
the Index is designed to limit exposure to trading or price distortion 
of any individual Digital Asset Trading Platform that experiences 
periods of unusual activity or limited liquidity by discounting, in 
real-time, anomalous price movements at individual Digital Asset 
Trading Platforms.
    The Sponsor believes the Index Provider's selection process for 
Constituent Trading Platforms as well as the methodology of the Index 
Price's algorithm provides a more accurate picture of Bitcoin price 
movements than a simple average of Digital Asset Trading Platform spot 
prices, and that the weighting of Bitcoin prices on the Constituent 
Trading Platforms limits the inclusion of data that is influenced by 
temporary price dislocations that may result from technical problems, 
limited liquidity or fraudulent activity elsewhere in the Bitcoin spot 
market. By referencing multiple trading venues and weighting them based 
on trade activity, the Sponsor believes that the impact of any 
potential fraud, manipulation or anomalous trading activity occurring 
on any single venue is reduced.
    If the Index Price becomes unavailable, or if the Sponsor 
determines in good faith that such Index Price does not reflect an 
accurate price for Bitcoin, then the Sponsor will, on a best efforts 
basis, contact the Index Provider to obtain the Index Price directly 
from the Index Provider. If after such contact such Index Price remains 
unavailable or the Sponsor continues to believe in good faith that such 
Index Price does not reflect an accurate price for the relevant digital 
asset, then the Sponsor will employ a cascading set of rules to 
determine the Index Price, as described below in ``Determination of the 
Index Price When Index Price is Unavailable.''
    The Trust values its Bitcoin for operational purposes by reference 
to the Index Price. The Index Price is the value of a Bitcoin as 
represented by the Index, calculated at 4:00 p.m., New York time, on 
each business day.
Illustrative Example
    For the purposes of illustration, outlined below are examples of 
how the attributes that impact weighting and adjustments in the 
aforementioned methodology may be utilized to generate the Index Price 
for a digital asset. For purposes of this illustrative example only, 
assume that the Constituent Trading Platforms used to calculate the 
Index Price for a digital asset are Coinbase, Kraken, LMAX Digital and 
Bitstamp.
    The Index Price algorithm, as described above, accounts for 
manipulation at the outset by only including data from executed trades 
on Constituent Trading Platforms that charge trading fees. Then, the 
below-listed elements may impact the weighting of the Constituent 
Trading Platforms on the Index Price as follows:
     Volume Weighting: Each Constituent Trading Platform will 
be weighted to appropriately reflect the trading volume share of the 
Constituent Trading Platform relative to all the Constituent Trading 
Platforms during this same period. For example, an average hourly 
weighting of 67.06%, 14.57%, 11.88% and 6.49% for Coinbase, Kraken, 
LMAX Digital and Bitstamp, respectively, would represent each 
Constituent Trading Platform's share of trading volume during the same 
period.
     Inactivity Adjustment: Assume that a Constituent Trading 
Platform represented a 14% weighting on the Index Price of the digital 
asset, which is based on the per-second calculations of its trading 
volume and price-variance relative to the cohort of Constituent Trading 
Platforms included in such Index, and then went offline for 
approximately two hours. The index algorithm would automatically 
recognize inactivity and start de-weighting the Constituent Trading 
Platform at the 3-minute mark and continue to do so over a 7-minute 
period until its influence was effectively zero, 10 minutes after 
becoming inactive. As soon as trading activity resumed at the 
Constituent Trading Platform, the index algorithm would re-weight it to 
the appropriate weighting based on trading volume and price-variance 
relative to the cohort of Constituent Trading Platforms included in the 
Index. Due to the period of inactivity, it would re-weight the 
Constituent Trading Platform activity to a weight lower than its 
original weighting--for example, to 12%.
     Price-Variance Weighting: Assume that for a one-hour 
period, the digital asset's execution prices on one Constituent Trading 
Platform were trading more than 7% higher than the average execution 
prices on another Constituent Trading Platform. The algorithm will 
automatically detect the anomaly and reduce that specific Constituent 
Trading Platform's weighting to 0% for that one-hour period, ensuring a 
reliable spot reference unaffected by the localized event.
Determination of the Index Price When Index Price Is Unavailable
    The Sponsor uses the following cascading set of rules to calculate 
the Index Price when the Index Price is unavailable.\20\ For the 
avoidance of doubt, the Sponsor will employ the below rules 
sequentially and in the order as presented below, should one or more 
specific rule(s) fail.
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    \20\ The Sponsor updated these rules on January 11, 2022.
---------------------------------------------------------------------------

    1. Index Price = The price set by the Index as of 4:00 p.m., New 
York time, on the valuation date.\21\ If the Index becomes unavailable, 
or if the Sponsor determines in good faith that the Index does not 
reflect an accurate price, then the Sponsor will, on a best efforts 
basis, contact the Index Provider to obtain the Index Price directly 
from the Index Provider. If after such contact the Index remains 
unavailable or the Sponsor continues to believe in good faith that the 
Index does not reflect an accurate price, then the Sponsor will employ 
the next rule to determine the Index Price. There are no predefined 
criteria to make a good faith assessment and it will be made by the 
Sponsor in its sole discretion.
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    \21\ The valuation date is any day for which the value of the 
Bitcoin in the Trust may be calculated utilizing the Index Price. 
This calculation may be performed on business days for creation or 
redemption procedures or on non-business days in relation to 
calculating information that may be included in SEC reports 
comparing the GAAP and non-GAAP prices on period end dates that are 
non-business days. The cascading rule set is consistent for 
determining the value of the Bitcoin in the Trust on both business 
days and non-business days.
---------------------------------------------------------------------------

    2. Index Price = The price set by Coin Metrics Real-Time Rate (the 
``Secondary Index'') as of 4:00 p.m., New York time, on the valuation 
date (the ``Secondary Index Price''). The Secondary Index Price is a 
real-time reference rate price, calculated using trade data from 
constituent markets selected by Coin Metrics (the ``Secondary Index 
Provider''). The Secondary Index Price is calculated by applying 
weighted-median techniques to such trade data where half the weight is 
derived from

