The
information in this Preliminary Prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Preliminary Prospectus is
not an offer to sell these securities and it is not soliciting an offer to buy
these securities in any jurisdiction where the offer or sale is not
permitted.
Subject
to Completion
Preliminary
Prospectus dated October 30, 2025
PRELIMINARY
PROSPECTUS
VanEck
BNB ETF
The
VanEck BNB ETF (the "Trust") is an exchange-traded fund that issues common
shares of beneficial interest (the "Shares") that are expected to be approved
for listing, subject to notice of issuance, on the
[ ] (the "Exchange") pursuant to the Exchange’s
existing generic listing standards under the ticker symbol
[ ]. The Trust's investment objective is to reflect
the performance of the price of BNB ("BNB") and rewards from staking a portion
of the Trust's BNB, to the extent the Sponsor in its sole discretion determines
that the Trust may do so without undue legal or regulatory risk, such as,
without limitation, by jeopardizing the Trust's ability to qualify as a grantor
trust for tax purposes, less the expenses of the Trust's operations. In seeking
to achieve its investment objective, the Trust will hold BNB and will value its
Shares daily based on the reported MarketVectorTM
[ ](the "Index" or "MarketVectorTM
[ ]"), which is calculated based on prices
contributed by trading platforms that the Sponsor's (as defined below)
affiliate, MarketVector Indexes GmbH ("MarketVector"), believes represent the
top five BNB trading platforms based on the industry leading
[ ] review report. See "The Trust and BNB
Prices—Description of the MarketVectorTM
[ ] Construction and Maintenance" for more
information. To the extent the Sponsor determines to stake a portion of the
Trust's BNB, the Sponsor plans to engage one or more third party staking
services providers (each a "Staking Services Provider") to conduct such staking
activities ("Staking Activities"). To the extent the Sponsor engages additional
Staking Services Providers, the Sponsor will determine the amount of BNB to
allocate to each Staking Services Provider based on each Staking Services
Provider's performance, including uptime and compliance with staking
requirements. In the future, subject to advice from counsel that doing so should
not cause the Trust to fail to qualify as an investment trust or grantor trust
for U.S. federal income tax purposes, the Sponsor may seek to use or hold liquid
staking tokens ("LSTs"), though no such determination has been made as of the
date of this registration statement. VanEck Digital Assets, LLC (the "Sponsor")
is the sponsor of the Trust, CSC Delaware Trust Company (the "Trustee") is the
trustee of the Trust, and [ ], (the "BNB Custodian"
or "[ ]"), [ ] (the
"Additional BNB Custodian" or "[ ]"), or any
successor custodians, are the custodians of the Trust, who will hold all of the
Trust's BNB on the Trust's behalf.
The
Trust intends to issue Shares on a continuous basis and is registering an
indeterminate number of Shares with the Securities and Exchange Commission (the
"SEC") in accordance with Rule 456(d) and 457(u). When the Trust sells or
redeems its Shares, it will do so in blocks of [ ]
Shares (a "Basket") that are based on the amount of BNB represented by the
Basket being created, the amount of BNB being equal to the combined net asset
value of the number of Shares included in the Basket (net of accrued but unpaid
remuneration due to the Sponsor (the "Sponsor Fee") and any accrued but unpaid
expenses or liabilities not assumed by the Sponsor). The Trust will conduct
subscriptions and redemptions in cash or in-kind transactions with financial
firms that are authorized to purchase or redeem Shares with the Trust (known as
"Authorized Participants" or "APs"). For a subscription in cash, the Authorized
Participant's subscription shall be in the amount of cash needed to purchase the
amount of BNB represented by the Basket being created, as calculated by
[ ] (the "Administrator") based on the Index or the
other valuation policies described herein. The AP will deliver the cash to the
Trust's account at [ ] (the "Cash Custodian"),
which the Sponsor will then use to purchase BNB from a third party selected by
the Sponsor who (1) is not the Authorized Participant and (2) will not be acting
as an agent, nor at the direction, of the Authorized Participant with respect to
the delivery of BNB to the Trust (such third party, a "Liquidity Provider"). For
a redemption in cash, the Sponsor shall arrange for the BNB represented by the
Basket to be sold to a Liquidity Provider selected by the Sponsor and the cash
proceeds to be distributed from the Trust's account at the Cash Custodian to the
Authorized Participant in exchange for their Shares. For an "in-kind"
subscription, Authorized Participants will deliver, or arrange for the delivery
by the Authorized Participant's designee of, BNB to the Trust's account with the
BNB Custodian in exchange for Shares when they purchase Shares. For an "in-kind"
redemption transaction with the Trust, when Authorized Participants redeem
Shares, the Trust, through the BNB Custodian, will deliver BNB to such
Authorized Participants, or a designee thereof, in exchange for their
Shares.
Following
an Authorized Participant's subscription in cash for a Basket and issuance by
the Trust of the corresponding Shares to such AP, Authorized Participants may
then offer Shares to the public at prices that depend on various factors,
including the supply and demand for Shares, the value of the Trust's assets, and
market conditions at the time of a transaction. Shareholders who buy or sell
Shares during the day from their broker may do so at a premium or discount
relative to the net asset value of the Shares of the Trust.
Except
when aggregated in Baskets, Shares are not redeemable securities. Baskets are
only redeemable by Authorized Participants.
Shareholders
who decide to buy or sell Shares of the Trust will place their trade orders
through their brokers and may incur customary brokerage commissions and charges.
Prior to this offering, there has been no public market for the Shares. The
Shares are expected to be approved for listing, subject to notice of issuance,
on the Exchange under the ticker symbol
[ ].
Investing
in the Trust involves risks similar to those involved with an investment
directly in BNB and other significant risks. See "Risk Factors"
beginning on page 17.
The
offering of the Trust's Shares is registered with the SEC in accordance with the
Securities Act of 1933, as amended (the "1933 Act"). The offering is intended to
be a continuous offering. The Trust is not registered under the Investment
Company Act of 1940, as amended (the "1940 Act") and is not subject to
regulation under the 1940 Act. The Trust is not a commodity pool for purposes of
the Commodity Exchange Act of 1936, as amended (the "CEA"), and the Sponsor is
not subject to regulation by the Commodity Futures Trading Commission (the
"CFTC") as a commodity pool operator or a commodity trading advisor. The Trust's
Shares are neither interests in nor obligations of the Sponsor or the
Trustee.
On
[ ], [ ] (the "Seed
Capital Investor"), [ ], subject to certain
conditions, purchased the "Seed Shares," comprising
[ ] Shares at a per-Share price of
$[ ]. Delivery of the Seed Shares was made on
[ ]. Total proceeds to the Trust from the sale of
the Seed Shares were $[ ]. On
[ ], 2025, the Seed Shares were redeemed for cash
and the Seed Capital Investor purchased the "Seed Creation Baskets," comprising
of [ ] Shares at a per-Share price equal to
[ ] BNB. The price of BNB was determined using the
Index on [ ], 2025. The Index price on
[ ], 2025 was $[ ].
Total proceeds to the Trust from the sale of the Seed Creation Baskets were
[ ] BNB. Delivery of the Seed Creation Baskets was
made on [ ], 2025. The Seed Capital Investor has
acted as a statutory underwriter in connection with this purchase.
The
price of the Seed Creation Baskets was determined as described above and such
Shares could be sold at different prices if sold by the Seed Capital Investor at
different times.
The
value of BNB and, therefore, the value of the Trust's Shares could decline
rapidly, including to zero. You could lose your entire investment. The Shares
are neither insured nor guaranteed by the Federal Deposit Insurance Corporation,
or any other governmental agency or other person or entity. The Shares are not
interests in nor obligations of nor guaranteed by any of the Sponsor, the
Trustee, Seed Capital Investor, MarketVector, the Administrator, the Cash
Custodian, the BNB Custodian, the Additional BNB Custodian, any Liquidity
Provider, any Staking Services Provider, or their respective
affiliates.
AN
INVESTMENT IN THE TRUST INVOLVES SIGNIFICANT RISKS AND MAY NOT BE SUITABLE FOR
SHAREHOLDERS THAT ARE NOT IN A POSITION TO ACCEPT MORE RISK THAN MAY BE INVOLVED
WITH OTHER EXCHANGE-TRADED PRODUCTS THAT DO NOT HOLD BNB OR INTERESTS RELATED TO
BNB. THE SHARES ARE SPECULATIVE SECURITIES. THEIR PURCHASE INVOLVES A HIGH
DEGREE OF RISK AND YOU COULD LOSE YOUR ENTIRE INVESTMENT. YOU SHOULD CONSIDER
ALL RISK FACTORS BEFORE INVESTING IN THE TRUST. PLEASE REFER TO "RISK FACTORS"
BEGINNING ON PAGE 17.
NEITHER
THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE
SECURITIES OFFERED IN THIS PROSPECTUS, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE
TRUST IS AN "EMERGING GROWTH COMPANY" AS THAT TERM IS USED IN THE JUMPSTART OUR
BUSINESS STARTUPS ACT (THE "JOBS ACT") AND, AS SUCH, MAY ELECT TO COMPLY WITH
CERTAIN REDUCED REPORTING REQUIREMENTS.
The
date of this Prospectus is
, 2025
TABLE
OF CONTENTS
This
Prospectus contains information you should consider when making an investment
decision about the Shares of the Trust. You may rely on the information
contained in this Prospectus. The Trust and the Sponsor have not authorized any
person to provide you with different information and, if anyone provides you
with different or inconsistent information, you should not rely on it. This
Prospectus is not an offer to sell the Shares in any jurisdiction where the
offer or sale of the Shares is not permitted.
The
Shares of the Trust are not registered for public sale in any jurisdiction other
than the United States.
Until
[ ], 2025, all dealers effecting transactions in
the Shares, whether or not participating in this offering, may be required to
deliver a prospectus. This requirement is in addition to the dealer's obligation
to deliver a prospectus when acting as underwriters and with respect to unsold
allotments or subscriptions.
STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
This
Prospectus includes "forward-looking statements" which generally relate to
future events or future performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expect," "intend", "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or the negative of these terms or other comparable terminology. All
statements (other than statements of historical fact) included in this
Prospectus that address activities, events or developments that will or may
occur in the future, including such matters as movements in the cryptocurrencies
markets and indexes that track such movements, the Trust's operations, the
Sponsor's plans and references to the Trust's future success and other similar
matters, are forward-looking statements. These statements are only predictions.
Actual events or results may differ materially. These statements are based upon
certain assumptions and analyses the Sponsor has made based on its perception of
historical trends, current conditions and expected future developments, as well
as other factors appropriate in the circumstances. Whether or not actual results
and developments will conform to the Sponsor's expectations and predictions,
however, is subject to a number of risks and uncertainties, including the
special considerations discussed in this Prospectus, general economic, market
and business conditions, changes in laws or regulations, including those
concerning taxes, made by governmental authorities or regulatory bodies, and
other world economic and political developments. Consequently, all the
forward-looking statements made in this Prospectus are qualified by these
cautionary statements, and there can be no assurance that actual results or
developments the Sponsor anticipates will be realized or, even if substantially
realized, that they will result in the expected consequences to, or have the
expected effects on, the Trust's operations or the value of its
Shares.
PROSPECTUS
SUMMARY
This
is only a summary of the Prospectus and, while it contains material information
about the Trust and its Shares, it does not contain or summarize all of the
information about the Trust and the Shares contained in this Prospectus that is
material and/or which may be important to you. You should read this entire
Prospectus, including "Risk Factors" on page 17,
before making an investment decision about the Shares. For a glossary of defined
terms, see Appendix A.
Overview
of the Trust
The
VanEck BNB ETF (the "Trust") is an exchange-traded fund that issues common
shares of beneficial interest (the "Shares") that are expected to be approved
for listing, subject to notice of issuance, on the
[ ] (the "Exchange") pursuant to the Exchange’s
existing generic listing standards under the ticker symbol
[ ]. The Trust is not registered as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and is not required to register under such act. The Trust is not a commodity
pool for purposes of the CEA, and the Sponsor is not subject to regulation by
the Commodity CFTC as a commodity pool operator or a commodity trading advisor.
The Trust is a passive investment vehicle that does not seek to pursue any
investment strategy beyond reflecting the performance of the price of BNB and
any rewards from staking a portion of the Trust’s BNB ("BNB"). As a result, the
Trust will not attempt to avoid losses or hedge exposure arising from the risk
of changes in the price of BNB. The Trust's investment objective is to reflect
the performance of the price of BNB, and rewards from staking a portion of the
Trust's BNB, to the extent the Sponsor in its sole discretion determines that
the Trust may do so without undue legal or regulatory risk, such as, without
limitation, by jeopardizing the Trust's ability to qualify as a grantor trust
for U.S. federal income tax purposes, less the expenses of the Trust's
operations. In seeking to achieve its investment objective, the Trust will hold
BNB and will value its Shares daily based on the reported
MarketVectorTM
[ ], which is calculated based on prices
contributed by trading platforms that the Sponsor's affiliate, MarketVector
Indexes GmbH ("MarketVector"), believes represent the top five BNB trading
platforms based on the industry leading [ ] review
report. See "The Trust and BNB Prices— Description of the
MarketVectorTM
[ ] Construction and Maintenance" for more
information. To the extent the Sponsor determines to stake a portion of the
Trust's BNB, the Sponsor plans to engage one or more third party staking
services providers (each a "Staking Services Provider") to conduct such staking
activities ("Staking Activities"). To the extent the Sponsor engages additional
Staking Services Providers, the Sponsor will determine the amount of BNB to
allocate to each Staking Services Provider based on each Staking Services
Provider's performance, including uptime and compliance with staking
requirements. In the future, subject to advice from counsel that doing so should
not cause the Trust to fail to qualify as an investment trust or grantor trust
for U.S. federal income tax purposes, the Sponsor may seek to use or hold liquid
staking tokens ("LSTs"), though no such determination has been made as of the
date of this registration statement. The Trust will not utilize leverage,
derivatives or any similar arrangements in seeking to meet its investment
objective. The Trust is sponsored by VanEck Digital Assets, LLC (the "Sponsor"),
a wholly-owned subsidiary of Van Eck Associates Corporation ("VanEck"), a U.S.
registered investment adviser with approximately $145.7 billion in assets under
management as of August 31, 2025. The Sponsor is not registered as an investment
adviser and currently is not required to register under the Advisers Act in
connection with its activities on behalf of the Trust. The Trust, the Sponsor
and the service providers will not loan or pledge the Trust's assets, nor will
the Trust's assets serve as collateral for any loan or similar
arrangement.
BNB
is a digital asset that is created and transmitted through the operations of the
peer-to-peer BNB Chain, a network of computers that operates on cryptographic
software protocols based on open-source code, the transaction validation and
recordkeeping infrastructure of which is collectively maintained by a global
user base. The BNB Chain enables users to exchange tokens of value, or BNB,
which are recorded on a distributed public recordkeeping system or ledger known
as a blockchain (the "BNB Chain"), and which may be used to pay for goods and
services. Because BNB is issued by and can be used to interact directly with the
BNB Chain through, e.g., the payment of transaction fees needed to execute smart
contract code or record transactions on the BNB Chain, BNB is commonly referred
to as the native asset of the BNB Chain.
The
Trust intends to stake a portion of the Trust's assets through one or more
Staking Services Providers. The Sponsor has adopted a staking program and
liquidity risk policy (the "Staking Policy"). The Sponsor is responsible for
administering the staking program, which will be overseen by a designated
staking committee. The Sponsor is
responsible
for evaluating several factors—such as the underlying BNB, the associated
protocol, liquidity (relative to the circulating market cap), and operational
risks such as slashing—when determining the percentage of the Trust's BNB that
will be allocated to staking. The Sponsor will review historical redemption
patterns as a part of its evaluation to ensure sufficient buffers are in place
during extreme market conditions. Pursuant to the Staking Policy, a base staking
percentage is set and adjusted for unstaking delays, with a 5% buffer in place
to prompt rebalancing if the staked amount deviates significantly. Staking
Services Providers will be chosen based on cost, reputation, financial
stability, and operational security, with a preference for Staking Services
Providers with System and Organization Controls (SOC) reports and/or ISO/IEC
certifications. The Trust may be responsible for fees charged by the BNB
Custodian and/or Additional BNB Custodian for facilitating staking of the
Trust’s assets held with such Custodian (the “Custodian Staking Facilitation
Fee”). To the extent that a Custodian Staking Facilitation Fee is incurred, such
fee shall be paid from the Trust’s staking proceeds by the applicable custodian,
deducted from the Trust’s staking proceeds before such amounts are received by
the Trust or paid by the Sponsor, and the Sponsor shall be entitled to
reimbursement by the Trust of the amount of such Custodian Staking Facilitation
Fee that it has paid on the Trust's behalf. Other than reimbursement by the
Trust of the amount of such Custodian Staking Facilitation Fee that the Sponsor
has paid on the Trust's behalf, which is treated as an extraordinary expense,
the
Sponsor and its affiliates will not receive any compensation from the staked
assets of the Trust.
Ongoing due diligence will be conducted on validators, including performance
monitoring and benchmarking. Staking rewards, net of fees, will be automatically
credited to the Trust and reflected in its daily NAV, with a 4:00 p.m. Eastern
time cut-off. The Trust will generally re-stake the staking rewards it receives,
subject to the target staking percentage. Investors are not required to take any
action to receive rewards, and the Trust does not operate its own validator
nodes. Key staking metrics, such as current percentage of the Trust’s BNB being
staked and gross and net yields of staked assets, are published and updated on
the Trust's website.
Pursuant
to the Staking Policy, the Sponsor is responsible for assessing, managing and
reviewing liquidity risk of the Trust at least annually based on the following
five factors: (i) the Trust's investment strategy and liquidity of the Trust's
assets during normal and stressed conditions, including use of borrowing for
investment purposes and derivatives and whether the investment strategy is
appropriate for effective and efficient arbitrage, (ii) holdings of cash and
cash equivalents, as well as borrowing arrangements and other funding sources,
(iii) percentage and description of the Trust's assets that are segregated,
pledged, hypothecated, encumbered, or otherwise restricted or prevented from
being liquidated, sold, transferred or assigned, (iv) the lock-up period,
including the bonding and unbonding periods and the entry and exit wait times
involved in the staking process, and (v) the historical percentages of
cumulative drawdowns in redemptions for U.S. listed crypto-based ETFs and other
similar instruments listed globally. With respect to factor (i) above, the
Staking Policy provides that the Sponsor has the authority to adjust the size of
the Baskets if it determines that such changes would improve the effectiveness
and efficiency of the arbitrage mechanism.
