ARK 21Shares Bitcoin ETF

Information management · Technology vendor dependence

The Bitcoin Custodians and the Prime Broker may act in the same or similar capacity for other competing products. Currently, the number of digital assets intermediaries with the reputation and operational capability to serve as custodian and/or prime broker to the Trust or other competing products is limited.

Cybersecurity and data protection · Data breaches and cyber attacks

Security breaches, cyber-attacks, computer malware and computer hacking attacks have been a prevalent concern in relation to digital assets. Multiple thefts of bitcoin and other digital assets from other holders have occurred in the past.

Technology infrastructure · Technology systems and infrastructure failure

A disruption of the Internet may affect Bitcoin operations, which may adversely affect the bitcoin industry and an investment in the Trust. The functionality of the Bitcoin network relies on the Internet. A significant disruption of Internet connectivity could disrupt the Bitcoin Network's functionality and operations.

Information management · Data quality and integrity

The Index Provider does not guarantee the validity of any of these inputs, which may be subject to technological error, manipulative activity, or fraudulent reporting from their initial source.

Digital transformation and innovation · Technology implementation and upgrades

The Trust could experience difficulties in operating and maintaining its technical infrastructure, including in connection with expansions or updates to such infrastructure, which are likely to be complex and could lead to unanticipated delays, unforeseen expenses and security vulnerabilities.

Supply chain and procurement · Supplier operation and dependance

The Trust is dependent on the Bitcoin Custodians as well as the Prime Broker to operate. The Bitcoin Custodians perform essential functions in terms of safekeeping the Trust's bitcoin in the Cold Vault Balance, and the Prime Broker facilitates the selling of bitcoin by the Trust to pay the Sponsor's Fee.

Supply chain and procurement · Supplier financial distress and capability

The Bitcoin Custodians could become insolvent. The insolvency of the Bitcoin Custodians or of any broker, custodian bank or clearing corporation used by the Bitcoin Custodians, may result in the loss of all or a substantial portion of the Trust's assets.

Tax and financial reporting · Financial reporting and accounting standards

The Trust uses the Index to determine its NAV and NAV per Share. However, for financial statement purposes, the Trust's bitcoin is carried at fair value as required by GAAP, which requires a determination based on the price of bitcoin on principal market.

Industry regulation · Regulatory compliance and changes

Future and current regulations by a United States or foreign government or quasi-governmental agency could have an adverse effect on an investment in the Trust. The regulation of bitcoin and related products and services continues to evolve, may take many different forms and will, therefore, impact bitcoin and its usage in a variety of manners.

Data and privacy · Regulatory investigations and penalties

If the Trust, the Sponsor or the Trustee were to transact with a sanctioned entity, the Trust, the Sponsor or the Trustee would be at risk of potential criminal or civil lawsuits or liability.

Tax and financial reporting · Internal controls and compliance programs

The Administrator is solely responsible for determining the value of the Trust's bitcoin, the Trust's NAV and the Trust's Principal Market NAV. The value of the Shares may experience an adverse effect in the event of any errors, discontinuance or changes in such valuation calculations.

International and currency · International operations and emerging markets

Various foreign jurisdictions have adopted, and may continue to adopt in the near future, laws, regulations or directives that affect bitcoin, particularly with respect to bitcoin spot markets, trading venues and service providers that fall within such jurisdictions' regulatory scope.

Credit and liquidity · Credit risk and customer defaults

A Bitcoin Counterparty may fail to deliver to the Trust's account with the Bitcoin Custodians the amount of bitcoin associated with a creation order. A Bitcoin Counterparty may fail to deliver to the Trust's account at the Cash Custodian the amount of cash associated with a redemption order.

Market and investment · Investment portfolio performance

The NAV or the Principal Market NAV may not always correspond to the market price of bitcoin and, as a result, Creation Baskets may be created or redeemed at a value that is different from the market price of the Shares.

Market and investment · Trading and market making activities

The inability of Authorized Participants and market makers to hedge their bitcoin exposure may adversely affect the liquidity of Shares and the value of an investment in the Shares.

Credit and liquidity · Access to capital and financing

Loss of a critical banking relationship for, or the failure of a bank used by, the Trust or the Prime Broker could adversely impact the Trust's ability to create or redeem Baskets, or could cause losses to the Trust.

Organizational and management · Leadership and management changes

If such key personnel were to leave or be unable to carry out their present responsibilities, it may have an adverse effect on the management of the Sponsor or the Sub-Adviser, as applicable.

Market position and competition · Industry consolidation and market concentration

The provision of bitcoin mining hardware is also becoming increasingly centralized and concentrated among a few key players such as Bitmain.

Market position and competition · Disruptive competitors and new market entrants

Competition from central bank digital currencies ('CBDCs') could adversely affect the value of bitcoin and other digital assets. Central banks have introduced digital forms of legal tender, which could have an advantage in competing with, or replacing, bitcoin and other digital assets as a medium of exchange or store of value.

Natural and catastrophic events · Force majeure and business interruption

The Bitcoin Custodians may not be liable for any delay in performance of any of its custodial obligations by reason of any cause beyond their reasonable control, including force majeure events, war or terrorism.