[[Page 49938]]

the trading volume on each constituent market and half is derived from 
inverse price variance, where a constituent market with high price 
variance as a result of outliers or market anomalies compared to other 
constituent markets is assigned a smaller weight. If the Secondary 
Index becomes unavailable, or if the Sponsor determines in good faith 
that the Secondary Index does not reflect an accurate price, then the 
Sponsor will, on a best efforts basis, contact the Secondary Index 
Provider to obtain the Secondary Index Price directly from the 
Secondary Index Provider. If after such contact the Secondary Index 
remains unavailable or the Sponsor continues to believe in good faith 
that the Secondary Index does not reflect an accurate price, then the 
Sponsor will employ the next rule to determine the Index Price. There 
are no predefined criteria to make a good faith assessment and it will 
be made by the Sponsor in its sole discretion.
    3. Index Price = The price set by the Trust's principal market (as 
defined in the Registration Statement) (the ``Tertiary Pricing 
Option'') as of 4:00 p.m., New York time, on the valuation date. The 
Tertiary Pricing Option is a spot price derived from the principal 
market's public data feed that is believed to be consistently 
publishing pricing information as of 4:00 p.m., New York time, and is 
provided to the Sponsor via an application programming interface. If 
the Tertiary Pricing Option becomes unavailable, or if the Sponsor 
determines in good faith that the Tertiary Pricing Option does not 
reflect an accurate price, then the Sponsor will, on a best efforts 
basis, contact the Tertiary Pricing Provider to obtain the Tertiary 
Pricing Option directly from the Tertiary Pricing Provider. If after 
such contact the Tertiary Pricing Option remains unavailable after such 
contact or the Sponsor continues to believe in good faith that the 
Tertiary Pricing Option does not reflect an accurate price, then the 
Sponsor will employ the next rule to determine the Index Price. There 
are no predefined criteria to make a good faith assessment and it will 
be made by the Sponsor in its sole discretion.
    4. Index Price = The Sponsor will use its best judgment to 
determine a good faith estimate of the Index Price. There are no 
predefined criteria to make a good faith assessment and it will be made 
by the Sponsor in its sole discretion.
    In the event of a fork, the Index Provider may calculate the Index 
Price based on a digital asset that the Sponsor does not believe to be 
an appropriate asset of the Trust (i.e., a digital asset other than 
Bitcoin).\22\ In this event, the Sponsor has full discretion to use a 
different index provider or calculate the Index Price itself using its 
best judgment. In such an event, the Exchange will submit a proposed 
rule filing to contemplate the assets that would subsequently be held 
by the Trust.\23\
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    \22\ According to the Sponsor, when a modification is introduced 
and a substantial majority of users and miners consent to the 
modification, the change is implemented and the network remains 
uninterrupted. However, if less than a substantial majority of users 
and miners consent to the proposed modification, and the 
modification is not compatible with the software prior to its 
modification, the consequence would be what is known as a ``hard 
fork'' of the Bitcoin Network, with one group running the pre-
modified software and the other running the modified software. The 
effect of such a fork would be the existence of two versions of 
Bitcoin running in parallel, yet lacking interchangeability. For 
example, in August 2017, Bitcoin ``forked'' into Bitcoin and a new 
digital asset, Bitcoin Cash, as a result of a several-year dispute 
over how to increase the rate of transactions that the Bitcoin 
Network can process. In the event of a hard fork of the Bitcoin 
Network, the Sponsor will, consistent with its obligations pursuant 
to the Trust Agreement, use its discretion to determine, in good 
faith, which peer-to-peer network, among a group of incompatible 
forks of the Bitcoin Network, is generally accepted as the Bitcoin 
Network and should therefore be considered the appropriate network 
for the Trust's purposes. The Sponsor will base its determination on 
a variety of then relevant factors, including, but not limited to, 
the Sponsor's beliefs regarding expectations of the core developers 
of Bitcoin, users, services, businesses, miners, and other 
constituencies, as well as the actual continued acceptance of, 
mining power on, and community engagement with, the Bitcoin Network. 
There is no guarantee that the Sponsor will choose the digital asset 
that is ultimately the most valuable fork, and the Sponsor's 
decision may adversely affect the value of the Shares as a result. 
The Sponsor may also disagree with shareholders, security vendors, 
and the Index Provider on what is generally accepted as Bitcoin and 
should therefore be considered ``Bitcoin'' for the Trust's purposes, 
which may also adversely affect the value of the Shares as a result.
    \23\ See note 8, supra.
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    The Sponsor may, in its sole discretion, select a different index 
provider, select a different index price provided by the Index 
Provider, calculate the Index Price by using the cascading set of rules 
set forth above, or change the cascading set of rules set forth above 
at any time.\24\
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    \24\ The Sponsor will provide notice of any such changes in the 
Trust's periodic or current reports and, if the Sponsor makes such a 
change other than on an ad hoc or temporary basis, it will file a 
proposed rule change under Section 19(b) with the Commission.
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The Structure and Operation of the Trust Protects Investors and 
Satisfies Commission Requirements for Bitcoin-Based Exchange Traded 
Products
    On January 10, 2024, the Commission approved the listing and 
trading of shares of Grayscale Bitcoin Trust (BTC) and Bitwise Bitcoin 
ETF under NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares); the 
Hashdex Bitcoin ETF under NYSE Arca Rule 8.500-E (Trust Units); the 
iShares Bitcoin Trust and Valkyrie Bitcoin Fund under Nasdaq Rule 
5711(d) (Commodity-Based Trust Shares); and the ARK 21Shares Bitcoin 
ETF, Invesco Galaxy Bitcoin ETF, VanEck Bitcoin Trust, the WisdomTree 
Bitcoin Fund, Fidelity Wise Origin Bitcoin Fund, and Franklin Bitcoin 
ETF under BZX Rule 14.11(e)(4) (Commodity-Based Trust Shares) 
(collectively, the ``Bitcoin ETPs'').\25\ In the Bitcoin ETP Approval 
Order, the Commission found that the proposed rule changes to list the 
Bitcoin ETPs demonstrated that there were ``sufficient `other means' of 
preventing fraud and manipulation,'' including that:
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    \25\ Securities Exchange Act Release No. 34-99306 (January 10, 
2024), 89 FR 3008 (January 17, 2024) (SR-NYSEARCA-2021-90; SR-
NYSEARCA-2023-44; SRNYSEARCA-2023-58; SR-NASDAQ-2023-016; SR-NASDAQ-
2023-019; SR-CboeBZX-2023028; SR-CboeBZX-2023-038; SR-CboeBZX-2023-
040; SR-CboeBZX-2023-042; SRCboeBZX-2023-044; SR-CboeBZX-2023-072) 
(Order Granting Accelerated Approval of Proposed Rule Changes, as 
Modified by Amendments Thereto, to List and Trade Bitcoin-Based 
Commodity-Based Trust Shares and Trust Units) (the ``Bitcoin ETP 
Approval Order'').

