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Federal Register / Vol. 86, No. 149 / Friday, August 6, 2021 / Notices
solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organizations Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes a rule change to list and trade shares of the ARK
21Shares Bitcoin ETF the Trust,3
under BZX Rule 14.11e4, Commodity-Based Trust Shares. The shares of the Trust are referred to herein as the Shares.
The text of the proposed rule change is also available on the Exchanges website http markets.cboe.com/us/
equities/regulation/rule_filings/bzx/, at the Exchanges Office of the Secretary, and at the Commissions Public Reference Room.
II. Self-Regulatory Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange 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 these 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 aspects of such statements.
A. Self-Regulatory Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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1. Purpose The Exchange proposes to list and trade the Shares under BZX Rule 14.11e4,4 which governs the listing and trading of Commodity-Based Trust Shares on the Exchange.5 21Shares US
LLC is the sponsor of the Trust the Sponsor. The Shares will be registered with the Commission by means of the Trusts registration statement on Form S1 the Registration Statement.6
3 The Trust was formed as a Delaware statutory trust on June 22, 2021 and is operated as a grantor trust for U.S. federal tax purposes. The Trust has no fixed termination date.
4 The Commission approved BZX Rule 14.11e4
in Securities Exchange Act Release No. 65225
August 30, 2011, 76 FR 55148 September 6, 2011
SRBATS2011018.
5 All statements and representations made in this filing regarding a the description of the portfolio, b limitations on portfolio holdings or reference assets, or c the applicability of Exchange rules and surveillance procedures shall constitute continued listing requirements for listing the Shares on the Exchange.
6 See Registration Statement on Form S1, dated June 28, 2021 submitted to the Commission by the
VerDate Sep<11>2014

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Background Bitcoin is a digital asset based on the decentralized, open source protocol of the peer-to-peer computer network launched in 2009 that governs the creation, movement, and ownership of bitcoin and hosts the public ledger, or blockchain, on which all bitcoin transactions are recorded the Bitcoin Network or Bitcoin. The decentralized nature of the Bitcoin Network allows parties to transact directly with one another based on cryptographic proof instead of relying on a trusted third party. The protocol also lays out the rate of issuance of new bitcoin within the Bitcoin Network, a rate that is reduced by half approximately every four years with an eventual hard cap of 21 million. Its generally understood that the combination of these two featuresa systemic hard cap of 21 million bitcoin and the ability to transact trustlessly with anyone connected to the Bitcoin Networkgives bitcoin its value.7 The first rule filing proposing to list an exchange-traded product to provide exposure to bitcoin in the U.S. was submitted by the Exchange on June 30, 2016.8 At that time, blockchain technology, and digital assets that utilized it, were relatively new to the broader public. The market cap of all bitcoin in existence at that time was approximately $10 billion. No registered offering of digital asset securities or shares in an investment vehicle with exposure to bitcoin or any other cryptocurrency had yet been conducted, and the regulated infrastructure for conducting a digital asset securities offering had not begun to develop.9
Similarly, regulated U.S. bitcoin futures contracts did not exist. The Commodity Sponsor on behalf of the Trust. The descriptions of the Trust, the Shares, and the Index as defined below contained herein are based, in part, on information in 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.
7 For additional information about bitcoin and the Bitcoin Network, see https bitcoin.org/en/gettingstarted; https www.fidelitydigitalassets.com/
articles/addressing-bitcoin-criticisms; and https
www.vaneck.com/education/investment-ideas/
investing-in-bitcoin-and-digital-assets/.
8 See Securities Exchange Act Release No. 83723
July 26, 2018, 83 FR 37579 August 1, 2018. This proposal was subsequently disapproved by the Commission. See Securities Exchange Act Release No. 83723 July 26, 2018, 83 FR 37579 August 1, 2018 the Winklevoss Order.
9 Digital assets that are securities under U.S. law are referred to throughout this proposal as digital asset securities. All other digital assets, including bitcoin, are referred to interchangeably as cryptocurrencies or virtual currencies. The term digital assets refers to all digital assets, including both digital asset securities and cryptocurrencies, together.

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Futures Trading Commission the CFTC had determined that bitcoin is a commodity,10 but had not engaged in significant enforcement actions in the space. The New York Department of Financial Services NYDFS adopted its final BitLicense regulatory framework in 2015, but had only approved four entities to engage in activities relating to virtual currencies whether through granting a BitLicense or a limited-purpose trust charter as of June 30, 2016.11 While the first over-thecounter bitcoin fund launched in 2013, public trading was limited and the fund had only $60 million in assets.12 There were very few, if any, traditional financial institutions engaged in the space, whether through investment or providing services to digital asset companies. In January 2018, the Staff of the Commission noted in a letter to the Investment Company Institute and SIFMA that it was not aware, at that time, of a single custodian providing fund custodial services for digital assets.13 Fast forward to the first quarter of 2021 and the digital assets financial ecosystem, including bitcoin, has progressed significantly. The development of a regulated market for digital asset securities has significantly evolved, with market participants having conducted registered public offerings of both digital asset securities 14 and shares in investment 10 See In the Matter of Coinflip, Inc.
Coinflip CFTC Docket 1529 September 17, 2015 order instituting proceedings pursuant to Sections 6c and 6d of the CEA, making findings and imposing remedial sanctions, in which the CFTC stated:
Section 1a9 of the CEA defines commodity to include, among other things, all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in. 7 U.S.C.
1a9. The definition of a commodity is broad. See, e.g., Board of Trade of City of Chicago v. SEC, 677
F. 2d 1137, 1142 7th Cir. 1982. Bitcoin and other virtual currencies are encompassed in the definition and properly defined as commodities.
11 A list of virtual currency businesses that are entities regulated by the NYDFS is available on the NYDFS website. See https www.dfs.ny.gov/apps_
and_licensing/virtual_currency_businesses/
regulated_entities.
12 Data as of March 31, 2016 according to publicly available filings. See Bitcoin Investment Trust Form S1, dated May 27, 2016, available: https
www.sec.gov/Archives/edgar/data/1588489/
000095012316017801/filename1.htm.
13 See letter from Dalia Blass, Director, Division of Investment Management, U.S. Securities and Exchange Commission to Paul Schott Stevens, President & CEO, Investment Company Institute and Timothy W. Cameron, Asset Management GroupHead, Securities Industry and Financial Markets Association January 18, 2018, available at https www.sec.gov/divisions/investment/
noaction/2018/cryptocurrency-011818.htm.
14 See Prospectus supplement filed pursuant to Rule 424b1 for INX Tokens Registration No.
333233363, available at: https www.sec.gov/
Archives/edgar/data/1725882/

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