Following
the liquidity risk assessment, the Sponsor will determine whether changes to the
administration of the Trust's staking program are necessary. Any changes made or
recommended will be evaluated during the next liquidity risk assessment.
The
Trust continues to update its liquidity risk policies and procedures with
respect to LSTs. The Staking Policy is intended to be and is in line with the
generic listing standards of the Exchange.
As
part of the "activating" and "de-activating" or "cooling down" processes of
staking, staked BNB will be inaccessible for a variable period of time
determined by a range of factors, resulting in potential inaccessibility during
those periods. As a result, the Trust may not be able to promptly access or
liquidate staked BNB to meet redemption requests in amounts that are greater
than the portion of the Trust's BNB that remains un-staked or respond to adverse
market conditions. This delay could adversely affect the Trust's liquidity and
its ability to fulfil investor redemptions in a timely manner, particularly
during periods of heightened market volatility or significant redemption
activity.
The
Sponsor is responsible for assessing, managing, and periodically reviewing the
Trust's liquidity risk annually. In conducting the liquidity risk assessment,
the Sponsor considers all relevant risks, including the Trust's investment
strategy and liquidity during normal and stressed conditions, the Trust's
holdings of cash and cash equivalents and the "activating" and "de-activating"
period involved in the staking process, and determines whether
any
adjustments to the management of the Trust's liquidity risk are necessary.
Potential adjustments may include reducing the proportion of BNB allocated to
staking or increasing the amount of BNB kept readily available to meet
redemption requests.
As
a result of any staking activity in which the Trust may engage, the Trust
expects to receive certain staking rewards of BNB, which may be treated for U.S.
federal income tax purposes as income to the Trust (see "United States Federal
Income Tax Consequences—Taxation of U.S. Shareholders," for a further
description of the tax implications of the activities of the Trust to an
investor). The Staking Services Provider exercises no discretion as to the
amount of the Trust's BNB to be staked or timing of the staking activities
(other than as is incidental in establishing or deactivating validator nodes).
The BNB Custodian and Additional BNB Custodian will maintain exclusive
possession and control of the private keys associated with any staked BNB(or, if
the Trust holds LSTs, the private keys to the Trust's LSTs) at all times.
Staking activity on the BNB Chain involves the delegation of BNB to validators
and carries certain risks, such as bugs, software defects, unauthorized
cybersecurity breaches ("hacks"), theft, or loss. Staked BNB may be subject to
community-determined penalties for validator misbehavior, or slashing. If the
Staking Service Provider causes the Trust's staked BNB to be subject to such
slashing losses, the Trust could suffer losses of the staked BNB. Additionally,
the staking process includes protocol-defined warm-up, activation and withdrawal
periods, during which staked BNB is temporarily locked and inaccessible. These
phases affect when BNB begins earning rewards, participates in consensus and
becomes available for transfer or redelegation. The description and
considerations related to staking are discussed more fully in "Principal
Risks-Risks Associated with
BNB
and the BNB Chain."
Under
normal circumstances, the Sponsor will seek to stake all of the Trust's BNB
except for BNB reserved by the Sponsor in its sole discretion to facilitate
foreseeable redemption transactions, pay Trust expenses or otherwise protect the
Trust and its assets.
Because
peer-to-peer transfers of BNB are recorded on the BNB Chain, which is a digital
public recordkeeping system or ledger, buying, holding and selling BNB is very
different than buying, holding and selling more conventional instruments like
cash, stocks or bonds. For example, BNB must either be acquired as a reward for
participating in the validation of transactions that are added to the BNB Chain
(the validation process is referred to interchangeably in this Prospectus as
"validation" or "staking", the rewards are referred to as "staking rewards", and
the parties performing such validation, "validators"), obtained in a
peer-to-peer transaction on the BNB Chain, or purchased through an online
digital asset trading platform or other intermediary, such as a broker in the
institutional over-the-counter ("OTC") market. Peer-to-peer transactions may be
difficult to arrange, and involve complex and potentially risky procedures
around safekeeping, transferring and holding the BNB. Alternatively, purchasing
BNB on an BNB trading platform requires choosing a trading platform, opening an
account, and transferring funds to the trading platform in order to purchase the
BNB. Transactions on centralized trading platforms are not ordinarily recorded
on the BNB Chain. There are currently a large number of BNB trading platforms
from which to choose, the quality and reliability of which varies significantly.
Some trading platforms have been subject to hacks, resulting in significant
losses to end users.
The
Trust provides direct exposure to BNB and the Shares of the Trust are valued on
a daily basis using prices drawn from a carefully evaluated group of trading
platforms selected by MarketVector, which utilizes the
[ ] data to construct the MarketVectorTM
[ ]. The Trust provides investors with the
opportunity to access the market for BNB through Shares held in a traditional
brokerage account without the potential barriers to entry or risks involved with
holding or transferring BNB directly, acquiring it from an exchange, or
participating in staking and receiving BNB as a reward as referenced above (to
the extent the Sponsor determines to stake a portion of the Trust's BNB). The
Trust will custody its BNB at [ ] (the "BNB
Custodian"), a regulated third-party custodian that carries insurance and is
chartered as a limited purpose trust company under the New York Banking Law. The
Trust will also custody its BNB at [ ] (the
"Additional BNB Custodian"), a regulated third-party custodian that carries
insurance and is chartered as a limited purpose trust company under the New York
Banking Law. The Trust will not use derivatives such as swaps, futures, or
options in its investment strategy. Using derivatives could subject the Trust to
derivatives counterparty, credit, and other risks, though the Trust also will
not attempt to use derivatives to hedge the risk of declines in the price of BNB
held by the Trust. The Sponsor believes that the design of the Trust will enable
certain investors to more effectively and efficiently implement strategic and
tactical asset allocation strategies that use BNB by investing in the Shares
rather than purchasing, holding and trading BNB directly or through derivatives.
Except
as set forth in the Trust Agreement, Shareholders have no voting rights with
respect to the Trust.
BNB
and the BNB Chain
BNB
is a digital asset that is created and transmitted through the operations of the
peer-to-peer BNB Chain, a network of computers that operates on cryptographic
protocols based on open-source code, the infrastructure of which is collectively
maintained by a global user base. The BNB Chain enables users to exchange tokens
of value, called BNB, which are recorded on a public transaction ledger known as
a blockchain. BNB may be used to pay for goods and services, including
computational power on the BNB Chain, or it may be converted to fiat currencies,
such as the U.S. dollar, at rates determined on digital asset trading platforms
or in individual end-user- to-end-user transactions under a barter system.
The
BNB Chain was designed to allow users to write and implement smart
contracts—that is, general-purpose code that executes on every computer in the
network and can instruct the transmission of information and value based on a
sophisticated set of logical conditions. Using smart contracts, users can create
markets, store registries of debts or promises, represent ownership of property,
move funds in accordance with conditional instructions and create digital assets
other than BNB on the BNB Chain. Smart contract operations are executed on the
BNB Chain in exchange for payment of BNB. Like the Ethereum network, the BNB
Chain is one of a number of projects intended to expand blockchain use beyond
just a peer-to-peer money system.
BNB
Chain
BNB
Chain (formerly referred to as Binance Smart Chain and Binance Chain) is a
blockchain and smart contract network for permissionless applications. The BNB
Chain is an open-source protocol that enables users to deploy smart contracts to
support their blockchain projects. The BNB ecosystem originated in 2017 with the
launch of BNB and later expanded into the current multi-chain “BNB Chain”
architecture. The BNB Chain is comprised of three blockchains, BNB Smart Chain,
opBNB and BNB Greenfield, which allow the network to create and trade assets
such as BNB, coordinate transaction validators and facilitate the creation of
smart contracts. Each chain serves a different purpose: BNB Smart Chain is a
Layer 1 blockchain used to enable the development of user-generated
permissionless applications (“Dapps”), including in the decentralized finance
(“DeFi”) space; opBNB is used as a Layer 2 scaling solution for BNB Smart Chain;
and BNB Greenfield is used as a blockchain storage solution. BNB Chain is
powered by the proof-of-staked-authority consensus protocol (“PoSA”), which
combines elements of delegated proof of stake (“DPoS”) and proof-of-authority
(“PoA”) by requiring validators to stake BNB and be selected based on stake and
reputation. Currently, the number of BNB Chain validator set consists of 45
active validators, comprising 21 “cabinet” (active block-producing) validators,
and 24 “candidate” (standby) validators. This design allows for faster block
times and lower transaction fees than some other blockchain networks however,
this design may result in greater centralization compared to networks with
larger, more distributed validator sets. See [ ]
for additional information.
Although
the technical and strategic development was originally initiated by Binance, the
network is now supported by a large number of participants. There is no central
legal control over BNB Chain, the BNB Chain community coordinates governance
processes through a decentralized governance mechanism (e.g., BEP proposals and
validator consensus). The connection to the broader BNB ecosystem remains
intact.
Governance
on BNB Chain
BNB
Chain incorporates a decentralized governance framework that enables token
holders and validators to influence the network’s evolution. Governance occurs
primarily through BNB Evolution Proposals (BEPs) and validator consensus.
Proposals may address technical upgrades, parameter adjustments (such as gas
limits or slashing thresholds), or changes to the validator set size, which can
be increased through community governance.
Validators
and delegators can vote on proposals using on-chain mechanisms implemented in
BNB Chain governance contracts. Accepted proposals are executed through protocol
updates coordinated by validators and core developers, and no single entity can
unilaterally amend network rules. This process, together with open-source
development and validator elections, contributes to the network’s progressive
decentralization and transparency.
The
BNB token
BNB
is the native token of the BNB Chain and serves as the base (“gas”) currency for
transactions, smart contract interactions and deployment, as a governance token
on BNB Chain that allows token holders to participate in the governance of the
network, and can currently be used to obtain discounts on trading fees on
Binance. BNB was introduced in 2017 as an ERC-20 token on the Ethereum network
and later migrated to the Binance Chain and BNB Chain. BNB can be staked to help
secure the network and earn staking rewards.
BNB
was initially issued with a maximum supply target of 200 million tokens.
However, the total number of BNB tokens in circulation is variable and subject
to change over time, and the total supply is gradually reduced through a token
burn mechanism, which permanently removes tokens from circulation based on usage
and predefined rules. While this mechanism aims to reduce overall supply and
support long-term scarcity, it does not guarantee a fixed or minimum future
supply, and actual circulating amounts may vary due to market activity and
on-chain dynamics. This mechanism means that risks remain with regard to changes
supply, as this is not guaranteed. As of October 17, 2025, BNB’s market
capitalization is approximately $150 billion, placing it among the top five
cryptocurrencies globally (coinmarketcap.com), with an average daily trading
volume of approximately $6.9 billion (coinmarketcap.com).
The
Trust's Investment Objective and Strategies
The
Trust's investment objective is to reflect the performance of the price of BNB,
and rewards from staking a portion of the Trust's BNB, to the extent the Sponsor
in its sole discretion determines that the Trust may do so without undue legal
or regulatory risk, such as, without limitation, by jeopardizing the Trust's
ability to qualify as a grantor trust for U.S. federal income tax purposes, less
the expenses of the Trust's operations. In seeking to achieve its investment
objective, the Trust will hold BNB and will value its Shares daily based on the
reported MarketVectorTM[ ],
which is calculated based on prices contributed by exchanges that the Sponsor's
affiliate, MarketVector, believes represent the top five BNB trading platforms
based on the industry leading [ ] review report as
described below, and process all creations and redemptions in transactions with
Authorized Participants as described below. To the extent the Sponsor determines
to stake a portion of the Trust's BNB, the Sponsor plans to engage one or more
Staking Services Providers to conduct such staking activities. To the extent the
Sponsor engages additional Staking Services Providers, the Sponsor will
determine the amount of BNB to allocate to each Staking Services Provider based
on each Staking Services Provider's performance, including uptime and compliance
with staking requirements. In the future, subject to advice from counsel that
doing so should not cause the Trust to fail to qualify as an investment trust or
grantor trust for U.S. federal income tax purposes, the Sponsor may seek to use
or hold LSTs, though no such determination has been made as of the date of this
registration statement. The Trust is a passive investment vehicle that does not
seek to pursue any investment strategy beyond reflecting the performance of the
price of BNB and any rewards from staking a portion of the Trust's BNB. As a
result, the Trust will not attempt to speculatively sell BNB at times when its
price is high or speculatively acquire BNB at low prices in the expectation of
future price increases, nor will the Trust attempt to avoid losses or hedge
exposure arising from the risk of changes in the price of BNB. The Trust will
not utilize leverage, derivatives or any similar arrangements in seeking to meet
its investment objective.
When
the Trust sells or redeems its Shares, it will do so in blocks of
[ ] Shares ("Baskets") that are based on the amount
of BNB represented by the Basket being created, the amount of BNB being equal to
the combined net asset value of the number of Shares included in the Basket (net
of the accrued but unpaid remuneration due the Sponsor ("Sponsor Fee") and any
accrued but unpaid expenses or liabilities not assumed by the Sponsor). The
Trust conducts subscriptions and redemptions in cash or in-kind transactions
with financial firms that are authorized to purchase or redeem Shares with the
Trust (known as "Authorized Participants" or "APs"), which must be registered
broker-dealers.
For
a subscription in cash, the Authorized Participant's subscription for Shares
shall be in the amount of cash needed to purchase the amount of BNB represented
by the Basket being created, as calculated by the Administrator based on the
Index or the other valuation policies described herein. The AP will deliver the
cash to the Trust's account at the Cash Custodian, which the Sponsor will then
use to purchase BNB from a third party selected by the Sponsor who (1) is not
the Authorized Participant and (2) will not be acting as an agent, nor at the
direction, of the
Authorized
Participant with respect to the delivery of BNB to the Trust in connection with
such cash creation (such third party, a "Liquidity Provider"). For a redemption
in cash, the Sponsor shall arrange for the BNB represented by the Basket to be
sold to a Liquidity Provider selected by the Sponsor and the cash proceeds to be
distributed from the Trust's account at the Cash Custodian to the Authorized
Participant in exchange for their Shares. For an "in-kind" subscription,
Authorized Participants will deliver, or arrange for the delivery by the
Authorized Participant's designee of, BNB to the Trust's Custody Account with
the BNB Custodian in exchange for Shares when they purchase Shares. For an
"in-kind" redemption transaction with the Trust, when Authorized Participants
redeem Shares, the Trust, through the BNB Custodian, will deliver BNB to such
Authorized Participants, or a designee thereof, in exchange for their
Shares.
In
addition to selling BNB to distribute cash to Authorized Participants redeeming
Shares, the Sponsor may sell BNB to pay certain expenses not assumed by the
Sponsor (described below), which may be facilitated by one or more Liquidity
Providers and/or the BNB Custodian or an affiliate thereof. All BNB will be held
by a third-party custodian that carries insurance. The insurance carried by the
Trust's custodians may not be adequate to cover losses that might be suffered by
the Trust, as described further in "Risk Factors—The lack of full insurance and
Shareholders' limited rights of legal recourse against the Trust, Trustee,
Sponsor, Administrator, Cash Custodian, BNB Custodian and Additional BNB
Custodian expose the Trust and its Shareholders to the risk of loss of the
Trust's BNB for which no person or entity is liable". The Transfer Agent (as
defined below) will facilitate the processing of purchase and sale orders in
Baskets from the Trust.
The
Trust will engage in BNB transactions for converting cash into BNB (in
association with cash purchase orders) and BNB into cash (in association with
cash redemption orders). The Trust will conduct its BNB purchase and sale
transactions by trading directly with third parties selected by the Sponsor,
some of whom may be affiliated with APs (each, a "Liquidity Provider"), who are
not registered broker-dealers, pursuant to written agreements between such
Liquidity Providers and the Trust. Liquidity Providers may be added at any time,
subject to the discretion of the Sponsor. Alternatively, Liquidity Providers may
choose to terminate their participation as Liquidity Providers to the Trust at
any time. The Trust is not aware of any other affiliation or material
relationship between Liquidity Provider and the Authorized Participants or other
service providers of the Trust in executing a transaction in BNB with the Trust.
Each Liquidity Provider represents to the Trust that it is acting for itself and
not for another person, and is not acting as agent or at the direction of any
Authorized Participant. Upon receipt of an order from an Authorized Participant
to create or redeem Baskets, the Trust may obtain quotes for a price to purchase
or sell BNB from one or more Liquidity Providers. A Liquidity Provider may
respond to the Trust's request with an offer of a quote at which it is willing
to sell the specified quantity of BNB, or a portion thereof, in the case of a
creation, or a quote at which it is willing to buy the specified quantity of
BNB, or a portion thereof, in the case of a redemption, as indicated in such
offer. The Trust then determines, in its sole discretion, which Liquidity
Provider that provided a quote to use. Once an offer is accepted it becomes a
trade that is binding on both the Trust and the Liquidity Provider. Each
Liquidity Provider is required to comply with U.S. federal and/or state laws
including licensing and registration requirements or similar laws in non-U.S.
jurisdictions and maintain practices and policies designed to comply with AML
and KYC regulations.
The
Liquidity Providers as of the date of this Prospectus, that have agreed to serve
as a Liquidity Provider and have consented to be named in this Prospectus are
[ ].
Current
or future Liquidity Providers may be affiliates of, or have material
relationships with, the Trust's current or future Authorized
Participants.
The
MarketVectorTM
[ ]
Market
Vector is the index sponsor and index administrator for the
MarketVectorTM
[ ] ("MarketVectorTM
[ ]" or "Index"). MarketVector is a wholly-owned
subsidiary of VanEck. CryptoCompare Data Limited is the calculation agent for
the MarketVectorTM
[ ] and an affiliate of VanEck.
The
MarketVectorTM
[ ] is a U.S. dollar-denominated composite
reference rate for the price of BNB. The Index is calculated daily between 00:00
and 24:00 (CET) and the Index values are disseminated to data vendors. The
Index
is disseminated in U.S. dollars and the closing and intraday value is calculated
over twenty three-minute intervals pursuant to a methodology referred to as an
equal-weighted average of the volume-weighted median price.
The
MarketVectorTM
[ ] is designed to be a robust price for BNB in
U.S. dollars. There is no component other than BNB in the Index. The underlying
trading platforms are sourced from the industry leading
[ ] review report.