    [B]ased on the record before the Commission and the improved 
quality of the correlation analysis in the record, including the 
Commission's own analysis, the Commission is able to conclude that 
fraud or manipulation that impacts prices in spot bitcoin markets 
would likely similarly impact CME bitcoin futures prices. And 
because the CME's surveillance can assist in detecting those impacts 
on CME bitcoin futures prices, the Exchanges' comprehensive 
surveillance-sharing agreement with the CME--a U.S. regulated market 
whose bitcoin futures market is consistently highly correlated to 
spot bitcoin, albeit not of ``significant size'' related to spot 
bitcoin--can be reasonably expected to assist in surveilling for 
fraudulent and manipulative acts and practices in the specific 
context of the [Bitcoin ETPs].\26\
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    \26\ Bitcoin ETP Approval Order, 89 FR at 3009-11.

    The Trust is structured and will operate in a manner materially the 
same as the Bitcoin ETPs. Accordingly, the Sponsor believes that, for 
the reasons set forth in the Bitcoin ETP Approval Order, listing and 
trading Shares of the Trust would be consistent with the requirements 
of the Act.\27\
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    \27\ In particular, Grayscale Bitcoin Trust (BTC) (``GBTC''), an 
affiliate of the Trust that is structured identically to the Trust, 
currently lists its shares on the Exchange under NYSE Arca Rule 
8.201-E. The Trust and GBTC are identically structured investment 
vehicles and will have the same service providers. The Trust will 
have a materially lower sponsor's fee than GBTC.

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[[Page 49939]]

Creation and Redemption of Shares
    Authorized Participants may submit orders to create or redeem 
Shares under procedures for ``Cash Orders.''
    The Authorized Participants will deliver only cash to create Shares 
and will receive only cash when redeeming Shares. Further, Authorized 
Participants will not directly or indirectly purchase, hold, deliver, 
or receive Bitcoin as part of the creation or redemption process or 
otherwise direct the Trust or a third party with respect to purchasing, 
holding, delivering, or receiving Bitcoin as part of the creation or 
redemption process.
    The Trust will create Shares by receiving Bitcoin from a third 
party that is not the Authorized Participant and the Trust, or an 
affiliate of the Trust (and in any event not the Authorized 
Participant), is responsible for selecting the third party to deliver 
the Bitcoin. Further, the third party will not be acting as an agent of 
the Authorized Participant with respect to the delivery of the Bitcoin 
to the Trust or acting at the direction of the Authorized Participant 
with respect to the delivery of the Bitcoin to the Trust. The Trust 
will redeem Shares by delivering Bitcoin to a third party that is not 
the Authorized Participant and the Trust, or an affiliate of the Trust 
(and in any event not the Authorized Participant), is responsible for 
selecting the third party to receive the Bitcoin. Further, the third 
party will not be acting as an agent of the Authorized Participant with 
respect to the receipt of the Bitcoin from the Trust or acting at the 
direction of the Authorized Participant with respect to the receipt of 
the Bitcoin from the Trust.
    Cash Orders are made through the participation of a Liquidity 
Provider \28\ who obtains or receives Bitcoin in exchange for cash, and 
are facilitated by the Transfer Agent and Grayscale Investments, LLC, 
acting in its capacity as the Liquidity Engager. Liquidity Providers 
are not party to the Participant Agreements and are engaged separately 
by the Liquidity Engager.
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    \28\ A ``Liquidity Provider'' means one or more eligible 
companies that facilitate the purchase and sale of Bitcoins in 
connection with creations or redemptions pursuant to Cash Orders. 
The Liquidity Providers with which Grayscale Investments, LLC, 
acting other than in its capacity as the Sponsor (in such other 
capacity, the ``Liquidity Engager'') will engage in Bitcoin 
transactions are third parties that are not affiliated with the 
Sponsor or the Trust and are not acting as agents of the Trust, the 
Sponsor, or any Authorized Participant, and all transactions will be 
done on an arms-length basis. Except for the contractual 
relationships between each Liquidity Provider and Grayscale 
Investments, LLC in its capacity as the Liquidity Engager, there is 
no contractual relationship between each Liquidity Provider and the 
Trust, the Sponsor, or any Authorized Participant. When seeking to 
buy Bitcoin in connection with creations or sell Bitcoin in 
connection with redemptions, the Liquidity Engager will seek to 
obtain commercially reasonable prices and terms from the approved 
Liquidity Providers. Once agreed upon, the transaction will 
generally occur on an ``over-the-counter'' basis.
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    According to the Registration Statement, the Trust creates Baskets 
(as described below) of Shares only upon receipt of Bitcoins and 
redeems Shares only by distributing Bitcoins. ``Authorized 
Participants'' are the only persons that may place orders to create and 
redeem Baskets. Each Authorized Participant must (i) be a registered 
broker-dealer and (ii) enter into an agreement with the Sponsor and 
Transfer Agent that provides the procedures for the creation and 
redemption of Baskets and for the delivery of Bitcoins required for the 
creation and redemption of Baskets via a Liquidity Provider (each, a 
``Participant Agreement''). An Authorized Participant may act for its 
own account or as agent for broker-dealers, custodians and other 
securities market participants that wish to create or redeem Baskets. 
Shareholders who are not Authorized Participants will only be able to 
create or redeem their Shares through an Authorized Participant.
    The Trust issues Shares to and redeems Shares from Authorized 
Participants on an ongoing basis, but only in one or more ``Baskets'' 
(with a Basket being a block of 10,000 Shares). The Trust will not 
issue fractions of a Basket.
    The creation and redemption of Baskets will be made only in 
exchange for the delivery to the Trust, or the distribution by the 
Trust, of the number of whole and fractional Bitcoins represented by 
each Basket being created or redeemed, which is determined by dividing 
(x) the number of Bitcoins owned by the Trust at 4:00 p.m., New York 
time, on the trade date of a creation or redemption order, after 
deducting the number of Bitcoins representing the U.S. dollar value of 
accrued but unpaid fees and expenses of the Trust (converted using the 
Index Price at such time, and carried to the eighth decimal place), by 
(y) the number of Shares outstanding at such time (with the quotient so 
obtained calculated to one one-hundred-millionth of one Bitcoin (i.e., 
carried to the eighth decimal place)), and multiplying such quotient by 
10,000 (the ``Basket Amount''). The U.S. dollar value of a Basket is 
calculated by multiplying the Basket Amount by the Index Price as of 
the trade date (the ``Basket NAV''). The Basket NAV multiplied by the 
number of Baskets being created or redeemed is referred to as the 
``Total Basket NAV.'' All questions as to the calculation of the Basket 
Amount will be conclusively determined by the Sponsor and will be final 
and binding on all persons interested in the Trust. The number of 
Bitcoins represented by a Share will gradually decrease over time as 
the Trust's Bitcoins are used to pay the Trust's expenses.
    The creation of Baskets requires the delivery by the Authorized 
Participant of the Total Basket Amount and the redemption of Baskets 
requires the distribution to the Authorized Participant of the Total 
Basket Amount.
    Although the Trust creates Baskets only upon the receipt of 
Bitcoins, and redeems Baskets only by distributing Bitcoins, an 
Authorized Participant will submit Cash Orders, pursuant to which the 
Authorized Participant will deposit cash with, or accept cash from, the 
Transfer Agent in connection with the creation and redemption of 
Baskets.
    Cash Orders will be facilitated by the Transfer Agent and Liquidity 
Engager, acting other than in its capacity as Sponsor. On an order-by-
order basis, the Liquidity Engager will engage one or more Liquidity 
Providers to obtain or receive Bitcoin in exchange for cash in 
connection with such order, as described in more detail below.
    Unless the Sponsor requires that a Cash Order be effected at actual 
execution prices (an ``Actual Execution Cash Order''),\29\ each 
Authorized Participant that submits a Cash Order to create or redeem 
Baskets (a ``Variable Fee Cash Order'') \30\ will pay a fee (the

