Following last night’s news that the SEC had responded to several applicants for a spot Bitcoin ETF with additional comments, Blackrock has this morning, Jan. 9, submitted further amendments to its S1 prospectus with the SEC.
However, upon CryptoSlate’s review of the document, there appear to be only two minor changes, indicating this is likely the last filing before the SEC makes its decision. Essentially, these two updates similarly ensure to cover potential Force Majeure-like circumstances for the Authorized Participants and the Bitcoin Trading Counterparty.
[Editor’s note: It reads, as if the SEC has stated in their comments, ‘You need to add APs and trading counterparties to these two sections to cover off any risks there too, then we’re done.’]
There are no other material changes to the documents.
Updates to Blackrock S1 filing on Jan. 9
In the first change, the filing was amended to expand on the potential risks associated with the termination of key agreements or the failure of essential parties to provide their services.
Originally, the focus was solely on the Custodian Agreement and the Prime Execution Agent Agreement, highlighting the risks if these were terminated or if the Bitcoin Custodian or Prime Execution Agent failed to deliver the required services.
The amended text broadens this scope by including the Authorized Participant Agreement and the Bitcoin Trading Counterparty Agreement. It also adds that if any of these agreements are terminated, or if an Authorized Participant or a Bitcoin Trading Counterparty fails to perform as required, the Trustee might face challenges not only in safekeeping the Trust’s bitcoins but also in managing the creation and redemption of shares. This change emphasizes a more comprehensive range of operational risks that could adversely affect the Trust’s ongoing operations.
The second change to the filing was to address additional risks related to the roles of Authorized Participants and Bitcoin Trading Counterparties in the operation of the Trust.
Initially, the focus was on the challenges and potential consequences if the Trustee could not find a suitable replacement for the custodian or prime execution agent under favorable terms. This included the possibility of having to terminate the Trust and liquidate its bitcoin holdings and the potential adverse effect on the value of the Shares if less favorable agreements were made.
The amendment introduces new concerns regarding the Authorized Participants and Bitcoin Trading Counterparties. It highlights that if these parties suffer from issues like insolvency, business disruptions, failures to perform, security breaches, or choose not to participate in the Trust’s creation and redemption process, it could have significant negative impacts. Specifically, it could disrupt the Trust’s creation and redemption process, affect the arbitrage mechanism that aligns the Shares with the Net Asset Value (NAV), and generally impact the Trust’s operations.
The amendment points out that finding replacements for these parties on commercially acceptable terms, or at all, could be challenging, underlining the operational risks in these areas.
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