[ ]'s [ ] was
established in 2019 as a tool designed to bring clarity to the digital asset
trading platforms sector by providing a framework for assessing risk and in turn
bringing transparency and accountability to a complex and rapidly evolving
market. The [ ] methodology utilizes a combination
of qualitative and quantitative metrics to analyze a comprehensive data set
across eight categories of evaluation: legal/regulation, KYC/transaction risk,
data provision, security, team/exchange, asset quality/diversity, market quality
and negative events. See "The Trust and BNB Prices—Description of the
MarketVectorTM
[ ] Construction and Maintenance" for more details.
The [ ] review report provides a framework for
assessing risk of each trading platform and brings transparency and
accountability to a rapidly evolving market and industry. Based on the
[ ], MarketVector initially selects the top five
trading platforms by rank for inclusion in the MarketVectorTM
[ ]. If an eligible trading platform is downgraded
by two or more notches in a semi-annual review and is no longer in the top five
by rank, it is replaced by the highest ranked non-component trading platform.
Adjustments to exchange coverage are announced four business days prior to the
first business day of each of March and September at 23:00 CET. The
MarketVectorTM
[ ] is rebalanced at 16:00:00 GMT/BST on the last
business day of each of February and August. The current exchange composition of
the MarketVectorTM
[ ] is
[ ].
Pricing
Information Available on the Exchange and Other Sources
The
following table lists the Exchange symbols and their descriptions with respect
to the Shares and the MarketVectorTM
[ ]:
|
|
|
|
|
|
|
|
|
| Ticker |
|
Description |
|
[ ] |
|
Market
price per Share on the Exchange |
|
[ ].IV |
|
Indicative
intra-day value per Share |
|
[ ].NV |
|
End
of day NAV |
|
[ ].SO |
|
Number
of outstanding Shares |
The
intra-day data in the above table is published once every 15 seconds throughout
each trading day.
The
current market price per Share (symbol: [ ]) will
be published continuously as trades occur throughout each trading day on the
consolidated tape by market data vendors.
The
intra-day indicative value per Share (symbol:
[ ].IV) will be published by the Exchange once
every 15 seconds throughout each trading day on the consolidated tape by market
data vendors.
The
Trust's most recent end-of-day net asset value ("NAV") (symbol:
[ ].NV) will be published as of the close of
business by market data vendors and available on the Sponsor's website at
www.vaneck.com, or any successor thereto, and will be published on the
consolidated tape.
Any
adjustments made to the MarketVectorTM
[ ] will be published on the MarketVector website
at https://www.MarketVector.com/ or any successor thereto.
The
intra-day levels and closing levels of the MarketVectorTM
[ ] are published by MarketVector, and the closing
NAV is published by the Administrator.
The
Shares are not issued, sponsored, endorsed, sold or promoted by the Exchange,
and the Exchange makes no representation regarding the advisability of investing
in the Shares.
MarketVector
makes no warranty, express or implied, as to the results to be obtained by any
person or entity from the use of the MarketVectorTM
[ ] for any purpose. Index information and any
other data calculated and/or disseminated, in whole or part, by MarketVector is
for informational purposes only, not intended for trading purposes, and provided
on an "as is" basis. MarketVector does not warrant that the Index information
will be
uninterrupted
or error-free, or that defects will be corrected. MarketVector also does not
recommend or make any representation as to possible benefits from any securities
or investments, or third-party products or services. Shareholders should
undertake their own due diligence regarding securities and investment
practices.
For
more information on the MarketVectorTM
[ ] and MarketVector, see "The Trust and BNB
Prices" below.
The
Trust's Legal Structure
The
Trust is a Delaware statutory trust, formed on March 31, 2025 pursuant to the
Delaware Statutory Trust Act. The Trust continuously issues common shares
representing fractional undivided beneficial interest in and ownership of the
Trust that may be purchased and sold on the Exchange. The Trust operates
pursuant to the Declaration of Trust and Trust Agreement (the "Trust
Agreement"), dated as of March 31, 2025. CSC Delaware Trust Company, a Delaware
trust company, is the Delaware trustee of the Trust (the "Trustee"). The Trust
is managed and controlled by the Sponsor. The Sponsor is a limited liability
company formed in the state of Delaware on December 8, 2020.
The
Trust's Service Providers
The
Sponsor
The
Sponsor arranged for the creation of the Trust and is responsible for the
ongoing registration of the Shares for their public offering in the United
States and the listing of Shares on the Exchange. The Sponsor has developed a
marketing plan for the Trust, will prepare marketing materials regarding the
Shares of the Trust, and will exercise the marketing plan of the Trust on an
ongoing basis. The Sponsor appoints and may remove the Trust's other service
providers, including the Trustee, Administrator, Transfer Agent, BNB Custodian,
Additional BNB Custodian, Staking Services Provider, and Marketing Agent (as
defined below), as well as any additional, replacement, or successor service
providers. The Sponsor has agreed to pay all ordinary operating expenses (except
for litigation expenses and other extraordinary expenses) out of the Sponsor's
unified fee.
The
Trustee
The
Trustee, a Delaware trust company, acts as the trustee of the Trust as required
to create a Delaware statutory trust in accordance with the Declaration of Trust
and the Delaware Statutory Trust Act.
The
Administrator
[ ]
serves as the Trust's administrator (the "Administrator"). The Administrator's
principal address is [ ]. Under the Trust's
Administration Agreement between [ ] and the Trust
(the "Trust Administration Agreement") and a separate cash custodian agreement,
the Administrator provides certain administrative and accounting services and
financial reporting for the maintenance and operations of the Trust, including
valuing the Trust's BNB and calculating the net asset value per Share of the
Trust and the net asset value of the Trust and maintaining the books of account
of the Trust. In addition, the Administrator makes available the office space,
equipment, personnel and facilities required to provide such
services.
The
Transfer Agent
[ ]
serves as the transfer agent for the Trust (the "Transfer Agent"). The Transfer
Agent: (1) issues and redeems Shares of the Trust; (2) responds to
correspondence by Shareholders and others relating to its duties; (3) maintains
Shareholder accounts; and (4) makes periodic reports to the Trust. The Trust's
Transfer Agent will facilitate the settlement of Shares in response to the
placement of creation orders and redemption orders from Authorized
Participants.
The
Cash Custodian
Under
the cash custodian agreement (the "Cash Custody Agreement"),
[ ] will act as custodian for the Trust's cash (in
such capacity, the "Cash Custodian"). The Cash Custodian is responsible for,
among other things, maintaining a separate deposit account or accounts for cash
in the name of the Trust and determining the amount of
BNB
and/or cash required for the issuance or redemption, as the case may be, of
Shares in creation unit aggregations of the Trust after the end of each trading
day.
The
Staking Services Provider
[ ]
is expected to serve as the Staking Services Provider for the Trust from the
date the Shares are initially listed on the Exchange. Pursuant to the Staking
Services Addendum to the Custody Agreement (the "Staking Services Agreement"),
dated as of [ ], between
[ ] and the Trust, the Staking Services Provider
will transfer the Trust's BNB held in its BNB Account to a public blockchain
address for the purpose of staking such BNB (the "Staking Services"). The
Staking Services Provider will regularly credit staking rewards on a recurring
basis established by Staking Services Provider, after deducting any (i)
applicable payments to the Staking Services Provider as compensation for its
services under the Staking Services Agreement (the "Staking Provider
Consideration"); (ii) withholding required by applicable law or regulation; and
(iii) transaction fees or commissions imposed by the Staking Services Provider
or other third parties. Staking rewards will be recorded at the end of each
epoch and distributed shortly thereafter. Initially, block rewards will also be
recorded at the end of each epoch and distributed shortly thereafter. However
the Trust may elect to adopt a daily rewards system in the future for block
rewards, though no such determination has been made as of the date of this
registration statement. The Trust will pay the Staking Services Provider a
percentage of staking rewards for the Staking Services.
Either
party may terminate the Staking Services Agreement upon 60 days’ advance written
notice to the other party. Either Party may also terminate the Staking Services
Agreement immediately upon written notice to the other party if, in such party’s
reasonable discretion, the provision of the Staking Services may violate any
applicable law or regulation.
Once
the Trust's BNB is staked and completes its "activation" period, any staking
rewards will be posted to the staking ledger at the BNB Custodian. The date that
such rewards are deposited to the BNB Custodian account will be considered the
trade date for the recognition of the staking rewards. The received rewards are
retained by the Trust and may be delegated for staking. The staking rewards will
be recognized as income to the Trust's daily records on a T+1 basis. In
accordance with GAAP, the Trust will report such income in the financial
statements based upon trade date in the quarterly and annual
reports.
The
BNB Custodian
[ ]
serves as the Trust's BNB Custodian and is a fiduciary under § 100 of the New
York Banking Law. The BNB Custodian is authorized to serve as the Trust's
custodian under the Trust Agreement and pursuant to the terms and provisions of
the Custody Agreement. The BNB Custodian has its principal office at
[ ].
The
BNB Custodian makes available to the Trust a custodial account for BNB
maintained by the BNB Custodian ("BNB Account") and access to an omnibus
custodial account held at depository institutions or money market funds in the
BNB Custodian's name for the benefit of its customers at which a cash balance
may be maintained ("Fiat Account"). The BNB Custodian's services in respect of
the BNB Account (i) allow BNB to be deposited from a public blockchain address
to the Trust's BNB Account and (ii) allow BNB to be withdrawn from the BNB
Account to a public blockchain address as instructed by the Trust. The Trust
expects to use the Fiat Account to facilitate the purchase and sale of BNB in
connection with the cash creations and redemptions. In respect of the Fiat
Account, the BNB Custodian holds the Trust's cash held in its Fiat Account in
one or more omnibus accounts for the benefit of the BNB Custodian's customers at
depository institutions or money market funds.
The
Sponsor may, in its sole discretion, add or terminate other BNB Custodians. The
Sponsor has executed an agreement with [ ] that
allows [ ] to serve as an additional custodian for
the Trust's assets. The Sponsor may, in its sole discretion, change the
custodian for the Trust's BNB holdings, but it will have no obligation to do so
or to seek any particular terms for the Trust from other such custodians. To the
extent that the Sponsor adds or terminates other BNB Custodians, or changes the
custodian for the Trust's BNB holdings, notification will be made to
Shareholders via a prospectus supplement and/or a current report filed with the
SEC.
In
addition to the BNB custodial services in connection with the BNB Account, the
BNB Custodian will also provide the Trust with clearing and settlement services
for BNB purchase and sale transactions ("Clearing Services")
between
the Trust and Liquidity Providers and Authorized Participants or their designees
in connection with the Trust's creation and redemption processes as well as in
connection with transfers of BNB out of the Trust to pay the Sponsor Fee and to
reimburse the Sponsor in BNB for payment of extraordinary expenses. These
services are detailed within the clearing agreement between the Trust and the
BNB Custodian (the "Clearing Agreement"). In connection with the Clearing
Services, the BNB Custodian will make available to the Trust a clearing account
(the "Clearing Account"), as further described below in "—Custody of the Trust's
Assets."
The
Additional BNB Custodian
[ ],
serves as the Trust's Additional BNB Custodian and is a fiduciary under § 100 of
the New York Banking Law and a qualified custodian for purposes of Rule
206(4)-2(d)(6) under the Investment Advisers Act of 1940, as amended. The
Additional BNB Custodian is authorized to serve as the Trust's custodian under
the Trust Agreement and pursuant to the terms and provisions of the Additional
BNB Custody Agreement. The Additional BNB Custodian has its principal address at
[ ].
The
Additional BNB Custodian makes available to the Trust a custodial account for
BNB maintained by the Additional BNB Custodian (the "Additional BNB Account").
The Additional BNB Custodian's services in respect of the Additional BNB Account
(i) allow all or a portion of the Trust's BNB allocated to the vault balance
(the "Additional BNB Vault Balance") to be held in the Additional BNB Account,
(ii) allow BNB to be deposited from a public blockchain address to the Trust's
Additional BNB Account, (iii) allow BNB to be withdrawn from the Additional BNB
Account to a public blockchain address as instructed by the Trust and (iv)
certain additional services as may be agreed to between the Trust and the
Additional BNB Custodian from time to time.
The
Marketing Agent
Van
Eck Securities Corporation (the "Marketing Agent"), a wholly-owned subsidiary of
VanEck, is responsible for reviewing and approving the marketing materials
prepared by the Trust for compliance with applicable SEC and Financial Industry
Regulatory Authority ("FINRA") advertising laws, rules, and
regulations.
The
Trust's Fees and Expenses
The
Trust will pay the Sponsor the Sponsor Fee, which is a unified fee of
[ ]%. The Sponsor Fee is paid by the Trust to the
Sponsor as compensation for services performed under the Trust Agreement. The
Administrator will make its determination regarding the Sponsor Fee in respect
of each day by reference to the Trust's NAV as of that day. The Sponsor Fee will
accrue in U.S. dollars and be payable monthly in arrears in BNB on, or by, the
tenth business day of the next month in respect of the prior month. Each month,
the Administrator will calculate the Sponsor Fee for each day of the month,
resulting in a cumulative total in U.S. dollars, which the Administrator will
then calculate the BNB equivalent of by reference to the Index as of the date of
calculation, and the Sponsor shall then withdraw the corresponding amount of BNB
from the Trust's BNB Account in payment of the Sponsor Fee. The Sponsor has
agreed to pay all ordinary operating expenses (except for extraordinary
expenses, including but not limited to, non-recurring expenses and costs of
services performed by the Sponsor or a service provider on behalf of the Trust
to protect the Trust or the interests of Shareholders, such as the Custodian
Staking Facilitation Fee, and in connection with any indemnification of agents,
service providers or counterparties of the Trust and extraordinary legal fees
and expenses, including any legal fees and expenses incurred in connection with
litigation, regulatory enforcement or investigation matters) out of the Sponsor
Fee. For extraordinary expenses not covered in the previous sentence, the
Sponsor shall pay these expenses as they become due and seek contemporaneous
reimbursement from the Trust in the form of BNB at the time of payment. For
extraordinary expenses denominated in dollars, the Sponsor shall convert the
expense amounts into BNB at the Index price on the date the Sponsor seeks such
reimbursement from the Trust, and shall withdraw the corresponding amounts of
BNB from the Trust as reimbursement for paying such extraordinary expenses of
the Trust. For extraordinary expenses denominated in BNB, if any, the Sponsor
shall withdraw the corresponding amounts of BNB from the Trust as reimbursement
for paying such extraordinary expenses. Neither the Trust nor the Shareholders
shall be responsible for any fees and expenses, including any BNB Chain fees,
incurred by the Sponsor to withdraw BNB from the Trust's BNB Account in
connection with payment of the Sponsor Fee or Trust expenses not assumed by the
Sponsor, or to convert such BNB, once withdrawn, into cash (if applicable). The
Sponsor will sell BNB which may be facilitated by one or more
Liquidity
Providers and/or the BNB Custodian or an affiliate thereof, in connection with
the termination of the Trust and the liquidation of the Trust's BNB holdings,
which the Sponsor shall do at a price which it is able to obtain through
commercially reasonable efforts, and arrange for the distribution of the cash
proceeds to the Trust's Shareholders and creditors (if any). The amount of BNB
held by the Trust may vary from time to time depending on the level of the
Trust's expenses and liabilities and the market price of BNB. Furthermore, the
Sponsor may, in its sole discretion, agree to rebate all or a portion of the
Sponsor Fee attributable to Shares held by certain investors, or share a portion
of the Sponsor Fee with such investors, subject to certain minimum Shareholding
and lock up requirements as determined by the Sponsor to foster stability in the
Trust's asset levels. Any such rebate or sharing of the Sponsor's Fee will be
subject to negotiation and agreement between the Sponsor and the investor on a
case-by-case basis. The Sponsor is under no obligation to provide any rebates
of, or share, the Sponsor Fee. Neither the Trust nor the Trustee will be a party
to any Sponsor Fee rebate or sharing arrangements negotiated by the Sponsor. Any
Sponsor Fee rebate, or any sharing of the Sponsor Fee, will be paid from the
funds of the Sponsor (including the Sponsor Fee) and not from the assets of the
Trust. In addition, the Sponsor may, at its sole discretion and from time to
time, waive all or a portion of the Sponsor Fee for stated periods of time. The
Sponsor is under no obligation to waive any portion of its fees and any such
waiver shall create no obligation to waive any such fees during any period not
covered by the waiver.
Custody
of the Trust's Assets
The
Trust's BNB Custodian and Additional BNB Custodian will keep custody of all of
the Trust's BNB and will safeguard the private keys to the BNB associated with
the Trust's BNB Account, Additional BNB Account and Clearing Account. BNB
private keys are stored in two different forms: "hot" storage, whereby the
private keys are stored on secure, internet-connected devices (a "hot wallet"),
and "cold" storage, where digital currency private keys are stored completely
offline. The BNB Custodian and Additional BNB Custodian maintain the private
keys to the Trust's BNB in the Trust's BNB Account, Additional BNB Account and
Clearing Account in a geographically distributed fashion across the continental
United States.
BNB
Account
The
Custody Agreement requires the BNB Custodian to hold the Trust's BNB in cold
storage, unless required to facilitate withdrawals as a temporary measure. Other
than in connection with creations and redemptions, where the associated BNB is
first transferred to the Trust's Clearing Account (where they may be held in
omnibus hot storage wallets, as described below) before being transferred to the
Trust's BNB Account (in the case of a creation) or to the Liquidity Provider's
[ ] account (in the case of a redemption), as well
as in connection with transfers of BNB to pay the Sponsor Fee and to reimburse
the Sponsor in BNB for payment of extraordinary expenses, which also are first
transferred to the Trust's Clearing Account before being transferred to the
Sponsor, the BNB Custodian will use segregated cold storage BNB addresses for
the Trust's BNB Account. The addresses on the BNB Chain at which the Trust's BNB
in the BNB Account are held by the BNB Custodian are separate from the BNB
addresses that the BNB Custodian uses for its other customers and are directly
verifiable via the BNB Chain. The BNB Custodian will at all times record and
identify in its books and records that such BNB constitute the property of the
Trust. The BNB Custodian will not withdraw the Trust's BNB from the Trust's BNB
Account with the BNB Custodian, or loan, hypothecate, pledge or otherwise
encumber the Trust's BNB, without the Trust's instruction, nor will the Sponsor
or any other entity or service provider. The Trust will not lease or loan BNB
held in the Trust's BNB Account with the BNB Custodian and will not give
instructions to that effect.