[[Page 49940]]

``Variable Fee'') based on the Total Basket NAV, and any price 
differential of Bitcoins between the trade date and the settlement date 
will be borne solely by the Liquidity Provider until such Bitcoins have 
been received or liquidated by the Trust. The Variable Fee is intended 
to cover all of a Liquidity Provider's expenses in connection with the 
creation or redemption order, including any Bitcoin trading platform 
fees that the Liquidity Provider incurs in connection with buying or 
selling Bitcoins. The amount may be changed by the Sponsor in its sole 
discretion at any time, and Liquidity Providers will communicate to the 
Sponsor in advance the Variable Fee they would be willing to accept in 
connection with a Variable Fee Cash Order, based on market conditions 
and other factors existing at the time of such Variable Fee Cash Order.
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    \29\ With respect to a creation or redemption pursuant to an 
Actual Execution Cash Order, as between the Trust and an Authorized 
Participant, the Authorized Participant is responsible for the 
dollar cost of the difference between the Bitcoin price utilized in 
calculating Total Basket NAV on the trade date and the price at 
which the Trust acquires or disposes of the Bitcoin on the 
settlement date. If the price realized in acquiring or disposing of 
the corresponding Total Basket Amount is higher than the Total 
Basket NAV, the Authorized Participant will bear the dollar cost of 
such difference, in the case of a creation, by delivering cash in 
the amount of such shortfall (the ``Additional Creation Cash'') to 
the Cash Account or, in the case of a redemption, with the amount of 
cash to be delivered to the Authorized Participant being reduced by 
the amount of such difference (the ``Redemption Cash Shortfall''). 
If the price realized in acquiring the corresponding Total Basket 
Amount is lower than the Total Basket NAV, the Authorized 
Participant will benefit from such difference, with the Trust 
promptly returning cash in the amount of such excess (the ``Excess 
Creation Cash'') to the Authorized Participant.
    \30\ Unless the Sponsor determines otherwise in its sole 
discretion based on market conditions and other factors existing at 
the time of such Cash Order, all creations and redemptions pursuant 
to Cash Orders are expected to be executed as Variable Fee Cash 
Orders, and any price differential of Bitcoins between the trade 
date and the settlement date will be borne solely by the Liquidity 
Provider until such Bitcoins have been received by the Trust.
---------------------------------------------------------------------------