The
BNB Custodian has adopted the following security policies and practices with
respect to digital assets held in cold storage: hardware security modules
("HSMs") are used to generate, store and manage cold storage private keys;
multi-signature technology is used to provide both security against attacks and
tolerance for losing access to a key or facility, eliminating single points of
failure; all HSMs are stored offline in air-gapped environments within a diverse
network of guarded, monitored and access-controlled facilities that are
geographically distributed; multiple levels of physical security and monitoring
controls are implemented to safeguard HSMs within storage facilities; and all
fund transfers require the coordinated actions of multiple
employees.
The
Sponsor has evaluated the BNB Custodian's policies, procedures, and controls for
safekeeping, exclusively possessing, and controlling the Trust's BNB holdings
and believes these are designed consistent with accepted
industry
practices to protect against theft, loss, and unauthorized and accidental use of
the private keys, though the Sponsor does not control the BNB Custodian's
operations or implementation of such policies, procedures and controls and there
can be no assurance that they will actually work as designed or prove to be
successful in safeguarding the Trust's assets against all possible sources of
theft, loss or damage.
The
BNB Custodian currently maintains digital asset insurance consisting of a $100
million specie policy and a $25 million crime policy.
Although
the BNB Custodian carries insurance, the BNB Custodian's insurance does not
cover any loss in value of BNB and only covers losses caused by certain events
such as fraud or theft and, in such covered events, it is unlikely the insurance
would cover the full amount of any losses incurred by the Trust. The insurance
maintained by the BNB Custodian is shared among all of the BNB Custodian's
customers, is not specific to the Trust or to customers holding BNB with the BNB
Custodian, and may not be available or sufficient to protect the Trust from all
possible losses or sources of losses. The Trust is not a named beneficiary under
the BNB Custodian's insurance policies, though the BNB Custodian has represented
to the Sponsor that the insurance covers customer losses, including losses
suffered by the Trust, arising from specified events, including fraud, theft,
and cyber-security breaches.
The
Additional BNB Account
The
Additional BNB Custody Agreement (as defined below) requires the Additional BNB
Custodian to hold the Trust's BNB in cold storage, unless required to facilitate
withdrawals as a temporary measure. The Additional BNB Custodian will use
segregated cold storage BNB addresses for the Trust's Additional BNB Account.
The addresses on the BNB Chain at which the Trust's BNB in the Additional BNB
Account are held by the Additional BNB Custodian are separate from the BNB
addresses that the Additional BNB Custodian uses for its other customers and are
directly verifiable via the BNB Chain. The Additional BNB Custodian will at all
times record and identify in its books and records that such BNB constitute the
property of the Trust. The Additional BNB Custodian will not withdraw the
Trust's BNB from the Trust's Additional BNB Account with the Additional BNB
Custodian, or loan, hypothecate, pledge or otherwise encumber the Trust's BNB,
without the Trust's instruction.
The
Sponsor has evaluated the Additional BNB Custodian's policies, procedures, and
controls for safekeeping, exclusively possessing, and controlling the Trust's
BNB holdings and believes these are designed consistent with accepted industry
practices to protect against theft, loss, and unauthorized and accidental use of
the private keys, though the Sponsor does not control the Additional BNB
Custodian's operations or implementation of such policies, procedures and
controls and there can be no assurance that they will actually work as designed
or prove to be successful in safeguarding the Trust's assets against all
possible sources of theft, loss or damage.
Although
the Additional BNB Custodian arranges for insurance, to be carried in respect of
customer assets, the Additional BNB Custodian's insurance does not cover any
loss in value of BNB and only covers losses caused by certain events such as
fraud or theft and, in such covered events, it is unlikely the insurance would
cover the full amount of any losses incurred by the Trust. The insurance
maintained by the Additional BNB Custodian is shared among all of the customers
of the [ ] (as defined below), is not specific to
the Trust or to customers of the Additional BNB Custodian, and may not be
available or sufficient to protect the Trust from all possible losses or sources
of losses. The Trust is not a named beneficiary under the Additional BNB
Custodian's insurance policies, though the Additional BNB Custodian has
represented to the Trust that it shall obtain and maintain, at its sole expense,
insurance coverage in such types and amounts as shall be commercially reasonable
for the custodial services provided under the Additional BNB Custody Agreement,
including through its parent [ ] (as defined
below).
Clearing
Account
The
Trust will use the Clearing Account in connection with the Clearing Services,
which the Trust utilizes to facilitate transfers, purchases and sales of BNB in
connection with creations and redemptions of Baskets as well as in connection
with transfers of BNB out of the Trust to pay the Sponsor Fee and to reimburse
the Sponsor in BNB for payment of extraordinary expenses. While the BNB
Custodian maintains records of the Trust's BNB balance in its Clearing Account,
the actual BNB relating to the Trust's Clearing Account is held in omnibus
wallets by the BNB
Custodian,
meaning that BNB owned by multiple customers is held in the same wallet and at
the same address on the BNB Chain. The Trust's Clearing Account balance
therefore represents an omnibus claim on the BNB Custodian's BNB held in such
wallets, and the Trust does not have an identifiable claim to specific BNB. The
BNB Custodian holds the BNB across a combination of omnibus hot wallets and cold
wallets. The Sponsor has no control over, and the BNB Custodian does not
disclose to the Sponsor, the amount of BNB that the BNB Custodian holds in
connection with the Trust's Clearing Account in omnibus hot wallets, as compared
to omnibus cold wallets. The BNB Custodian could hold substantially all BNB
connected to the Trust's Clearing Account in omnibus hot wallets, which permits
more efficient transfers (thus facilitating the settlement of BNB purchase and
sale transactions in connection with the Trust's creation and redemption
processes) but makes the BNB more vulnerable to hacking than if it were held in
cold storage in the BNB Account. The BNB Custodian has represented to the
Sponsor that it does not treat the Trust's BNB in its Clearing Account as the
BNB Custodian's own property and will not loan, hypothecate, pledge or otherwise
encumber the Trust's BNB in its Clearing Account.
Fiat
Account
The
Trust expects to use the Fiat Account to facilitate the purchase and sale of BNB
in connection with the cash creations and redemptions. In respect of the Fiat
Account, the BNB Custodian holds the Trust's cash held in its account at the BNB
Custodian in one or more Customer Omnibus Accounts. "Customer Omnibus Account"
means, with respect to fiat currency held for customers of the BNB Custodian in
fiat accounts (including the Trust's cash balance in its Fiat Account), omnibus
bank accounts (each an "Omnibus Account") at depository institutions (each, a
"Bank"); money market accounts (each, a "Money Market Account") at a Bank or
financial institution; and/or payment accounts (each, a "Payment Account") at a
financial institution. The Trust intends to maintain any cash not held in the
BNB Custodian's Fiat Account at the Cash Custodian in accordance with the Cash
Custody Agreement.
The
Trust generally does not intend to hold cash or cash equivalents except
temporarily in connection with a cash creation or redemption transaction or to
pay expenses. However, there may be situations where the Trust will unexpectedly
hold cash on a temporary basis. For additional information, see "CUSTODY
OF THE TRUST'S ASSETS"
below.
Net
Asset Value Determinations
As
described in more detail below in "NET ASSET VALUE DETERMINATIONS," "NAV" means
the total assets of the Trust which shall consist solely of BNB and cash, less
total liabilities of the Trust.
The
Trust Agreement gives the Sponsor the exclusive authority to determine the
Trust's NAV and the Trust's NAV per Share, which it has delegated to the
Administrator. The Administrator determines the NAV of the Trust on each day
that the Exchange is open for regular trading, as promptly as practical after
4:00 p.m. Eastern time based on the MarketVectorTM
[ ]. The NAV of the Trust is the aggregate value of
the Trust's assets less its estimated accrued but unpaid liabilities (which
include accrued expenses). In determining the Trust's NAV, the Administrator
values the BNB held by the Trust based on the price set by the
MarketVectorTM
[ ] as of 4:00 p.m. Eastern time. The Administrator
also determines the NAV per Share. The Sponsor believes that use of the
MarketVectorTM
[ ] mitigates against idiosyncratic market risk, as
the failure of any individual spot market will not materially impact pricing for
the Trust. It also allows the Administrator to calculate the NAV in a manner
that significantly deters manipulation.
However,
determining the value of Trust's BNB using the MarketVectorTM
[ ] is not in accordance with U.S. generally
accepted accounting principles ("GAAP"), and therefore is not used in the
Trust's financial statements. The Trust's BNB are carried, for financial
statement purposes, at fair value, as required by GAAP. The Trust determines the
fair value of BNB based on the price provided by the BNB market that the Trust
considers its "principal market" as of 11:59 p.m., Eastern time, on the
valuation date. A disparity between the fair value of the Trust's BNB determined
using "principal market" and the fair value of the Trust's BNB using the
MarketVectorTM
[ ] could be material. In the case of such a
material disparity that is ongoing, the Trust will notify Shareholders in a
prospectus supplement and a current report on Form 8-K or in its annual or
quarterly reports.
Plan
of Distribution
The
Trust is an exchange-traded fund. When the Trust sells or redeems its Shares, it
will do so in Baskets that are based on the amount of BNB represented by the
Basket being created, the amount of BNB being equal to the combined net asset
value of the number of Shares included in the Basket (net of the Sponsor Fee and
any accrued but unpaid expenses or liabilities not assumed by the Sponsor). The
Trust currently conducts subscriptions and redemptions in cash and in-kind.
Authorized Participants will deliver cash or BNB to create Shares and will
receive only cash when redeeming Shares. For a subscription in cash, the
Authorized Participant's subscription shall be in the amount of cash needed to
purchase the amount of BNB represented by the Basket being created, as
calculated by the Administrator based on the Index or the other valuation
policies described herein. The AP will deliver the cash to the Trust's account
at the Cash Custodian, which the Sponsor will then use to purchase BNB from a
Liquidity Provider. For a redemption in cash, the Sponsor shall arrange for the
BNB represented by the Basket to be sold to a Liquidity Provider selected by the
Sponsor and the cash proceeds distributed from the Trust's account at the Cash
Custodian to the Authorized Participant. For an "in-kind" subscription,
Authorized Participants will deliver, or arrange for the delivery by the
Authorized Participant's designee of, BNB to the Trust's Custody Account in
exchange for Shares when they purchase Shares. For an "in-kind" redemption
transaction with the Trust, when Authorized Participants redeem Shares, the
Trust, through the BNB Custodian, will deliver BNB to such Authorized
Participants, or a designee thereof, in exchange for their Shares.
Following
the issuance of Shares by the Trust to the AP in connection with a Basket
subscription, APs may then offer Shares to the public at prices that depend on
various factors, including the supply and demand for Shares, the value of the
Trust's assets, and market conditions at the time of a transaction. Shareholders
who buy or sell Shares during the day from their broker may do so at a premium
or discount relative to the NAV of the Shares of the Trust.
Shareholders
who decide to buy or sell Shares of the Trust will place their trade orders
through their brokers and may incur customary brokerage commissions and charges.
Prior to this offering, there has been no public market for the Shares. The
Shares are expected to be approved for listing, subject to notice of issuance,
on the Exchange under the ticker symbol
[ ].
Federal
Income Tax Considerations
It
is expected that owners of Shares will be treated, for U.S. federal income tax
purposes, as if they own a proportionate share of the assets of the Trust, as if
they directly receive a proportionate share of any income of the Trust, and as
if they will incur a proportionate share of the expenses of the Trust.
Consequently, each sale of BNB by the Trust (which includes under current
Internal Revenue Service ("IRS") guidance using BNB to pay expenses of the
Trust) would constitute a taxable event to Shareholders. See "United States
Federal Income Tax Consequences—Taxation of U.S. Shareholders."
Use
of Proceeds
Proceeds
received by the Trust from the issuance of Baskets consist of BNB, or cash.
Deposits of BNB are held by the BNB Custodian or the Additional BNB Custodian on
behalf of the Trust.
Principal
Investment Risks of an Investment in the Trust
An
investment in the Trust involves a high degree of risk. Some of the risks you
may face are summarized below. A more extensive discussion of these risks
appears beginning on page 17.
•Digital
assets such as BNB were only introduced within the past decade, and the
medium-to-long term value of the Shares is subject to a number of factors
relating to the capabilities and development of blockchain technologies and to
the fundamental investment characteristics of digital assets that are uncertain
and difficult to evaluate.
•The
trading prices of many digital assets, including BNB, have experienced extreme
volatility in recent periods and may continue to do so. Extreme volatility in
the future, including further declines in the trading
prices
of BNB, could have a material adverse effect on the value of the Shares and the
Shares could lose all or substantially all of their value.
•The
value of the Shares is subject to a number of factors relating to the
fundamental investment characteristics of BNB as a digital asset, including the
fact that digital assets are bearer instruments and loss, theft, destruction, or
compromise of the associated private keys could result in permanent loss of the
asset, and the capabilities and development of blockchain technologies such as
the BNB Chain.
•Due
to the nature of private keys, BNB transactions are irrevocable and stolen or
incorrectly transferred BNB may be irretrievable. As a result, any incorrectly
executed BNB transactions could adversely affect an investment in the
Trust.
•The
value of the Shares relates directly to the value of BNB, the value of which may
be highly volatile and subject to fluctuations due to a number of
factors.
•The
Index has a limited history, the Index price could fail to track the global BNB
price, and a failure of the Index price could adversely affect the value of the
Shares.
•The
Index price used to calculate the value of the Trust's BNB may be volatile,
adversely affecting the value of the Shares.
•Security
threats to the Trust's account with the BNB Custodian or the Additional BNB
Custodian could result in the halting of Trust operations and a loss of Trust
assets or damage to the reputation of the Trust, each of which could result in a
reduction in the price of the Shares.
•The
BNB Chain's decentralized governance structure may negatively affect its ability
to grow and respond to challenges.
•A
temporary or permanent "fork" of the BNB Chain could adversely affect the
short-, medium-, or long-term value of BNB and an investment in the
Trust.
•Blockchain
technologies are based on the theoretical conjectures as to the impossibility of
solving certain cryptographical puzzles quickly. These premises may be incorrect
or may become incorrect due to technological advances.
•Competition
from the emergence or growth of other digital assets or methods of investing in
BNB could have a negative impact on the price of BNB and adversely affect the
value of the Shares.
•Due
to the unregulated nature and lack of transparency surrounding the operations of
BNB trading platforms, which may be subject to regulation in a relevant
jurisdiction but may not be complying, they may experience fraud, manipulation,
security failures or operational problems, which may adversely affect the value
of BNB and, consequently, the value of the Shares.
•Digital
asset markets in the U.S. exist in a state of regulatory uncertainty, and
adverse legislative or regulatory developments could significantly harm the
value of BNB or the Shares, such as by banning, restricting or imposing onerous
conditions or prohibitions on the use of BNB, mining activity, digital wallets,
the provision of services related to trading and custodying BNB, the operation
of the BNB Chain, or the digital asset markets generally.
•Shareholders
do not have the protections associated with ownership of Shares in an investment
company registered under the 1940 Act or the protections afforded by the
CEA.
•If
regulatory changes or interpretations of an Authorized Participant's, Liquidity
Provider's, the Trust's or the Sponsor's activities require the regulation of an
Authorized Participant, Liquidity Provider, the Trust or the Sponsor as a money
service business under the regulations promulgated by FinCEN under the authority
of the U.S. Bank Secrecy Act or as a money transmitter or digital asset business
under state regimes for the licensing of such businesses, an Authorized
Participant, Liquidity Provider, the Trust or the Sponsor may
be
required to register and comply with such regulations, which could result in
extraordinary, recurring and/or nonrecurring expenses to the Authorized
Participant, Trust or Sponsor or increased commissions for the Authorized
Participant's clients, thereby reducing the liquidity of the
shares.
•The
treatment of digital currency for U.S. federal income tax purposes is
uncertain.
•Potential
conflicts of interest may arise among the Sponsor or its affiliates and the
Trust. The Sponsor and its affiliates have no fiduciary duties to the Trust and
its Shareholders other than as provided in the Trust Agreement, which may permit
them to favor their own interests to the detriment of the Trust and its
Shareholders.
RISK
FACTORS
You
should consider carefully the risks described below before making an investment
decision. You should also refer to the other information included in this
Prospectus, as well as information found in documents incorporated by reference
in this Prospectus, before you decide to purchase any Shares. These risk factors
may be amended, supplemented or superseded from time to time by risk factors
contained in any periodic report, prospectus supplement, post-effective
amendment or in other reports filed with the SEC in the future.
Risks
Associated with BNB And The BNB Chain
The
Trading Prices Of Many Digital Assets, Including BNB, Have Experienced Extreme
Volatility In Recent Periods And May Continue To Do So. Extreme Volatility In
The Future, Including Further Declines In The Trading Prices Of BNB, Could Have
A Material Adverse Effect On The Value Of The Shares And The Shares Could Lose
All Or Substantially All Of Their Value.
The
trading prices of many digital assets, including BNB, have experienced extreme
volatility in recent periods and may continue to do so. For instance, there were
steep increases in the value of certain digital assets, including BNB, over the
course of 2021, and multiple market observers asserted that digital assets were
experiencing a "bubble." These increases were followed by steep drawdowns
throughout 2022 in digital asset trading prices, including for BNB. These
episodes of rapid price appreciation followed by steep drawdowns have occurred
multiple times throughout BNB's history. BNB prices have continued to exhibit
extreme volatility through the date of this Prospectus.
Extreme
volatility may persist and the value of the Shares may significantly decline in
the future without recovery. The digital asset markets may still be experiencing
a bubble or may experience a bubble again in the future. For example, in the
first half of 2022, each of Celsius Network, Voyager Digital Ltd., and Three
Arrows Capital declared bankruptcy, resulting in a loss of confidence in
participants of the digital asset ecosystem and negative publicity surrounding
digital assets more broadly. In November 2022, FTX Trading Ltd. ("FTX"), one of
the largest digital asset exchanges by volume at the time, halted customer
withdrawals amid rumors of the company's liquidity issues and likely insolvency,
which were subsequently corroborated by its CEO. Shortly thereafter, FTX's CEO
resigned and FTX and many of its affiliates filed for bankruptcy in the United
States, while other affiliates have entered insolvency, liquidation, or similar
proceedings around the globe, following which the U.S. Department of Justice
brought criminal fraud and other charges, and the SEC and CFTC brought civil
securities and commodities fraud charges, against certain of FTX's and its
affiliates' senior executives, including its former CEO. In addition, several
other entities in the digital asset industry filed for bankruptcy following
FTX's bankruptcy filing, such as BlockFi Inc. and Genesis Global Capital, LLC
("Genesis"). In response to these events (collectively, the "2022 Events"), the
digital asset markets have experienced extreme price volatility and other
entities in the digital asset industry have been, and may continue to be,
negatively affected, further undermining confidence in the digital asset
markets. The 2022 events have also negatively impacted the liquidity of the
digital asset markets as certain entities affiliated with FTX engaged in
significant trading activity. If the liquidity of the digital asset markets
continues to be negatively impacted by these events, digital asset prices,
including BNB, may continue to experience significant volatility or price
declines and confidence in the digital asset markets may be further undermined.
In addition, regulatory and enforcement scrutiny has increased, including from,
among others, the Department of Justice, the SEC, the CFTC, the White House and
Congress, as well as state regulators and authorities. These events are
continuing to develop and the full facts are continuing to emerge. It is not
possible to predict at this time all of the risks that they may pose to the
Trust, its service providers or to the digital asset industry as a
whole.
The
price of some digital assets, including BNB, has risen following the election of
Donald Trump as president of the United States. Many expect the new
administration to facilitate a supportive regulatory approach toward the digital
asset industry. Through his executive orders, President Trump has indicated that
the administration will work toward providing greater regulatory clarity for
blockchain technology and digital assets, thereby fostering their development in
the U.S. Similarly, the digital asset industry expects favorable legislation
from the new U.S. Congress as certain members have expressed interest in
advancing digital asset specific legislation. There can be no assurance that
market expectations around future activity by the administration or Congress
will be fulfilled, or that digital asset prices will rise or maintain their
current levels. Some commentators have referred to the digital asset
market
post-President Trump's election as a bubble. There can be no assurance that such
a bubble does not exist. The failure of the administration and Congress to
provide the expected level of regulatory clarity and support for blockchain
technology and digital assets, could lead to a decline in digital asset prices,
including BNB. Such a decline could cause a decline in the value of the Shares
and cause Shareholders to suffer losses. Moreover, there can be no assurance
that political dynamics and sentiments toward the digital asset industry, or
market perceptions of those sentiments, will not shift over time.
On
March 6, 2025, President Trump issued an executive order for the "Establishment
of the Strategic Bitcoin Reserve and United States Digital Asset Stockpile" (the
"Order"). The Order requires the Secretary of the U.S. Department of Treasury to
establish two offices to administer and maintain a "Strategic Bitcoin Reserve"
(the "Bitcoin Reserve") and a U.S. Digital Asset Stockpile (the "Digital Asset
Stockpile"), respectively. The Bitcoin Reserve will be capitalized with bitcoin
forfeited as part of U.S. criminal or civil proceedings or in satisfaction of
penalties imposed by executive agencies. The Order directs the Secretaries of
the U.S. Treasury Department and the U.S. Department of Commerce to develop
budget-neutral strategies for acquiring additional bitcoin for the Bitcoin
Reserve. As established by the Order, the Bitcoin Reserve will not contain BNB,
and there can be no assurance, and there is no present indication, that it would
be changed to include BNB in the future. The Digital Asset Stockpile will be
capitalized initially with digital assets other than bitcoin forfeited as part
of criminal or civil asset forfeiture proceedings, which could include BNB;
however, there will be no new acquisitions of BNB as part of the Digital Asset
Stockpile. The anticipation of a U.S. government-funded strategic cryptocurrency
reserve may have motivated large-scale purchases of BNB in the expectation of
the U.S. government potentially acquiring BNB to fund such an expected reserve,
and the market price of BNB may have decreased as a result of the ultimate
content of the Order, which did not ultimately provide for acquisition of BNB as
part of the Bitcoin Reserve, though BNB could be held as part of the Digital
Asset Stockpile. While legislation has been introduced in the U.S. Senate and
the U.S. House of Representatives, which would direct the acquisition of 1
million bitcoin by the federal government over a five-year period, no such
similar federal legislation has been introduced that would provide for acquiring
BNB. Even if such legislation providing for the acquisition of BNB were to be
introduced at the federal level, it could fail to pass. Bills have also been
introduced in several state legislatures to authorize the acquisition of bitcoin
by state governments or their instrumentalities, some of which have failed to
pass; however, the Sponsor is not aware as of the date of this Prospectus that
similar legislation at the state level has been introduced in respect of BNB, in
the same quantity as legislation in respect of bitcoin. There can be no
assurance that any particular legislation will ever be introduced or passed at
either the federal or state level providing for the acquisition of BNB by
governmental instrumentalities.
Extreme
volatility in the future, including further declines in the trading prices of
BNB, could have a material adverse effect on the value of the Shares and the
Shares could lose all or substantially all of their value. Furthermore, negative
perception, a lack of stability and standardized regulation in the digital asset
economy may reduce confidence in the digital asset economy and may result in
greater volatility in the price of BNB and other digital assets, including a
depreciation in value. The Trust is not actively managed and will not take any
actions to take advantage, or mitigate the impacts, of volatility in the price
of BNB.
The
Value Of The Shares Depends On The Development And Acceptance Of The BNB Chain.
The Slowing Or Stopping Of The Development Or Acceptance Of The BNB Chain May
Adversely Affect An Investment In The Trust.
Digital
assets such as BNB have only been introduced within the past 15 years, and the
value of the Shares is subject to a number of factors over time relating to the
capabilities and development of blockchain technologies, such as the recentness
of their development, their dependence on the internet and other technologies,
their dependence on the role played by users, developers, and validators and the
potential for malicious activity. BNB itself was conceived only in 2017. For
example, the realization of one or more of the following risks could materially
adversely affect the value of the Shares: digital asset networks, including the
BNB peer-to-peer network and associated blockchain ledger (such blockchain, the
"BNB Chain" and together with the peer-to-peer network, the "BNB Network" or
"Layer 1 BNB Network"), and the software used to operate them are in the early
stages of development. Given the recentness of the development of digital asset
networks, digital assets may not function as intended and parties may be
unwilling to use digital assets, which would dampen the growth, if any, of
digital asset networks. Because BNB is a digital asset, the value of the Shares
is subject to a number of factors relating to the
fundamental
investment characteristics of digital assets, including the fact that digital
assets are bearer instruments and loss, theft, compromise, or destruction of the
associated private keys could result in permanent loss of the
asset.
The
BNB Network, including the cryptographic and algorithmic protocols associated
with the operation of the BNB Chain, has only been in existence since 2017, and
BNB markets have a limited performance record, making them part of a new and
rapidly evolving industry that is subject to a variety of factors that are
difficult to evaluate. For example, the following are some of the risks could
materially adversely affect the value of the Shares:
•Digital
assets, including BNB, are controllable only by the possessor of both the unique
public key and private key or keys relating to the BNB Chain address, or
"wallet", at which the digital asset is held. Private keys must be safeguarded
and kept private in order to prevent a third party from accessing the digital
asset held in such wallet. The loss, theft, compromise or destruction of a
private key required to access a digital asset may be irreversible. If a private
key is lost, stolen, destroyed or otherwise compromised and no backup of the
private key is accessible, the owner would be unable to access the digital asset
corresponding to that private key and the private key will not be capable of
being restored by the digital asset network resulting in the total loss of the
value of the digital asset linked to the private key.
•Digital
asset networks are dependent upon the internet. A disruption of the internet or
a digital asset network, such as the BNB Chain, would affect the ability to
transfer digital assets, including BNB, and, consequently, their
value.
•Governance
of the BNB Chain is by voluntary consensus and open competition. As a result,
there may be a lack of consensus or clarity on the governance of the BNB Chain,
which may stymie the BNB Chain's utility and ability to grow and face
challenges. In particular, it may be difficult to find solutions or martial
sufficient effort to overcome any future problems on the BNB Chain, especially
long-term problems.
•The
foregoing notwithstanding, the BNB Chain's protocol is informally overseen by a
collective of core developers who propose amendments to the relevant network's
source code. Core developers' roles evolve over time, largely based on
self-determined participation. If a significant majority of users and validators
were to adopt amendments to the BNB Chain based on the proposals of such core
developers, the BNB Chain would be subject to new protocols that may adversely
affect the value of BNB.
•To
the extent that any validators cease to record transactions that do not include
the payment of a transaction fee or do not record a transaction because the
transaction fee is too low, such transactions will not be recorded on the BNB
Chain until a block is validated by a validator who does not require the payment
of transaction fees or is willing to accept a lower fee. Any widespread delays
in the recording of transactions could result in a loss of confidence in a
digital asset network.
•As
the BNB Chain continues to develop and grow, certain technical issues might be
uncovered and the trouble shooting and resolution of such issues requires the
attention and efforts of BNB's global development community. Like all software,
the BNB Chain is at risk of vulnerabilities and bugs that can disrupt ordinary
operations or potentially be exploited by malicious actors.
•Many
digital asset networks, including the BNB Chain, face significant scaling
challenges and are being upgraded with various features designed to increase the
speed of digital asset transactions and the number of transactions that can
processed in a given period (known as "throughput"). These attempts to increase
the volume of transactions may not be effective, and such upgrades may fail,
resulting in potentially irreparable damage to the BNB Chain and the value of
BNB.
•Moreover,
in the past, bugs, defects and flaws in the source code for digital assets have
been exposed and exploited, including flaws that disrupted normal BNB Chain, BNB
Client, or DApp and smart contract operations or disabled related functionality
for users, exposed users' personal information and/or resulted in the theft of
users' digital assets. The cryptography underlying the BNB Chain or BNB as an
asset could prove to be flawed or ineffective, or developments in mathematics
and/or technology, including advances in digital computing, algebraic geometry
and quantum computing, could result in such cryptography becoming ineffective.
Quantum computing technology is an emerging phenomenon which, because it is
still
developing, makes it difficult to predict its ultimate effect on the future
value of BNB and other digital assets. However, if quantum computing technology
is able to advance and significantly increase its capacity relative to the
capacity of today's leading quantum computers, it could potentially undermine
the viability of many of the cryptographic algorithms used across the world's
information technology infrastructure, including the cryptographic algorithms
used for digital assets like BNB. If quantum computing is able to advance in
that way, there is a risk that quantum computing could result in the
cryptography underlying the BNB Chain becoming ineffective, which, if realized,
could compromise the security of the BNB Chain, or allow a malicious actor to
compromise the wallets holding BNB owned by the Trust or others on the BNB
Chain, which would result in losses to Shareholders. There is no guarantee that
new quantum-proof architectures for the BNB Chain will be built and appropriate
transitions will be implemented across the network at scale in a timely manner;
any such changes could require the achievement of broad consensus within the BNB
Chain community and a fork (or multiple forks), and there can be no assurance
that such consensus would be achieved or the changes implemented successfully.
See "— The BNB Chain's Decentralized Governance Structure May Negatively Affect
Its Ability To Grow And Respond To Challenges." and "— A Temporary Or Permanent
"Fork" or a "Clone" Of The BNB Chain Could Adversely Affect The Value Of The
Shares." If any of the foregoing were to occur, it could result in losses to
Shareholders. Moreover, normal operations and functionality of the BNB Chain may
be negatively affected. Such losses of functionality could lead to the BNB Chain
losing attractiveness to users, nodes, validators, or other stakeholders,
thereby dampening demand for BNB. Even if another digital asset other than BNB
were affected by similar circumstances, any reduction in confidence in the
source code or cryptography underlying digital assets generally could negatively
affect the demand for digital assets and therefore adversely affect the value of
the Shares.
•The
BNB Chain is still in the process of developing and making significant decisions
that will affect policies that govern the supply and issuance of BNB as well as
other BNB Chain protocols. The open-source nature of many digital asset network
protocols, such as the protocol for the BNB Chain, means that developers and
other contributors are generally not directly compensated for their
contributions in maintaining and developing such protocols. As a result, the
developers and other contributors of a particular digital asset may lack a
financial incentive to maintain or develop the network, or may lack the
resources to adequately address emerging issues. Alternatively, some developers
may be funded by companies whose interests are at odds with other participants
in a particular digital asset network. If the BNB Chain does not successfully
develop its policies on supply and issuance, and other major design decisions or
does so in a manner that is not attractive to network participants it could lead
to a decline in adoption of the BNB Chain and price of BNB.
•Software
applications running on top of the BNB Chain (often referred to as
"decentralized applications" or "DApps", whether or not decentralized in fact)
and smart contract developers depend on being able to obtain BNB to be able to
run their programs and operate their businesses. In particular, decentralized
applications and smart contracts require BNB in order to pay the gas fees needed
to power such applications and smart contracts and execute transactions. As
such, they represent a significant source of demand for BNB. BNB's price
volatility (particularly where BNB prices increase), or the BNB Chain's wider
inability to meet the demands of decentralized applications and smart contracts
in terms of inexpensive, reliable, and prompt transaction execution (including
during congested periods), or to solve its scaling challenges or increase its
throughput, may discourage such decentralized application and smart contract
developers from using the BNB Chain as the foundational infrastructure layer for
building their applications and smart contracts. If decentralized application
and smart contract developers abandon the BNB Chain for other blockchain or
digital asset networks or protocols for whatever reason, the value of BNB could
be negatively affected.
Moreover,
because digital assets, including BNB, have been in existence for a short period
of time and are continuing to develop, there may be additional risks in the
future that are impossible to predict as of the date of this
Prospectus.
The
BNB Protocol Was Only Conceived In 2017 And The BNB Protocol May Not Function As
Intended, Which Could Have An Adverse Impact On The Value Of BNB And An
Investment In The Shares.
The
development of the BNB Chain is ongoing and future disruptions, outages, bugs,
or other problems could have a material adverse effect on the value of BNB and
an investment in the Shares. Likewise, the client software implementation and
wallets used by users and validators to access the BNB Chain or BNB could suffer
future disruptions, bugs, or other problems that could have a material adverse
effect on the value of BNB and an investment in the Shares.
Digital
Assets Represent A New And Rapidly Evolving Industry, And The Value Of The
Shares Depends On The Acceptance Of BNB.
The
first major blockchain-based digital asset, bitcoin, was launched in 2009. BNB
launched in 2017. In general, digital asset networks, including the BNB Chain
and other cryptographic and algorithmic protocols governing the issuance of
digital assets represent a new and rapidly evolving industry that is subject to
a variety of factors that are difficult to evaluate. For example, the
realization of one or more of the following risks could materially adversely
affect the value of the Shares:
•Banks
and other established financial institutions may refuse to process funds for BNB
transactions; process wire transfers to or from Digital Asset Trading Platforms,
BNB-related companies or service providers; or maintain accounts for persons or
entities transacting in BNB. As a result, the prices of BNB are largely
determined by speculators and validators, thus contributing to price volatility
that makes retailers less likely to accept BNB in the future.
•Banks
may not provide banking services, or may cut off banking services, to businesses
that provide digital asset related services or that accept digital assets as
payment, which could dampen liquidity in the market and damage the public
perception of digital assets generally or any one digital asset in particular,
such as BNB, and their or its utility as a payment system, which could decrease
the price of digital assets generally or individually.
•Certain
privacy-preserving features have been or are expected to be introduced to a
number of digital asset networks. If any such features are introduced to the BNB
Chain, any trading platforms or businesses that facilitate transactions in BNB
may be at an increased risk of criminal or civil lawsuits, or of having banking
services cut off if there is a concern that these features interfere with the
performance of anti-money laundering duties and economic sanctions
checks.
•Users,
developers and validators may otherwise switch to or adopt certain digital
assets at the expense of their engagement with BNB or the BNB
Chain.
•The
Trust is not actively managed and will not have any formal strategy relating to
the development of the BNB Chain and will not attempt to avoid or mitigate
losses caused by declines in the price of BNB.
Due
To The Nature Of Private Keys, BNB Transactions Are Irrevocable And Stolen Or
Incorrectly Transferred BNB May Be Irretrievable. As A Result, Any Incorrectly
Executed BNB Transactions Could Adversely Affect An Investment In The
Trust.
BNB
transactions are typically not reversible without the consent and active
participation of the recipient of the transaction. Once a transaction has been
signed with private keys, verified and recorded in a block that is added to the
BNB Chain, an incorrect transfer of cryptocurrency, such as BNB, or a theft of
BNB generally will not be reversible and the Trust may not be capable of seeking
compensation for any such transfer or theft. Although the Trust's transfers of
BNB will regularly be made to or from the Trust's accounts at the BNB Custodian
or the Additional BNB Custodian, it is possible that, through computer or human
error, or through theft or criminal action, the Trust's BNB could be transferred
from the Trust's account at the BNB Custodian or the Additional BNB Custodian in
incorrect amounts or to unauthorized third parties, or to uncontrolled accounts.
To the extent that the Trust is unable to successfully seek redress for such
error or theft, such loss could adversely affect an investment in the
Trust.
The
custody of the Trust's BNB is handled by the BNB Custodian or the Additional BNB
Custodian, and the transfer of BNB to and from Liquidity Providers normally
takes place through the BNB Custodian's Clearing Services and is directed by the
Administrator and the Transfer Agent. The Sponsor has evaluated the procedures
and internal controls of the Trust's BNB Custodian and the Additional BNB
Custodian to safeguard the Trust's BNB holdings, as well as the procedures and
internal controls of the Trust's Administrator. However, it is possible that,
through computer or human error, or through theft or criminal action, the
Trust's BNB could be transferred from the Trust's BNB Account or Clearing
Account at the BNB Custodian or the Additional BNB Account at the Additional BNB
Custodian in incorrect amounts or to unauthorized third parties, or to incorrect
destination addresses on the BNB Chain. Alternatively, if the BNB Custodian's
and the Additional BNB Custodian's internal procedures and controls are
inadequate to safeguard the Trust's BNB holdings, and the Trust's private key(s)
is (are) lost, destroyed or otherwise compromised and no backup of the private
key(s) is (are) accessible, the Trust will be unable to access its BNB, which
could adversely affect an investment in the Shares of the Trust. In addition, if
the Trust's private key(s) is (are) misappropriated and the Trust's BNB holdings
are stolen, including from or by the BNB Custodian or the Additional BNB
Custodian, the Trust could lose some or all of its BNB holdings, which could
adversely impact an investment in the Shares of the Trust.