    Alternatively, the Sponsor may require that a Cash Order be 
effected as an Actual Execution Cash Order, in its sole discretion 
based on market conditions and other factors existing at the time of 
such Cash Order, and under such circumstances, any price differential 
of Bitcoins between the trade date and the settlement date will be 
borne solely by the Authorized Participant until such Bitcoins have 
been received or liquidated by the Trust.
    In the case of creations, to transfer the Total Basket Amount to 
the Trust's Digital Asset Account, the Liquidity Provider will transfer 
Bitcoin to one of the public key addresses associated with the Digital 
Asset Account and as provided by the Sponsor. In the case of 
redemptions, the same procedure is conducted, but in reverse, using the 
public key addresses associated with the wallet of the Liquidity 
Provider and as provided by such party. All such transactions will be 
conducted on the Blockchain and parties acknowledge and agree that such 
transfers may be irreversible if done incorrectly.
    Authorized Participants do not pay a transaction fee to the Trust 
in connection with the creation or redemption of Baskets, but there may 
be transaction fees associated with the validation of the transfer of 
Bitcoins by the Bitcoin Network, which will be paid by the Custodian in 
the case of redemptions and the Authorized Participant or the Liquidity 
Provider in the case of creations. Service providers may charge 
Authorized Participants administrative fees for order placement and 
other services related to creation of Baskets. As discussed above, 
Authorized Participants will also pay the Variable Fee in connection 
with Variable Fee Cash Orders. Under certain circumstances Authorized 
Participants may also be required to deposit additional cash in the 
Cash Account, or be entitled to receive excess cash from the Cash 
Account, in connection with creations and redemptions pursuant to 
Actual Execution Cash Orders. Authorized Participants will receive no 
fees, commissions or other form of compensation or inducement of any 
kind from either the Sponsor or the Trust and no such person has any 
obligation or responsibility to the Sponsor or the Trust to effect any 
sale or resale of Shares.
    The following is a summary of the procedures for the creation and 
redemption of Baskets.
Creation Procedures
    On any business day, an Authorized Participant may place an order 
with the Transfer Agent to create one or more Baskets.
    Cash Orders for creation must be placed with the Transfer Agent no 
later than 1:59:59 p.m., New York time.
    The Sponsor may in its sole discretion limit the number of Shares 
created pursuant to Cash Orders on any specified day without notice to 
the Authorized Participants and may direct the Marketing Agent to 
reject any Cash Orders in excess of such capped amount. In exercising 
its discretion to limit the number of Shares created pursuant to Cash 
Orders, the Sponsor expects to take into consideration a number of 
factors, including the availability of Liquidity Providers to 
facilitate Cash Orders and the cost of processing Cash Orders.
    Creations under Cash Orders will take place as follows, where ``T'' 
is the trade date and each day in the sequence must be a business day. 
Before a creation order is placed, the Sponsor determines if such 
creation order will be a Variable Fee Cash Order or an Actual Execution 
Cash Order, which determination is communicated to the Authorized 
Participant.

------------------------------------------------------------------------
                                          Settlement date (T+1, or T+2,
             Trade date (T)               as established at the time of
                                                 order placement)
------------------------------------------------------------------------
 The Authorized Participant       The Authorized
 places a creation order with the         Participant delivers to the
 Transfer Agent.                          Cash Account: *
 The Marketing Agent accepts     (x) in the case of a Variable
 (or rejects) the creation order, which   Fee Cash Order, the Total
 is communicated to the Authorized        Basket NAV, plus any Variable
 Participant by the Transfer Agent.       Fee; or
 The Sponsor notifies the        (y) in the case of an Actual
 Liquidity Provider of the creation       Execution Cash Order, the
 order.                                   Total Basket NAV, plus any
 The Sponsor determines the       Additional Creation Cash, less
 Total Basket NAV and any Variable Fee    any Excess Creation Cash, if
 and Additional Creation Cash as soon     applicable (such amount, as
 as practicable after 4:00 p.m., New      applicable, the ``Required
 York time.                               Creation Cash'').
                                          The Liquidity Provider
                                          transfers the Total Basket
                                          Amount to the Trust's Digital
                                          Asset Account.
                                          Once the Trust is in
                                          simultaneous possession of (x)
                                          the Total Basket Amount and
                                          (y) the Required Creation
                                          Cash, the Trust issues the
                                          aggregate number of Shares
                                          corresponding to the Baskets
                                          ordered by the Authorized
                                          Participant, which the
                                          Transfer Agent holds for the
                                          benefit of the Authorized
                                          Participant.
                                          Cash equal to the
                                          Required Creation Cash is
                                          delivered to the Liquidity
                                          Provider from the Cash
                                          Account.
                                          The Transfer Agent
                                          delivers Shares to the
                                          Authorized Participant by
                                          crediting the number of
                                          Baskets created to the
                                          Authorized Participant's DTC
                                          account.
------------------------------------------------------------------------
* The ``Cash Account'' means the account maintained by the Transfer
  Agent for purposes of receiving cash from, and distributing cash to,
  Authorized Participants in connection with creations and redemptions
  pursuant to Cash Orders. For the avoidance of doubt, the Trust shall
  have no interest (beneficial, equitable or otherwise) in the Cash
  Account or any cash held therein.


[[Page 49941]]

Redemption Procedures
    The procedures by which an Authorized Participant can redeem one or 
more Baskets mirror the procedures for the creation of Baskets. On any 
business day, an Authorized Participant may place a redemption order 
specifying the number of Baskets to be redeemed.
    The redemption of Shares pursuant to Cash Orders will only take 
place if approved by the Sponsor in writing, in its sole discretion and 
on a case-by-case basis. In exercising its discretion to approve the 
redemption of Shares pursuant to Cash Orders, the Sponsor expects to 
take into consideration a number of factors, including the availability 
of Liquidity Providers to facilitate Cash Orders and the cost of 
processing Cash Orders
    Cash Orders for redemption must be placed no later than 1:59:59 
p.m., New York time on each business day. The Authorized Participants 
may only redeem Baskets and cannot redeem any Shares in an amount less 
than a Basket.
    Redemptions under Cash Orders will take place as follows, where 
``T'' is the trade date and each day in the sequence must be a business 
day. Before a redemption order is placed, the Sponsor determines if 
such redemption order will be a Variable Fee Cash Order or an Actual 
Execution Cash Order, which determination is communicated to the 
Authorized Participant.

------------------------------------------------------------------------
                                         Settlement date (T+1 (or T+2 on
             Trade date (T)              case-by-case basis, as approved
                                                   by Sponsor))
------------------------------------------------------------------------
 The Authorized Participant       The Authorized
 places a redemption order with the       Participant delivers Baskets
 Transfer Agent.                          to be redeemed from its DTC
 The Marketing Agent accepts      account to the Transfer Agent.
 (or rejects) the redemption order,       The Liquidity Provider
 which is communicated to the             delivers to the Cash Account:
 Authorized Participant by the Transfer  (x) in the case of a Variable
 Agent.                                   Fee Cash Order, the Total
 The Sponsor notifies the         Basket NAV less any Variable
 Liquidity Provider of the redemption     Fee; or
 order.                                  (y) in the case of an Actual
 The Sponsor determines the       Execution Cash Order, the
 Total Basket NAV and, in the case of a   actual proceeds to the Trust
 Variable Fee Cash Order, any Variable    from the liquidation of the
 Fee, as soon as practicable after 4:00   Total Basket Amount (such
 p.m., New York time.                     amount, as applicable, the
                                          ``Required Redemption Cash'').
                                          Once the Trust is in
                                          simultaneous possession of (x)
                                          the Total Basket Amount and
                                          (y) the Required Redemption
                                          Cash, the Transfer Agent
                                          cancels the Shares comprising
                                          the number of Baskets redeemed
                                          by the Authorized Participant.
                                          The Custodian sends
                                          the Liquidity Provider the
                                          Total Basket Amount, and cash
                                          equal to the Required
                                          Redemption Cash is delivered
                                          to the Authorized Participant
                                          from the Cash Account.
------------------------------------------------------------------------

Suspension or Rejection of Orders and Total Basket Amount
    The creation or redemption of Shares may be suspended generally, or 
refused with respect to particular requested creations or redemptions, 
during any period when the transfer books of the Transfer Agent are 
closed or if circumstances outside the control of the Sponsor or its 
delegates make it for all practicable purposes not feasible to process 
creation orders or redemption orders or for any other reason at any 
time or from time to time.\31\ The Transfer Agent may reject an order 
or, after accepting an order, may cancel such order if: (i) such order 
is not presented in proper form as described in the Participant 
Agreement, (ii) the transfer of the Total Basket Amount comes from an 
account other than a Bitcoin wallet address that is known to the 
Custodian as belonging to a Liquidity Provider or (iii) the fulfillment 
of the order, in the opinion of counsel, might be unlawful, among other 
reasons. None of the Sponsor or its delegates will be liable for the 
suspension, rejection or acceptance of any creation order or redemption 
order.
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    \31\ Extenuating circumstances outside of the control of the 
Sponsor and its delegates or that could cause the transfer books of 
the Transfer Agent to be closed are outlined in the Participant 
Agreement and include, for example, public service or utility 
problems, power outages resulting in telephone, telecopy and 
computer failures, acts of God such as fires, floods or extreme 
weather conditions, market conditions or activities causing trading 
halts, systems failures involving computer or other information 
systems, including any failures or outages of the Bitcoin Network, 
affecting the Authorized Participant, the Sponsor, the Trust, the 
Transfer Agent, the Marketing Agent and the Custodian and similar 
extraordinary events.
---------------------------------------------------------------------------

Availability of Information
    The Trust's website (https://grayscale.com/crypto-products/grayscale-bitcoin-trust/) will include quantitative information on a 
per Share basis updated on a daily basis, including, (i) the current 
NAV per Share daily and the prior business day's NAV per Share and the 
reported closing price of the Shares; (ii) the mid-point of the bid-ask 
price \32\ as of the time the NAV per Share is calculated (``Bid-Ask 
Price'') and a calculation of the premium or discount of such price 
against such NAV per Share; and (iii) data in chart format displaying 
the frequency distribution of discounts and premiums of the daily Bid-
Ask Price against the NAV, within appropriate ranges, for each of the 
four previous calendar quarters (or for as long as the Trust has been 
trading as an ETP if shorter). In addition, on each business day the 
Trust's website will provide pricing information for the Shares.
---------------------------------------------------------------------------

    \32\ The bid-ask price of the Trust is determined using the 
highest bid and lowest offer on the Consolidated Tape as of the time 
of calculation of the closing day NAV.
---------------------------------------------------------------------------

    One or more major market data vendors, will provide an intra-day 
indicative value (``IIV'') per Share updated every 15 seconds, as 
calculated by the Exchange or a third party financial data provider 
during the Exchange's Core Trading Session (9:30 a.m. to 4:00 p.m., 
E.T.).\33\ The IIV will be calculated using the same methodology as the 
NAV per Share of the Trust (as described above), specifically by using 
the prior day's closing NAV per Share as a base and updating that value 
during the NYSE Arca Core Trading Session based on the value of the 
Index during the trading day.
---------------------------------------------------------------------------

    \33\ The IIV on a per Share basis disseminated during the Core 
Trading Session should not be viewed as a real-time update of the 
NAV, which is calculated once a day.
---------------------------------------------------------------------------

    The IIV disseminated during the NYSE Arca Core Trading Session 
should not be viewed as an actual real-time update of the NAV per 
Share, which will be calculated only once at the end of each trading 
day. The IIV will be widely disseminated on a per Share basis every 15 
seconds during the NYSE Arca Core Trading Session by one or more major 
market data vendors. In addition, the IIV will be available through on-
line information services.

[[Page 49942]]