Such
events have occurred in connection with digital assets in the past. For example,
in September 2014, the Chinese digital asset exchange Huobi announced that it
had sent approximately 900 bitcoins and 8,000 Litecoins (worth approximately
$400,000 at the prevailing market prices at the time) to the wrong customers. To
the extent that the Trust is unable to seek a corrective transaction with such
third party or is incapable of identifying the third party which has received
the Trust's BNB through error or theft, the Trust will be unable to revert or
otherwise recover incorrectly transferred BNB. The Trust will also be unable to
convert or recover its BNB transferred to uncontrolled accounts. To the extent
that the Trust is unable to seek redress for such error or theft, such loss
could adversely affect the value of the Shares.
A
Disruption Of The Internet May Affect BNB Operations, Which May Adversely Affect
The BNB Industry And An Investment In The Trust.
The
BNB Chain relies on the Internet. A significant disruption of Internet
connectivity (i.e., one that affects large numbers of users or geographic
regions) could disrupt the BNB Chain's functionality and operations until the
disruption in the Internet is resolved. A disruption in the Internet could
adversely affect an investment in the Trust or the ability of the Trust to
operate.
BNB
And BNB Chain Have Links To, And May Be Controlled By, Binance And Its
Principals.
Binance
has links to BNB and BNB Chain, and Binance has historically played a major role
in BNB Chain’s development. Binance typically has among the highest trading
volume of BNB for any global trading platform. Users of the Binance trading
platform who pay trading fees in BNB receive a trading discount, and users who
maintain a certain minimum balance of BNB on Binance’s trading platform may
qualify to receive additional benefits, such as additional reduced fees, lower
interest rates, higher borrowing limits, and other benefits, from Binance.
(Binance, Fee Schedule, https://www.binance.com/en/fee/schedule (last visited
Apr. 23, 2025)). Concurrent with the launch of the Binance’s exchange in July
2017, Binance or its affiliates minted 200 million BNB tokens on the Ethereum
blockchain using Ethereum’s ERC-20 functionality. These tokens were initially
created for the purpose of allowing the holder of BNB to pay for fees incurred
from the use of the Binance exchange, among other uses. Binance according to the
BNB white paper issued the 200 million BNB as follows: 10% (20 million BNB) to
angel investors in Binance Ltd., 40% (80 million BNB) to the founding employees
of Binance exchange subject to a 4 year schedule, and 50% (100 million BNB) in
what the BNB white paper termed an “ICO” (an abbreviation of “Initial Coin
Offering”) in exchange for Ethereum (ETH) or the equivalent Ethereum price in
Bitcoin in three consecutive tranches from July 1, 2017 to July 21, 2017. The
Sponsor is not aware of the precise extent that the employees, principals and
angel investors of Binance and its affiliates have retained their BNB that they
originally received in the BNB ICO, or what percentage of outstanding BNB is
currently owned by Binance and its associated persons (following open-market
purchases or otherwise), but there can be no assurance that they do not
currently control a majority of outstanding BNB. If Binance and persons
associated with it did in fact possess control of a majority of outstanding BNB,
it would give them the corresponding ability to control validator selection via
voting, and numerous other governance decisions relating to the future of BNB
Chain and
BNB,
such as forks, future development roadmaps, scaling decisions, etc., which they
could in theory choose to exercise in a way that benefits themselves or their
interests. In the BNB white paper, Binance represented it would use the proceeds
of the BNB ICO to develop the Binance exchange. Moreover, Binance has been
responsible for operating the deflationary burning program for BNB tokens, which
was a significant force in their market value.
Apart
from the risks of potential centralized control, the perception that BNB Chain
and BNB are associated with Binance could cause BNB’s value to be affected by
developments involving or affecting Binance. For example, in 2023 the SEC filed
a lawsuit against Binance, alleging, inter alia, that the offering and sale of
BNB by Binance was an unregistered securities offering. The district court’s
decision in SEC
v. Binance Holdings Ltd. et al.,
738 F.Supp.3d 20, 48-58 (D.D.C. Aug. 23, 2024), ruled that, while the SEC’s
allegations regarding the manner in which Binance offered and sold BNB as part
of the initial distribution of BNB were sufficient at the motion to dismiss
stage, the SEC’s complaint did not include sufficient facts to support a
plausible inference that any particular secondary sales of BNB satisfy the Howey
test for an investment contract. In 2023, the Department of Justice, OFAC,
FinCEN, and the CFTC reached a series of settlements with Binance for charges
involving violations of U.S. laws governing money laundering, sanctions,
registration as a money services business, and registration under the Commodity
Exchange Act, among others. If Binance were to subject to operating restrictions
or was no longer able to facilitate trading in BNB, the liquidity and market
value of BNB would be negatively affected, causing the Shares to decline in
value. If BNB were no longer able to be used for trading fee discounts on
Binance, the demand for BNB would be negatively affected, which would likewise
negatively impact BNB’s market value and therefore the value of the Shares.
Likewise, negative developments, publicity, or sentiment relating to Binance or
its principals could affect market demand for, and value of, BNB.
Transactions
using BNB require the payment of “gas fees,” which are subject to fluctuations
that may result in high transaction fees.
Transactions
using BNB, including purchases, sales and staking, require the payment of “gas
fees” in BNB. Gas fees are payments made by the user to compensate for the
computational energy required to process and validate transactions, such as
purchases, sales and staking, on the BNB Chain. These fees can fluctuate and can
be very expensive relative to the cost of the transaction depending upon
congestion and demand on the network. If fees are high, the cost of a
transaction will potentially decrease the return of the investment, which could
be negative. High gas fees may also cause delays in the execution of a
transaction, which could affect the preferred timing of execution and may lead
to execution of a transaction during inopportune times. In addition, gas fees
are paid in BNB itself, which would require that sufficient BNB balances are
maintained. Future upgrades to the BNB protocol, regulatory changes, or
technical issues could also adversely impact the cost of gas fees and could have
a material adverse effect on the Trust’s business, financial condition and
results of operations and the price of the Trust’s Common Stock.
The
BNB Chain's Decentralized Governance Structure May Negatively Affect Its Ability
To Grow And Respond To Challenges.
The
governance of decentralized networks, such as the BNB Chain, is by voluntary
consensus and open competition. In other words, the BNB Chain has no central
decision-making body or clear manner in which participants can come to an
agreement other than through voluntary, widespread consensus. As a result, a
lack of widespread consensus in the governance of the BNB Chain may adversely
affect the network's utility and ability to adapt and face challenges, including
technical and scaling challenges. Historically the development of the source
code of the BNB Chain has been overseen by [ ] and
other core developers. Core developers' roles evolve over time, largely based on
self determined participation. If a significant majority of users and validators
adopt amendments to a decentralized network based on the proposals of such core
developers, such network will be subject to new protocols that may adversely
affect the value of the relevant digital asset. However, the BNB Chain would
cease to operate successfully without both validators and users, and the core
developers cannot formally compel them to adopt the changes to the source code
desired by core developers, or to continue to render services or participate in
the BNB Chain. As a general matter, the governance of the BNB Chain generally
depends on most of members of the BNB community ultimately reaching some form of
voluntary agreement on significant changes.
The
decentralized governance of the BNB Chain may make it difficult to find or
implement solutions or marshal sufficient effort to overcome existing or future
problems, especially protracted ones requiring substantial directed
effort
and resource commitment over a long period of time, such as scaling challenges.
The BNB Chain's failure to overcome governance challenges could exacerbate
problems experienced by the network or cause the network to fail to meet the
needs of its users, and could cause users, miners, and developer talent to
abandon the BNB Chain or to choose competing blockchain protocols, or lead to a
drop in speculative interest, which could cause the value of BNB to decline. If
the BNB community is unable to reach consensus in the future, it could have
adverse consequences for the network or lead to a fork, which could affect the
value of BNB.
Digital
Asset Networks Are Developed By A Diverse Set Of Contributors And The Perception
That Certain High-Profile Contributors Will No Longer Contribute To The Network
Could Have An Adverse Effect On The Market Price Of The Related Digital
Asset.
Digital
asset networks and related protocols are often developed by a diverse set of
contributors but certain identifiable and high-profile contributors may be
perceived as playing an impactful role. The perception that high-profile
contributors may no longer contribute to the network may have an adverse effect
on the market price of any related digital assets. For example, in June 2017, an
unfounded rumor circulated that Ethereum core developer Vitalik Buterin had
died. Following the rumor, the price of ETH decreased approximately 20% before
recovering after Buterin himself dispelled the rumor. Some have speculated that
the rumor led to the decrease in the price of ETH. In the event a high-profile
contributor to the BNB Chain is perceived as no longer able to contribute to the
BNB Chain due to death, retirement, withdrawal, incapacity, or otherwise,
whether or not such perception is valid, it could negatively affect the price of
BNB, which could adversely impact the value of the Shares.
The
Open-Source Structure Of The BNB Chain Protocol Means That The Core Developers
And Other Contributors Are Generally Not Directly Compensated For Their
Contributions In Maintaining And Developing The BNB Chain Protocol. A Failure To
Properly Monitor And Upgrade The BNB Chain Protocol Could Damage The BNB Chain
And An Investment In The Trust.
The
BNB Chain operates based on an open-source protocol maintained by the core
developers and other contributors. As new BNB are not sold on an ongoing basis
to generate revenue to support development activity, and the BNB Chain protocol
itself is made available for free rather than sold or made available subject to
licensing or subscription fees and its use does not generate revenues for its
development team, the core developers are generally not compensated for
maintaining and updating the source code for the BNB Chain protocol.
Consequently, there is a lack of financial incentive for developers to maintain
or develop the BNB Chain and the core developers may lack the resources to
adequately address emerging issues with the BNB Chain protocol. Although the BNB
Chain is currently supported by the core developers, there can be no guarantee
that such support will continue or be sufficient in the future. The perception
that high-profile contributors may no longer contribute to the network may have
an adverse effect on the market price of any related digital assets. For
example, in June 2017, an unfounded rumor circulated that Ethereum core
developer Vitalik Buterin had died. Following the rumor, the price of ether
decreased approximately 20% before recovering after Buterin himself dispelled
the rumor. Some have speculated that the rumor led to the decrease in the price
of ether. In the event a high-profile contributor to the BNB Chain is perceived
as no longer able to contribute to the BNB Chain due to death, retirement,
withdrawal, incapacity, or otherwise, whether or not such perception is valid,
it could negatively affect the price of BNB, which could adversely impact the
value of the Shares.
Alternatively,
some developers may be funded by entities whose interests are at odds with other
participants in the BNB Chain. See “— BNB And BNB Chain Have Links To, And May
Be Controlled By, Binance And Its Principals.”. In addition, a bad actor could
also attempt to interfere with the operation of the BNB Chain by attempting to
exercise a malign influence over a core developer. To the extent that material
issues arise with the BNB Chain protocol and the core developers and open-source
contributors are unable to address the issues adequately or in a timely manner,
the BNB Chain and an investment in the Trust may be adversely
affected.
Digital
Assets May Have Concentrated Ownership And Large Sales Or Distributions By
Holders Of Such Digital Assets, Or Any Ability To Participate In Or Otherwise
Influence A Digital Asset's Underlying Network, Could Have An Adverse Effect On
The Market Price Of Such Digital Asset.
As
of [September 17, 2025], the largest 100 BNB wallets held approximately
[ ]% of the BNB in circulation. Moreover, it is
possible that other persons or entities control multiple wallets that
collectively hold a significant number of BNB, even if they individually only
hold a small amount, and it is possible that some of these wallets are
controlled by the same person or entity. As a result of this concentration of
ownership, large sales or distributions by such holders could have an adverse
effect on the market price of BNB. See "—The BNB Chain Could Be Vulnerable To
Attacks on Transaction Finality and Consensus Processes, Which Could Adversely
Affect An Investment In The Trust Or The Ability Of The Trust To Operate." Any
such malicious behavior, if the bad actor or colluding bad actors had a
sufficiently large portion of the total outstanding staked assets, could lead to
an immediate loss of value of BNB.
The
BNB Chain Could Be Vulnerable To Centralization Concerns Which Could Adversely
Affect The Security And Stability of the BNB Chain As Well As The Value Of The
Shares.
In
the context of blockchain networks and digital assets, although there is no
universally accepted definition of "centralization", concerns arise when a
limited number of persons, entities, or software infrastructure have a
disproportionate amount of control over the network's operations or governance
or could serve as a single point of failure, thereby undermining the network's
ability as a distributed system to continue functioning correctly even if some
of its nodes or participants are faulty or malicious (also known as "Byzantine
Fault Tolerance"). See also "—The BNB Chain Could Be Vulnerable To Attacks on
Transaction Finality and Consensus Processes, Which Could Adversely Affect An
Investment In The Trust Or The Ability Of The Trust To Operate."
The
BNB Chain is believed to be decentralized in that it does not require
governmental authorities or financial institution intermediaries to create,
transmit or determine the value of BNB. The source code of the BNB Chain is
open-source and available to the public. As of [September 22, 2025], more than
[ ] applications were built on the BNB Chain. As of
[September 22,
2025],
[ ] reports there were approximately
[ ] validator nodes on the BNB Chain, with no
single validator node directly controlling more than
[ ]% of the aggregate stake (Source:
[ ]). However, the real figure could be higher
because some entities may operate multiple nodes.
A
Temporary Or Permanent "Fork" or a "Clone" Of The BNB Chain Could Adversely
Affect The Value Of The Shares.
The
BNB Chain operates using open-source protocols, meaning that any user can
download the software, modify it and then propose that the users and validators
of BNB adopt the modification. When a modification is introduced and a
substantial majority of users and validators' consent to the modification, the
change is implemented and the network remains uninterrupted. However, if less
than a substantial majority of users and validators' 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
BNB Chain, 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 BNB running in parallel, yet lacking interchangeability. For
example, in September 2022, the Ethereum Network transitioned to a
proof-of-stake model, in an upgrade referred to as the "Merge." Following the
Merge, a hard fork of the Ethereum Network occurred, as certain Ethereum miners
and network participants planned to maintain the proof-of-work consensus
mechanism that was removed as part of the Merge. This version of the network was
rebranded as "Ethereum Proof-of-Work."
In
BNB Chain’s case, BNB was originally issued on Ethereum as an ERC-20 token
(“ERC-20 BNB”). When the Binance Chain was developed as a standalone blockchain
by Binance (“Beacon Chain”), ERC-20 BNB was migrated by minting new BNB on the
Binance Chain (“Beacon Chain BNB”) in proportion to the balance of each existing
ERC-20 BNB address on the Ethereum blockchain at a fixed exchange rate, with the
Beacon Chain BNB being the successor asset and ERC-20 BNB being burned. Because
the Beacon Chain was not designed to accommodate smart contracts and
user-generated decentralized applications, a new standalone blockchain, Binance
Smart Chain (“BNB Chain”), was then developed to accommodate smart contract
functionality and Dapps.
Eventually,
the Beacon Chain was hard forked and merged into BNB Chain, with BNB Chain as
the successor blockchain network and new BNB on the BNB Chain issued in
proportion to the balance of each existing Beacon Chain BNB wallet on the Beacon
Chain at a fixed exchange rate, with BNB being the successor asset and Beacon
Chain BNB no longer functional or operational after the elapsing of a sunset
period.
Forks
may also occur as a network community's response to a significant security
breach. For example, in July 2016, Ethereum "forked" into Ethereum and a new
digital asset, Ethereum Classic, as a result of the Ethereum Network community's
response to a significant security breach. In June 2016, an anonymous hacker
exploited a smart contract running on the Ethereum Network to syphon
approximately $60 million of ETH held by The DAO, a distributed autonomous
organization, into a segregated account. In response to the hack, most
participants in the Ethereum community elected to adopt a "fork" that
effectively reversed the hack. However, a minority of users continued to develop
the original blockchain, referred to as "Ethereum Classic" with the digital
asset on that blockchain now referred to as ETC. ETC now trades on several
Digital Asset Trading Platforms. A fork may also occur as a result of an
unintentional or unanticipated software flaw in the various versions of
otherwise compatible software that users run. Such a fork could lead to users
and validators abandoning the digital asset with the flawed software. It is
possible, however, that a substantial number of users and validators could adopt
an incompatible version of the digital asset while resisting community-led
efforts to merge the two chains. This could result in a permanent fork, as in
the case of Ethereum and Ethereum Classic.
Furthermore,
a hard fork can lead to new security concerns. For example, when the Ethereum
and Ethereum Classic networks, two other digital asset networks, split in July
2016, replay attacks, in which transactions from one network were rebroadcast to
nefarious effect on the other network, plagued Ethereum trading platforms
through at least October 2016. An Ethereum trading platform announced in July
2016 that it had lost 40,000 Ethereum Classic, worth about $100,000 at that
time, as a result of replay attacks. Similar replay attack concerns occurred in
connection with the Bitcoin Cash and Bitcoin Satoshi's Vision networks split in
November 2018. Another possible result of a hard fork is an inherent decrease in
the level of security due to significant amounts of validating power remaining
on one network or migrating instead to the new forked network. After a hard
fork, it may become easier for an individual validator or validating pool's
validating power to exceed 50% of the validating power of a digital asset
network that retained or attracted less validating power, thereby making digital
asset networks that rely on proof-of-stake more susceptible to
attack.
Protocols
may also be cloned. Unlike a fork, which modifies an existing blockchain, and
results in two competing networks, each with the same genesis block, a "clone"
is a copy of a protocol's codebase, but results in an entirely new blockchain
and new genesis block. Tokens are created solely from the new "clone" network
and, in contrast to forks, holders of tokens of the existing network that was
cloned do not receive any tokens of the new network. A "clone" results in a
competing network that has characteristics substantially similar to the network
it was based on, subject to any changes as determined by the developer(s) that
initiated the clone.
A
hard fork may adversely affect the price of BNB at the time of announcement or
adoption. For example, the announcement of a hard fork could lead to increased
demand for the pre-fork digital asset, in anticipation that ownership of the
pre-fork digital asset would entitle holders to a new digital asset following
the fork. The increased demand for the pre-fork digital asset may cause the
price of the digital asset to rise. After the hard fork, it is possible the
aggregate price of the two versions of the digital asset running in parallel
would be less than the price of the digital asset immediately prior to the fork.