    The NAV for the Trust will be calculated by the Sponsor once a day 
and will be disseminated daily to all market participants at the same 
time. To the extent that the Sponsor has utilized the cascading set of 
rules described in ``Index Price'' above, the Trust's website will note 
the valuation methodology used and the price per Bitcoin resulting from 
such calculation. Quotation and last-sale information regarding the 
Shares will be disseminated through the facilities of the Consolidated 
Tape Association (``CTA'').
    Quotation and last sale information for Bitcoin will be widely 
disseminated through a variety of major market data vendors, including 
Bloomberg and Reuters. In addition, real-time price (and volume) data 
for Bitcoin is available by subscription from Reuters and Bloomberg. 
The spot price of Bitcoin is available on a 24-hour basis from major 
market data vendors, including Bloomberg and Reuters. Information 
relating to trading, including price and volume information, in Bitcoin 
will be available from major market data vendors and from the trading 
platforms on which Bitcoin is traded. The normal trading hours for 
Digital Asset Trading Platforms are 24-hours per day, 365-days per 
year.
    On each business day, the Sponsor will publish the Index Price, the 
Trust's NAV, and the NAV per Share on the Trust's website as soon as 
practicable after its determination. If the NAV and NAV per Share have 
been calculated using a price per Bitcoin other than the Index Price 
for such Evaluation Time, the publication on the Trust's website will 
note the valuation methodology used and the price per Bitcoin resulting 
from such calculation.
    The Trust will provide website disclosure of its NAV and NAV per 
Share daily. The website disclosure of the Trust's NAV and NAV per 
Share will occur at the same time as the disclosure by the Sponsor of 
the NAV and NAV per Share to Authorized Participants so that all market 
participants are provided such portfolio information at the same time. 
Therefore, the same portfolio information will be provided on the 
public website as well as in electronic files provided to Authorized 
Participants. Accordingly, each investor will have access to the 
current NAV and NAV per Share of the Trust through the Trust's website, 
as well as from one or more major market data vendors.
    The value of the Index, as well as additional information regarding 
the Index, will be available on a continuous basis at https://www.coindesk.com/indices.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services.
    Information regarding the previous day's closing price and trading 
volume information for the Shares will be published daily in the 
financial section of newspapers.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m., E.T. in 
accordance with NYSE Arca Rule 7.34-E (Early, Core, and Late Trading 
Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Rule 7.6-E, the minimum price variation (``MPV'') for quoting 
and entry of orders in equity securities traded on the NYSE Arca 
Marketplace is $0.01, with the exception of securities that are priced 
less than $1.00, for which the MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rule 8.201-E. The trading of the Shares will 
be subject to NYSE Arca Rule 8.201-E(g), which sets forth certain 
restrictions on Equity Trading Permit Holders (``ETP Holders'') acting 
as registered Market Makers in Commodity-Based Trust Shares to 
facilitate surveillance. The Exchange represents that, for initial and 
continued listing, the Trust will be in compliance with Rule 10A-3 \34\ 
under the Act, as provided by NYSE Arca Rule 5.3-E. A minimum of 
100,000 Shares of the Trust will be outstanding at the commencement of 
trading on the Exchange.
---------------------------------------------------------------------------

    \34\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Trust.\35\ Trading in Shares of the Trust 
will be halted if the circuit breaker parameters in NYSE Arca Rule 
7.12-E have been reached. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable.
---------------------------------------------------------------------------

    \35\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    The Exchange may halt trading during the day in which an 
interruption to the dissemination of the IIV or the value of the Index 
occurs. If the interruption to the dissemination of the IIV or the 
value of the Index persists past the trading day in which it occurred, 
the Exchange will halt trading no later than the beginning of the 
trading day following the interruption. In addition, if the Exchange 
becomes aware that the NAV per Share is not disseminated to all market 
participants at the same time, it will halt trading in the Shares until 
such time as the NAV per Share is available to all market participants.
Surveillance
    The Exchange represents that trading in the Shares of the Trust 
will be subject to the existing trading surveillances administered by 
the Exchange, as well as cross-market surveillances administered by 
FINRA on behalf of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities 
laws.\36\ The Exchange represents that these procedures are adequate to 
properly monitor Exchange trading of the Shares in all trading sessions 
and to deter and detect violations of Exchange rules and federal 
securities laws applicable to trading on the Exchange.
---------------------------------------------------------------------------

    \36\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares with other 
markets and other entities that are members of the ISG, and the 
Exchange or FINRA, on behalf of the Exchange, or both, may obtain 
trading information regarding trading in the Shares and Bitcoin 
derivatives from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares and 
Bitcoin derivatives from markets and other entities that are members of 
ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement

[[Page 49943]]

(``CSSA'').\37\ The Exchange is also able to obtain information 
regarding trading in the Shares and any underlying Bitcoin, Bitcoin 
futures contracts, options on Bitcoin futures, or any other Bitcoin 
derivative in connection with ETP Holders' proprietary trades, or 
customer trades effected through ETP Holders on any relevant market.
---------------------------------------------------------------------------

    \37\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Trust may trade on markets that are members of ISG or with which the 
Exchange has in place a CSSA.
---------------------------------------------------------------------------

    Under NYSE Arca Rule 8.201-E(g), an ETP Holder acting as a 
registered Market Maker in the Shares is required to provide the 
Exchange with information relating to its accounts for trading in any 
underlying commodity, related futures or options on futures, or any 
other related derivatives. Commentary .04 of NYSE Arca Rule 11.3-E 
requires an ETP Holder acting as a registered Market Maker, and its 
affiliates, in the Shares to establish, maintain and enforce written 
policies and procedures reasonably designed to prevent the misuse of 
any material nonpublic information with respect to such products, any 
components of the related products, any physical asset or commodity 
underlying the product, applicable currencies, underlying indexes, 
related futures or options on futures, and any related derivative 
instruments (including the Shares). As a general matter, the Exchange 
has regulatory jurisdiction over its ETP Holders and their associated 
persons, which include any person or entity controlling an ETP Holder. 
To the extent the Exchange may be found to lack jurisdiction over a 
subsidiary or affiliate of an ETP Holder that does business only in 
commodities or futures contracts and that subsidiary or affiliate is a 
member of another regulatory organization, the Exchange could obtain 
information regarding the activities of such subsidiary or affiliate 
through a surveillance sharing agreement with that regulatory 
organization.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the index, portfolio or reference asset, (b) 
limitations on index or portfolio holdings or reference assets, or (c) 
the applicability of Exchange listing rules specified in this rule 
filing shall constitute continued listing requirements for listing the 
Shares on the Exchange.
    The Sponsor has represented to the Exchange that it will advise the 
Exchange of any failure by the Trust to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Trust is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an ``Information Bulletin'' of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (1) 
the procedures for creations of Shares in Baskets; (2) NYSE Arca Rule 
9.2-E(a), which imposes a duty of due diligence on its ETP Holders to 
learn the essential facts relating to every customer prior to trading 
the Shares; (3) information regarding how the value of the Index and 
NAV are disseminated; (4) the possibility that trading spreads and the 
resulting premium or discount on the Shares may widen during the 
Opening and Late Trading Sessions, when an updated IIV will not be 
calculated or publicly disseminated; (5) the requirement that members 
deliver a prospectus to investors purchasing newly issued Shares prior 
to or concurrently with the confirmation of a transaction and (6) 
trading information.
    In addition, the Information Bulletin will reference that the Trust 
is subject to various fees and expenses as described in the 
Registration Statement. The Information Bulletin will disclose that 
information about the Shares of the Trust is publicly available on the 
Trust's website. The Information Bulletin will also reference the fact 
that there is no regulated source of last sale information regarding 
Bitcoin, that the Commission has no jurisdiction over the trading of 
Bitcoin as a commodity, and that the CFTC has regulatory jurisdiction 
over the trading of CME Bitcoin futures contracts and options on CME 
Bitcoin futures contracts.
    The Information Bulletin will also discuss any relief, if granted, 
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \38\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.201-E. The 
Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws. The Exchange or FINRA, on behalf of the Exchange, or 
both, will communicate as needed regarding trading in the Shares with 
other markets that are members of the ISG, and the Exchange or FINRA, 
on behalf of the Exchange, or both, may obtain trading information 
regarding trading in the Shares and Bitcoin derivatives from such 
markets. In addition, the Exchange may obtain information regarding 
trading in the Shares and Bitcoin derivatives from markets that are 
members of ISG or with which the Exchange has in place a CSSA. Also, 
pursuant to NYSE Arca Rule 8.201-E(g), the Exchange is able to obtain 
information regarding Market Maker accounts for trading in the Shares 
and the underlying Bitcoin or any Bitcoin derivative through ETP 
Holders acting as registered Market Makers, in connection with such ETP 
Holders' proprietary trades which they effect on any relevant market.
    The proposed rule change is also designed to prevent fraudulent and 
manipulative acts and practices because the Trust is structured 
similarly to and will operate in materially the same manner as the 
Bitcoin ETPs previously approved by the Commission. The Exchange 
further believes that the proposed rule change is designed to prevent 
fraudulent and manipulative acts and practices because, as noted by the 
Commission in the Bitcoin ETP Approval Order, the Exchange's ability to 
obtain information regarding trading in the Shares and futures from 
markets and other entities that are members of the ISG (including the 
CME) would assist the Exchange in detecting and deterring misconduct. 
In particular, the CME Bitcoin futures market is a large, surveilled, 
and regulated market that is closely connected with the spot market for 
Bitcoin and through which the Exchange could obtain information to