Furthermore, while the Trust would be entitled to both versions of the digital
asset running in parallel, the Sponsor will, as permitted by the terms of the
Trust Agreement, determine which version of the digital asset is generally
accepted as the BNB Chain and should therefore be considered the appropriate
network for the Trust's purposes, and there is no guarantee that the Sponsor
will choose the digital asset that is ultimately the most valuable fork. Either
of these events could therefore adversely impact the value of the
Shares.
Shareholders
May Not Receive The Benefits Of Any Forks Or "Airdrops."
We
refer to the right to receive any benefits arising from a fork, airdrop (defined
below), or similar event as an "Incidental Right" and any such virtual currency
acquired through an Incidental Right as "IR Virtual Currency." The only crypto
asset to be held by the Trust will be BNB. The Trust has adopted the following
procedures to address
situations
involving any fork, airdrop or similar event that results in the issuance of
Incidental Rights or IR Virtual Currency that the Trust may receive. [The Trust
Agreement stipulates that if a fork occurs, the Sponsor shall determine which
asset constitutes BNB and which network constitutes the BNB Chain, and the
Sponsor will as soon as possible cause the Trust to irrevocably abandon the
Incidental Rights or IR Virtual Currency. Because the Trust will abandon any
Incidental Rights and IR Virtual Currency, the Trust would not receive any
direct or indirect consideration for the Incidental Rights or IR Virtual
Currency and thus the value of the Shares will not reflect the value of the
Incidental Rights or IR Virtual Currency. Such Incidental Rights or IR Virtual
Currency will not be taken into account for purposes of determining NAV. In the
event the Trust seeks to change this position, an application would need to be
filed with the SEC by the Exchange seeking approval to amend its listing rules
to permit the Trust to distribute the Incidental Rights or IR Virtual Currency
that is not BNB in-kind to the Sponsor, as agent for the Shareholders, and the
Sponsor would arrange to sell or otherwise dispose of the Incidental Rights or
IR Virtual Currency and for the proceeds (if any) to be distributed to the
Shareholders. There can be no assurance as to whether or when the Sponsor would
make such a decision, or when the Exchange will seek or obtain this approval, if
at all.]
In
addition to forks, a digital asset may become subject to a similar occurrence
known as an "airdrop." In an airdrop, the promotors of a new digital asset
announce to holders of another digital asset that such holders will be entitled
to claim a certain amount of the new digital asset for free, based on the fact
that they hold such other digital asset. Neither the Trust nor the Sponsor shall
be under any obligation to claim or attempt to secure or realize any economic
benefit from "airdropped" assets, and the Sponsor will cause the Trust to
irrevocably and permanently abandon, for no consideration, such Incidental
Rights or IR Virtual Currency. In the event the Trust seeks to change this
position, an application would need to be filed with the SEC by the Exchange
seeking approval to amend its listing rules to permit the Trust to distribute
the Incidental Rights or IR Virtual Currency associated with the airdropped
assets in-kind to the Sponsor, as agent for the Shareholders, and the Sponsor
would arrange to sell or otherwise dispose of the Incidental Rights or IR
Virtual Currency and for the proceeds (if any) to be distributed to the
Shareholders.
In
The Event Of A Hard Fork Of The BNB Chain, The Sponsor Will, If Permitted By The
Terms Of The Trust Agreement, Use Its Discretion To Determine Which Network
Should Be Considered The Appropriate Network For The Trust's Purposes, And In
Doing So May Adversely Affect The Value Of The Shares.
In
the event of a hard fork of the BNB Chain, the Sponsor will, if permitted by the
terms of the Trust Agreement, use its discretion to determine, in good faith,
which peer-to-peer network, among a group of incompatible forks of the BNB
Chain, is generally accepted as the BNB Chain 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 BNB,
users, service providers, businesses, validators and other constituencies, as
well as the actual continued acceptance of, staking power, and community
engagement with, the BNB Chain. 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 MarketVector
on what is generally accepted as BNB and should therefore be considered "BNB"
for the Trust's purposes, which may also adversely affect the value of the
Shares as a result.
In
The Event Of A Hard Fork Of The BNB Chain, The BNB Custodian's And The
Additional BNB Custodian's Operations May Be Interrupted Or Subject To
Additional Security Risks That Could Disrupt The Trust's Ability To Process
Creations And Redemptions Of Shares Or Otherwise Threaten The Security Of The
Trust's BNB Holdings.
In
the event of a hard fork of the BNB Chain, the BNB Custodian and the Additional
BNB Custodian may temporarily halt the ability of customers (including the
Trust) to deposit, withdraw or transfer BNB on the Custodian's platform. Such a
delay may be intended to permit the Custodian to assess the resulting versions
of the Blockchain, to determine how best to securely "split" the BNB from the
forked asset, and to prevent malicious users from conducting "replay attacks"
(i.e., broadcasting transactions on both versions of the forked networks to put
Custodian assets at risk). As a result, the Trust is likely to suspend creations
and redemptions during a period in which the Custodian's operations are
halted.
In
addition, any losses experienced by the Custodian due to a hard fork, including
due to replay attacks or technological errors in assessing the fork, could have
a materially adverse impact on an investment in the Shares.
Any
Name Change And Any Associated Rebranding Initiative By The Core Developers Of
BNB May Not Be Favorably Received By The Digital Asset Community, Which Could
Negatively Impact The Value Of BNB And The Value Of The Shares.
From
time to time, digital assets may undergo name changes and associated rebranding
initiatives. For example, Bitcoin Cash may sometimes be referred to as Bitcoin
ABC in an effort to differentiate itself from any Bitcoin Cash hard forks, such
as Bitcoin Satoshi's Vision, and in the third quarter of 2018, the team behind
ZEN rebranded and changed the name of ZenCash to "Horizen." We cannot predict
the impact of any name change and any associated rebranding initiative on BNB.
After a name change and an associated rebranding initiative, a digital asset may
not be able to achieve or maintain brand name recognition or status that is
comparable to the recognition and status previously enjoyed by such digital
asset. The failure of any name change and any associated rebranding initiative
by a digital asset may result in such digital asset not realizing some or all of
the anticipated benefits contemplated by the name change and associated
rebranding initiative, and could negatively impact the value of BNB and the
value of the Shares.
[The
BNB Chain Could Be Vulnerable To Attacks on Transaction Finality and Consensus
Processes, Which Could Adversely Affect An Investment In The Trust Or The
Ability Of The Trust To Operate.
The
BNB Chain is currently vulnerable to several types of attacks,
including:
•"33%
attack" where, if a validator or group of validators were to gain control of
more than 33% of the total staked BNB on the BNB Chain, a malicious actor could
impede or delay block confirmation or even cause a fork in the
blockchain.
•"50%
attack" where, if a validator or group of validators acting in concert were to
gain control of more than 50% of the total staked BNB on the BNB Chain, a
malicious actor would be able to gain full control of the BNB Chain and the
ability to manipulate the blockchain on a forward-looking basis, including
censoring transactions following the achievement of threshold, double- spending
and fraudulent block propagation, while the attacker maintains the threshold. In
theory, the minority non-attackers might reach social consensus to reject blocks
proposed by the malicious majority attacker, reducing the attacker's ability to
engage in malicious activity, but there can be no assurance this would happen or
that non-attackers would be able to coordinate effectively.
•">66%
attack" where, if a validator or group of validators acting in concert were to
gain control of more than 66% of the total staked BNB on the BNB Chain, a
malicious actor could permanently and irreversibly manipulate the blockchain,
including censorship, double-spending and fraudulent block propagation, both on
a forward- and backward-looking basis. The attacker could unilaterally finalize
their preferred chain without the votes of any other stakers, and could also
reverse past finalized blocks.
If
a malicious actor, group or botnet (a volunteer or hacked collection of
computers controlled by networked software coordinating the actions of the
computers) obtains certain percentages of the validating power dedicated to
validation on the BNB Chain is controlled by a bad actor (often referred to as a
"51% attack", though the numerical thresholds vary in the proof-of-stake
consensus mechanism of the BNB Chain), it may be able to alter the BNB Chain on
which the BNB Chain and BNB transactions rely. The BNB Chain's proof- of-stake
consensus mechanism requires a 2/3 supermajority of validators who have staked
BNB to vote in favor in order to finalize transactions and add blocks to the BNB
Chain. If the bad actor were to obtain 2/3 of the total BNB staked in validation
processes, it is widely believed that the bad actor could construct fraudulent
blocks, "double-spend" its own BNB (i.e., spend the same BNB in more than one
transaction), or censor other users' transactions by preventing them from being
confirmed while continuing to validate and confirm its own transactions and earn
the associated block reward, thereby enriching itself while also entrenching its
own control of the BNB Chain. If the bad actor were to obtain 1/3 of the total
BNB staked in validation processes, the bad actor could prevent certain
transactions from completing in a timely manner, or at all, and prevent the
confirmation of other users' transactions, though this would likely be temporary
(since it would likely be penalized for inactivity leakage, resulting in the bad
actor's staked BNB being
slashed,
as defined below) and it likely could not double spend or propagate fraudulent
blocks without the 66% supermajority of staked assets. With control of the
respective threshold of total staked assets on the BNB Chain, it could be
possible for the malicious actor to control, exclude or modify the ordering of
transactions on the BNB Chain and prevent the confirmation of other users'
transactions, while continuing to mine new BNB and confirm its own blocks, for
so long as it maintained control. To the extent that such malicious actor or
botnet did not yield its control of the validating power on the BNB Chain or the
BNB community did not reject the fraudulent blocks as malicious or to the extent
that such bad actor did not yield its control of processing power, reversing any
changes made to the BNB Chain may be difficult or impossible. Further, a
malicious actor or botnet could create a flood of transactions in order to slow
down the BNB Chain.
For
example, in August 2020, the Ethereum Classic network was the target of two
double-spend attacks by an unknown actor or actors that gained more than 50% of
the processing power of the Ethereum Classic network. The attacks resulted in
reorganizations of the Ethereum Classic blockchain that allowed the attacker or
attackers to reverse previously recorded transactions in excess of $5.0 million
and $1.0 million. Any similar attacks on the BNB Chain could negatively impact
the value of BNB and the value of the Shares.
In
addition, in May 2019, the Bitcoin Cash network experienced a 51% attack when
two large mining pools reversed a series of transactions in order to stop an
unknown miner from taking advantage of a flaw in a recent Bitcoin Cash protocol
upgrade. Although this particular attack was arguably benevolent, the fact that
such coordinated activity was able to occur may negatively impact perceptions of
the Bitcoin Cash network. Although the two attacks described above took place on
proof-of-work-based networks, it is possible that a similar attack may occur on
the BNB Chain, which could negatively impact the value of BNB and the value of
the Shares.
Although
there are no known reports of malicious control of the BNB Chain, if groups of
coordinating or connected BNB holders that together have more than 50% of
outstanding BNB, were to stake that BNB and run validators, they could exert
authority over the validation of BNB transactions. This risk is heightened if
over 50% of the validating power on the network falls within the jurisdiction of
a single governmental authority. If network participants, including the core
developers and the administrators of validating pools, do not act to ensure
greater decentralization of BNB, the feasibility of a malicious actor obtaining
control of the validating power on the BNB Chain will increase, which may
adversely affect the value BNB and the value of the Shares.
A
malicious actor may also obtain control over the BNB Chain through its influence
over core developers by gaining direct control over a core developer or an
otherwise influential programmer. See discussion of hacking incident affecting
Raj Gokal in "—The Open-Source Structure Of The BNB Chain Protocol Means That
The Core Developers And Other Contributors Are Generally Not Directly
Compensated For Their Contributions In Maintaining And Developing The BNB Chain
Protocol. A Failure To Properly Monitor And Upgrade The BNB Chain Protocol Could
Damage The BNB Chain And An Investment In The Trust." To the extent that users
and validators accept amendments to the source code proposed by the controlled
core developer, other core developers do not counter such amendments, and such
amendments enable the malicious exploitation of the BNB Chain, the risk that a
malicious actor may be able to obtain control of the BNB Chain in this manner
exists. Moreover, it is possible that a group of BNB holders that together
control more than 50% of outstanding BNB are in fact part of the initial or core
developer group, or are otherwise influential members of the BNB community. To
the extent that the initial or existing core developer groups also control more
than the relevant thresholds of outstanding BNB, as some believe, the risk of
and arising from this particular group of users obtaining control of the
validating power on the BNB Chain will be even greater, and should this
materialize, it may adversely affect the value of the Shares.]
The
potential compromise of the BNB Chain and other cryptocurrencies’ network
security by emerging technologies, including artificial intelligence and quantum
computing, may materially and adversely impact the Trust’s operations and
financial condition.
The
security and integrity of the BNB Chain and other cryptocurrencies’ networks are
fundamentally dependent on the robustness of its cryptographic algorithms. BNB
and other cryptocurrencies’ protocol relies heavily on public key cryptography
and hashing algorithms to secure transactions, safeguard private keys, and
prevent double-spending. Advances in emerging technologies, particularly
artificial intelligence (AI”) and quantum computing may pose significant risks
to the BNB Chain and other cryptocurrencies’ network’s security and operational
stability.
Quantum
computing, in particular, presents a long-term threat to the cryptographic
assumptions underpinning the BNB Chain and other cryptocurrencies. Should
quantum computing achieve sufficient maturity, it could undermine the
effectiveness of the cryptographic algorithms used to secure the blockchain,
such as elliptic curve digital signature algorithms (ECDSA). A sufficiently
powerful quantum computer could potentially reverse-engineer private keys from
public addresses or compromise the blockchain’s consensus mechanism, leading to
the theft of digital assets, double-spending, and other forms of fraud. Although
current quantum computing capabilities are not yet at this level, advancements
in quantum technologies could materialize more rapidly than anticipated,
creating significant systemic risks for the BNB Chain.
AI
may also pose indirect security risks. AI-driven cyberattacks, including
advanced phishing schemes, autonomous malware, and intelligent blockchain
analysis tools, could increase the sophistication and success rate of attacks
targeting BNB and other cryptocurrencies’ users, exchanges, custodians, and node
operators. The use of AI to exploit vulnerabilities in software, mining
hardware, or network protocols could threaten the stability and reliability of
the BNB Chain and other cryptocurrencies’ ecosystems.
There
can be no assurance that BNB and other cryptocurrencies’ current cryptographic
safeguards will be sufficient to protect against future technological advances.
While research and development efforts are ongoing to develop quantum-resistant
cryptographic protocols, the BNB Chain and other cryptocurrencies’ networks may
face challenges in adopting such technologies at scale, particularly given their
decentralized governance structure. Any successful attack or perceived
vulnerability arising from AI or quantum computing could materially and
adversely affect the price, liquidity, and adoption of BNB and other
cryptocurrencies and could negatively impact the Trust’s business, financial
condition and results of operations.
If
Validators Exit The BNB Chain, It Could Increase The Likelihood Of A Malicious
Actor Obtaining Control.
Validators
exiting the network could make the BNB Chain more vulnerable to a malicious
actor obtaining control of a large percentage of staked BNB, which might enable
them to manipulate the BNB Chain by censoring or manipulating specific
transactions, as discussed previously. If the BNB Chain suffers such an attack,
the price of BNB could be negatively affected, and a loss of confidence in the
BNB Chain could result. Any reduction in confidence in the transaction
confirmation process or staking power of the BNB Chain may adversely affect an
investment in the Trust.
Blockchain
Technologies Are Based On Theoretical Conjectures As To The Impossibility Of
Solving Certain Cryptographical Puzzles Quickly. These Premises May Be Incorrect
Or May Become Incorrect Due To Technological Advances.
Blockchain
technologies are premised on theoretical conjectures as to the impossibility, in
practice, of solving certain mathematical problems quickly. Those conjectures
remain unproven, however, and mathematical or technological advances could
conceivably prove them to be incorrect. Blockchain technology companies may also
be negatively affected by cryptography or other technological or mathematical
advances, such as the development of quantum computers with significantly more
power than computers presently available, that undermine or vitiate the
cryptographic consensus mechanism underpinning the BNB Chain and other
distributed ledger protocols. If either of these events were to happen, markets
that rely on blockchain technologies, such as the BNB Chain, could quickly
collapse, and an investment in the Trust may be adversely affected.
The
Price Of BNB On The BNB Market Has Exhibited Periods Of Extreme Volatility,
Which Could Have A Negative Impact On The Performance Of The Trust.
The
price of BNB as determined by the BNB market has experienced periods of extreme
volatility and may be influenced by a wide variety of factors. Speculators and
investors who seek to profit from trading and holding BNB generate a significant
portion of BNB demand. Such speculation regarding the potential future
appreciation in the value of BNB may cause the price of BNB to increase.
Conversely, a decrease in demand for or speculative interest regarding BNB may
cause the price to decline. The volatility of the price of BNB, particularly
arising from speculative activity, may have a negative impact on the performance
of the Trust.
MarketVector
Has Analyzed BNB Trading Platform Data And Developed Insights That Have Informed
Marketvector's Understanding Of The BNB Market And The Design Of The Trust. If
Such Data Or Insights Are Inaccurate Or Incorrect, The Value Of An Investment In
The Trust May Be Adversely Affected.
MarketVector
has relied upon BNB market data in developing its analysis of the BNB market.
This analysis has informed MarketVector's understanding of the BNB market, the
design of the Trust and the design of the MarketVectorTM
[ ]. The continued viability of the Trust relies
upon access to accurate data, and MarketVector's continued ability to
effectively analyze such data. If data is inaccurate or becomes unavailable, or
if MarketVector's analysis of such data is incorrect, the value of an investment
in the Trust may be adversely affected.
Smart
Contracts, Including Those Relating To DeFi Applications, Are A New Technology
And Their Ongoing Development And Operation May Result In Problems, Which Could
Reduce The Demand For BNB Or Cause A Wider Loss Of Confidence In The BNB Chain,
Either Of Which Could Have An Adverse Impact On The Value Of BNB.
Smart
contracts are programs that run on the BNB Chain that execute automatically when
certain conditions are met. Since smart contracts typically cannot be stopped or
reversed, vulnerabilities in their programming can have damaging effects. For
example, in June 2016, a vulnerability in the smart contracts underlying The
DAO, a distributed autonomous organization for venture capital funding on the
Ethereum network, allowed an attack by a hacker to syphon approximately $60
million worth of ETH from The DAO's accounts into a segregated account. In the
aftermath of the theft, certain core developers and contributors pursued a "hard
fork" of the Ethereum Network in order to erase any record of the theft. Despite
these efforts, the price of ETH reportedly dropped approximately 35% in the
aftermath of the attack and subsequent hard fork. In addition, in July 2017, a
vulnerability in a smart contract for a multi-signature wallet software
developed by Parity led to a reportedly $30 million theft of ETH, and in
November 2017, a new vulnerability in Parity's wallet software reportedly led to
roughly $160 million worth of ETH being indefinitely frozen in an account.