[[Page 49944]]

assist in detecting and deterring potential fraud or manipulation.
    The proposed rule change is also designed to prevent fraudulent and 
manipulative acts and practices because, although the Digital Asset 
Trading Platform Market is not inherently resistant to fraud and 
manipulation, the Index serves as a means sufficient to mitigate the 
impact of instances of fraud and manipulation on a reference price for 
Bitcoin. Specifically, the Index provides a better benchmark for the 
price of Bitcoin than the Digital Asset Trading Platform Market price 
because it (1) tracks the Digital Asset Trading Platform Market price 
through trading activity at U.S.-Compliant Trading Platforms; (2) 
mitigates the impact of instances of fraud, manipulation and other 
anomalous trading activity in real-time through systematic adjustments; 
(3) is constructed and maintained by an expert third-party index 
provider, allowing for prudent handling of non-market-related events; 
and (4) mitigates the impact of instances of fraud, manipulation and 
other anomalous trading activity concentrated on any one specific 
trading platform through a cross-trading platform composite index rate. 
GBTC has used the Index to price the Shares for more than seven years, 
and the Sponsor believes the Index has proven its ability to (i) 
mitigate the effects of fraud, manipulation and other anomalous trading 
activity from impacting the Bitcoin reference rate, (ii) provide a 
real-time, volume-weighted fair value of Bitcoin and (iii) 
appropriately handle and adjust for non-market related events, such 
that efforts to manipulate the price of Bitcoin would have had a 
negligible effect on the pricing of the Trust, due to the controls 
embedded in the structure of the Index. In addition, certain of the 
Index's Constituent Trading Platforms also have or have begun to 
implement market surveillance infrastructure to further detect, 
prevent, and respond to fraud, attempted fraud, and similar wrongdoing, 
including market manipulation.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that there is a considerable amount of Bitcoin price and market 
information available on public websites and through professional and 
subscription services. Investors may obtain, on a 24-hour basis, 
Bitcoin pricing information based on the spot price for Bitcoin from 
various financial information service providers. The closing price and 
settlement prices of Bitcoin are readily available from the Digital 
Asset Trading Platforms and other publicly available websites. In 
addition, such prices are published in public sources, or on-line 
information services such as Bloomberg and Reuters. The NAV per Share 
will be calculated daily and made available to all market participants 
at the same time. The Trust will provide website disclosure of its NAV 
and NAV per Share daily. One or more major market data vendors will 
disseminate for the Trust on a daily basis information with respect to 
the most recent NAV per Share and Shares outstanding. In addition, if 
the Exchange becomes aware that the NAV per Share is not disseminated 
to all market participants at the same time, it will halt trading in 
the Shares until such time as the NAV per Share is available to all 
market participants. Quotation and last-sale information regarding the 
Shares will be disseminated through the facilities of the CTA. The IIV 
will be widely disseminated on a per Share basis every 15 seconds 
during the NYSE Arca Core Trading Session (normally 9:30 a.m., E.T., to 
4:00 p.m., E.T.) by one or more major market data vendors. The Exchange 
represents that the Exchange may halt trading during the day in which 
an interruption to the dissemination of the IIV or the value of the 
Index occurs. If the interruption to the dissemination of the IIV or 
the value of the Index persists past the trading day in which it 
occurred, the Exchange will halt trading no later than the beginning of 
the trading day following the interruption.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of exchange-traded product that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a CSSA. In addition, as noted above, 
investors will have ready access to information regarding the Trust's 
NAV per Share, IIV, and quotation and last sale information for the 
Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
additional type of exchange-traded product, which will enhance 
competition among market participants, to the benefit of investors and 
the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2024-45 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-NYSEARCA-2024-45. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements

[[Page 49945]]

with respect to the proposed rule change that are filed with the 
Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10 a.m. and 3 
p.m. Copies of the filing also will be available for inspection and 
copying at the principal office of the Exchange. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to file number SR-NYSEARCA-2024-45 and should be submitted 
on or before July 3, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
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    \39\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-12793 Filed 6-11-24; 8:45 am]
BILLING CODE 8011-01-P