Furthermore, in April 2018, a batch overflow bug was found in many
Ethereum-based ERC20-compatible smart contract tokens that allows hackers to
create a large number of smart contract tokens, causing multiple crypto asset
platforms worldwide to shut down ERC20-compatible token trading. Similarly, in
March 2020, a design flaw in the MakerDAO smart contract caused forced
liquidations of crypto assets at significantly discounted prices, resulting in
millions of dollars of losses to users who had deposited crypto assets into the
smart contract. In another example, in February 2022, a vulnerability in a smart
contract for Wormhole, a bridge between the Ethereum and Solana Networks led to
a $320 million theft of Ethereum. Other smart contracts, such as bridges between
blockchain networks and decentralized finance ("DeFi") protocols have also been
manipulated, exploited or used in ways that were not intended or envisioned by
their creators such that attackers syphoned over $3.8 billion worth of digital
assets from smart contracts in 2022. Problems with the development, deployment,
and operation of smart contracts may have an adverse effect on the value of BNB,
just as they have for other digital assets like Ethereum.
In
some cases, smart contracts can be controlled by one or more "admin keys" or
users with special privileges, or "super users". These users may have the
ability to unilaterally make changes to the smart contract, enable or disable
features on the smart contract, change how the smart contract receives external
inputs and data, and make other changes to the smart contract. Furthermore, in
some cases inadequate public information may be available about certain smart
contracts or applications, and information asymmetries may exist, even with
respect to open-source smart contracts or applications; certain participants may
have hidden informational or technological advantages, making for an uneven
playing field. There may be opportunities for bad actors to perpetrate
fraudulent schemes and engage in illicit activities and other misconduct, such
as exit scams and rug pulls (orchestrated by developers and/or influencers who
promote a smart contract or application and, ultimately, escape with the money
at an agreed time), or Ponzi or similar fraud schemes.
Many
DeFi applications are currently deployed on the BNB Chain, and smart contracts
relating to DeFi applications currently represent a significant source of demand
for BNB. DeFi applications may achieve their investment purposes through
self-executing smart contracts that may allow users to invest digital assets in
a pool from which other users can borrow without requiring an intermediate party
to facilitate these transactions. These investments may earn interest to the
investor based on the rates at which borrowers repay the loan, and can generally
be withdrawn by the investor. For smart contracts that hold a pool of digital
asset reserves, smart contract super
users
or admin key holders may be able to extract funds from the pool, liquidate
assets held in the pool, or take other actions that decrease the value of the
digital assets held by the smart contract in reserves. Even for digital assets
that have adopted a decentralized governance mechanism, such as smart contracts
that are governed by the holders of a governance token, such governance tokens
can be concentrated in the hands of a small group of core community members, who
would be able to make similar changes unilaterally to the smart contract. If any
such super user or group of core members unilaterally make adverse changes to a
smart contract, the design, functionality, features and value of the smart
contract, its related digital assets may be harmed. In addition, assets held by
the smart contract in reserves may be stolen, misused, burnt, locked up or
otherwise become unusable and irrecoverable. Super users can also become targets
of hackers and malicious attackers. If an attacker is able to access or obtain
the super user privileges of a smart contract, or if a smart contract's super
users or core community members take actions that adversely affect the smart
contract, users who transact with the smart contract may experience decreased
functionality of the smart contract or may suffer a partial or total loss of any
digital assets they have used to transact with the smart contract. Furthermore,
the underlying smart contracts may be insecure, contain bugs or other
vulnerabilities, or otherwise may not work as intended. Any of the foregoing
could cause users of the DeFi application to be negatively affected, or could
cause the DeFi application to be the subject of negative publicity. Because DeFi
applications may be built on the BNB Chain and represent a significant source of
demand for BNB, public confidence in the BNB Chain itself could be negatively
affected, such sources of demand could diminish and the value of BNB could
decrease. Similar risks apply to any smart contract or decentralized
application, not just DeFi applications.
Popular
Decentralized Applications Running On BNB May Cease To Operate Or May Migrate To
Competing Blockchains, Which May Negatively Impact The Price Of BNB And Make The
BNB Chain Less Attractive.
Certain
decentralized applications currently running on the BNB Chain may cease
operations due to regulatory concerns, lawsuits, or a decline in demand.
Additionally, such decentralized applications may also migrate away from BNB to
an alternative competing blockchain.
Validation
On the BNB Chain Is Subject to Risks, including Staking Liquidity and
Operational Uncertainty on the BNB Chain.
Validation
on the BNB Chain requires BNB to be transferred into smart contracts on the
underlying blockchain networks not under the Trust's or anyone else's control.
If the BNB Chain source code or protocol fail to behave as expected, suffer
cybersecurity attacks or hacks, experience security issues, or encounter other
problems, such assets may be irretrievably lost. In addition, the BNB Chains
dictate requirements for participation in validation activity, and may impose
penalties, if the relevant activities are not performed correctly. The BNB Chain
sanction (i.e., "slashing") is imposed if a validator commits malicious acts
related to the validation of blocks with invalid transactions. [On the BNB
Chain, slashing generally operates by social consensus, rather than being
automatically hardwired into the protocol's code. The BNB community generally
aspires to slash 100% of staked assets in cases where a BNB node is maliciously
trying to violate safety rules and 0% during routine operation. There is
currently no automatic slashing in the BNB Chain. Rather, for regular consensus,
after a safety violation, the BNB Chain will halt. The validators will analyze
the data prior to the halt and figure out who was responsible and propose that
the stake of the malicious actors responsible for the safety violation should be
slashed after restart, typically 100%. Separately, as part of the "activating"
and "de-activating" or "cooling down" processes of staking, staked BNB will be
inaccessible for a variable period of time determined by a range of factors,
resulting in potential inaccessibility during those periods. "Activation" is the
funding of a validator to be included in the active set, thereby allowing the
validator to participate in the BNB Chain's proof-of-stake consensus protocol.
"De-activating" is the request to exit from the active set and no longer
participate in the BNB Chain's proof-of-stake consensus protocol. As part of
these "activating" and "de-activating" processes of staking on the BNB Chain,
any staked BNB will be inaccessible for a period of time, as the duration of
activating and exiting periods are dependent on a range of factors. This can
also be longer depending on network conditions and the total amount of BNB being
un-staked globally. As a result, the Trust may not be able to promptly access or
liquidate staked BNB to meet redemption requests in amounts that are greater
than the portion of the Trust's BNB that remains un-staked or respond to adverse
market conditions. This delay could adversely affect the Trust's liquidity and
its ability to fulfil investor redemptions in a timely manner, particularly
during periods of heightened market volatility or significant redemption
activity.]
The
Sponsor is responsible for assessing, managing, and periodically reviewing the
Trust's liquidity risk annually. In conducting the liquidity risk assessment,
the Sponsor considers all relevant risks, including the Trust's investment
strategy and liquidity during normal and stressed conditions, the Trust's
holdings of cash and cash equivalents and the "activating" and "de-activating"
period involved in the staking process, and determines whether any adjustments
to the management of the Trust's liquidity risk are necessary. Potential
adjustments may include reducing the proportion of BNB allocated to staking or
increasing the amount of BNB kept readily available to meet redemption requests.
The
BNB Chain requires the payment of base fees and the practice of paying
prioritization fees is common, and such fees can become significant as the
amount and complexity of the transaction grows, depending on the degree of
network congestion and the price of BNB. Any cybersecurity attacks, security
issues, hacks, penalties, slashing events, or other problems could damage
validators' willingness to participate in validation, discourage existing and
future validators from serving as such, and adversely impact the BNB Chain's
adoption or the price of BNB. Any disruption of validation on the BNB Chain
could interfere with network operations and cause the BNB Chain to be less
attractive to users and application developers than competing blockchain
networks, which could cause the price of BNB to decrease. The limited liquidity
during the "activation" or "de-activation" processes could dissuade potential
validators from participating, which could interfere with network operations or
security and cause the BNB Chain to be less attractive to users and application
developers than competing blockchain networks, which could cause the price of
BNB to decrease.
Operational
Cost May Exceed The Award For Validating Transaction, And Increased Transaction
Fees May Adversely Affect The Usage Of The BNB Chain.
If
transaction confirmation fees become too high, the marketplace may be reluctant
to use the BNB Chain. This may result in decreased usage and limit expansion of
the BNB Chain in the retail, commercial and payments space, adversely impacting
investment in the Trust. Conversely, if the reward for validators or the value
of the transaction fees is insufficient to motivate validators, they may cease
to validate transactions.
Ultimately,
if the awards of new BNB costs of validating transactions grow
disproportionately, miners may operate at a loss, transition to other networks,
or cease operations altogether. Each of these outcomes could, in turn, slow
transaction validation and usage, which could have a negative impact on the BNB
Chain and could adversely affect the value of the BNB held by the
Trust.
As
a result of BNB's fee burning mechanism, the incentives for validators to
validate transactions with higher gas fees are reduced, since those validators
would not receive those gas fees.
An
acute cessation of validator operations would reduce the collective processing
power on the BNB Chain, which would adversely affect the transaction
verification process by temporarily decreasing the speed at which blocks are
added to the blockchain and make the blockchain more vulnerable to a malicious
actor obtaining control in excess of the relevant threshold of the processing
power on the blockchain. Reductions in processing power could result in
material, though temporary, delays in transaction confirmation time. Any
reduction in confidence in the transaction verification process or may adversely
impact the value of Shares of the Trust or the ability of the Sponsor to
operate.
A
Large Validator Exit Could Lead To Congestion and Deactivation Delays On The BNB
Chain.
The
Trust may be adversely affected by delays in deactivating of its staked assets
if a large validator [or the Staking Services Provider] initiates a mass exit
from the BNB Chain.
A
recent incident on the Ethereum blockchain illustrates the potential impact of
such events. In September 2025, Kiln, a major staking provider with over $15
billion in assets staked across multiple networks, exited all 51,000 of its
Ethereum validators following a security breach involving its API. This decision
led to a 150% spike in Ethereum’s validator exit queue, increasing the total
queued Ethereum to 2.6 million Ethereum and extending unbonding times on the
Ethereum blockchain to over 45 days.
Although
BNB’s staking architecture differs from Ethereum’s, similar risks may arise in
the event of a large validator exit. A mass exit and withdrawal of staked assets
by a major validator or validators could result in congestion in the
deactivation queue and delayed deactivation of the Trust's staked BNB. In
addition, a mass exit could also lead to disruption of earning staking rewards
if there is a prolonged deactivation period, during which staked BNB will not
earn any new staking rewards and will not be able to be restaked until the
deactivation period ends.
These
risks may materially and adversely affect the Trust's ability to maintain
liquidity and accurately value its BNB holdings. There can be no assurance that
validator-related disruptions will not occur or that their impact will be
limited.
Risks
Associated with the Digital Asset Markets
Recent
Developments In The Digital Asset Economy Have Led To Extreme Volatility And
Disruption In Digital Asset Markets, A Loss Of Confidence In Participants Of The
Digital Asset Ecosystem, Significant Negative Publicity Surrounding Digital
Assets Broadly And Market-Wide Declines In Liquidity.
Since
the fourth quarter of 2021 and to date, digital asset prices have fluctuated
widely. This has led to volatility and disruption in the digital asset markets
and financial difficulties for several prominent industry participants,
including Digital Asset Trading Platforms, hedge funds and lending platforms.
For example, in the first half of 2022, digital asset lenders Celsius Network
LLC and Voyager Digital Ltd. and digital asset hedge fund Three Arrows Capital
each entered into insolvency proceedings. This resulted in a loss of confidence
in participants in the digital asset ecosystem, negative publicity surrounding
digital assets more broadly and market-wide declines in digital asset trading
prices and liquidity.
Thereafter,
in November 2022, FTX, the third largest Digital Asset Trading Platform by
volume at the time, halted customer withdrawals amid rumors of the company's
liquidity issues and likely insolvency. Shortly thereafter, FTX's CEO resigned
and FTX and several affiliates of FTX filed for bankruptcy. The U.S. Department
of Justice subsequently brought criminal charges, including charges of fraud,
violations of federal securities laws, money laundering, and campaign finance
offenses, against FTX's former CEO and others. In November 2023, FTX's former
CEO was convicted of fraud and money laundering. Similar charges related to
violations of anti-money laundering laws were brought in November 2023 against
Binance and its former CEO. FTX was also under investigation by the SEC, the
Justice Department, and the Commodity Futures Trading Commission, as well as by
various regulatory authorities in the Bahamas, Europe and other jurisdictions.
In response to these events, the digital asset markets have experienced extreme
price volatility and declines in liquidity. In addition, several other entities
in the digital asset industry filed for bankruptcy following FTX's bankruptcy
filing, such as BlockFi Inc. and Genesis Global Capital, LLC ("Genesis
Capital"), a subsidiary of Genesis Global Holdco, LLC ("Genesis Holdco"). The
SEC also brought charges against Genesis Capital and Gemini Trust Company, LLC
("Gemini") in January 2023 for their alleged unregistered offer and sale of
securities to retail investors. In October 2023, the New York Attorney General
("NYAG") brought charges against Gemini, Genesis Capital, Genesis Asia Pacific
PTE. LTD. ("Genesis Asia Pacific"), Genesis Holdco, (together with Genesis
Capital and Genesis Asia Pacific, the "Genesis Entities"), Genesis Capital's
former CEO, DCG, and DCG's CEO alleging violations of the New York Penal Law,
the New York General Business Law and the New York Executive Law. In February
2024, the NYAG amended its complaint to expand the charges against Gemini, the
Genesis Entities, Genesis Capital's former CEO, DCG, and DCG's CEO to include
harm to additional investors. Also in February 2024, the Genesis Entities
entered into a settlement agreement with the NYAG to resolve the NYAG's
allegations against the Genesis Entities, which settlement was subsequently
approved by the Bankruptcy Court of the Southern District of New York. In
September 2025, Gemini and the SEC reached a preliminary settlement to resolve
the lawsuit over the Gemini Earn program, with the SEC closing its investigation
without pursuing enforcement action, though formal approval of the settlement is
still pending.
Furthermore,
Genesis Holdco, together with certain of its subsidiaries, filed a voluntary
petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in
January 2023. While Genesis Holdco is not a service provider to the Trust, it is
a wholly owned subsidiary of DCG, and is an affiliate of the Trust and the
Sponsor.
These
events led to a substantial increase in regulatory and enforcement scrutiny of
the industry as a whole and of Digital Asset Trading Platforms in particular,
including from the Department of Justice, the SEC, the CFTC, the White House and
Congress. For example, in June 2023, the SEC brought charges against Binance
(the "Binance Complaint") and Coinbase (the "Coinbase Complaint"), two of the
largest Digital Asset Trading Platforms, alleging that they solicited U.S.
investors to buy, sell, and trade "crypto asset securities" through their
unregistered trading platforms and operated unregistered securities exchanges,
brokerages and clearing agencies. Binance subsequently announced that it would
be suspending USD deposits and withdrawals on Binance. US and that it plans to
delist its USD trading pairs. In addition, in November 2023, the SEC brought
similar charges against Kraken (the "Kraken Complaint"), alleging that it
operated as an unregistered securities exchange, brokerage and clearing agency.
The Binance Complaint, the Coinbase Complaint and the Kraken Complaint have led,
and may in the future lead, to further volatility in digital asset prices. In
February 2025, a 60-day stay was granted in the SEC's lawsuit against Binance in
response to a joint request by both the SEC and Binance, which acknowledged that
the SEC's newly formed Crypto Task Force's focus on developing a federal
securities law framework for digital assets may resolve the case. In February
2025, Coinbase and the SEC entered into a joint stipulation to dismiss the SEC's
lawsuit with prejudice, subject to the court's approval. Kraken has also
announced that it reached an agreement in principle with the SEC to dismiss the
SEC's lawsuit, subject to formal approval by the SEC's Commissioners. Several
other digital asset market participants have also announced that the SEC
informed them that the SEC was terminating its investigation or enforcement
action into their firm. The final outcome of these lawsuits (to the extent not
yet dismissed), their effect on the broader digital asset ecosystem and the
reputational impact on industry participants, remain uncertain.
In
January 2025, the SEC launched a Crypto Task Force dedicated to developing a
comprehensive and clear regulatory framework for digital assets led by
Commissioner Hester Peirce. Subsequently, Commissioner Peirce announced a list
of specific priorities to further that initiative, which included pursuing final
rules related to a digital asset's security status, a revised path to registered
offerings and listings for digital asset-based investment vehicles, and clarity
regarding digital asset custody, lending and staking.
These
events have also led to significant negative publicity around digital asset
market participants including DCG, Genesis and DCG's other affiliated entities.
This publicity could negatively impact the reputation of the Sponsor and have an
adverse effect on the trading price and/or the value of the Shares. Moreover,
sales of a significant number of Shares of the Trust as a result of these events
could have a negative impact on the trading price of the Shares.
Digital
asset markets have also been negatively impacted by the failure of entities
perceived to be integral to the digital asset ecosystem. For example, in March
2023, state banking regulators placed Silicon Valley Bank and Signature Bank
into FDIC receiverships. Also, in March 2023, Silvergate Bank announced plans to
wind down and liquidate its operations. Because these banks were perceived to be
the banks most open to providing services for the digital asset ecosystem in the
United States, their failures may impact the willingness of banks (based on
regulatory pressure or otherwise) to provide banking services to digital asset
market participants. In addition, because these banks were perceived to be the
banks most open to providing services for the digital asset ecosystem, their
failure has caused a number of companies that provide digital asset-related
services to be unable to find banks that are willing to provide them with such
banking services. The inability to access banking services could negatively
impact digital asset market participants and therefore the value of digital
assets, including BNB, and thus the Shares. In addition, although these events
did not have an impact directly on the Trust or the Sponsor when these bank
failures occurred, it is possible that a future closing of a bank with which the
Trust or the Sponsor has a financial relationship could subject the Trust or the
Sponsor to adverse conditions and pose challenges in finding an alternative
suitable bank to provide the Trust or the Sponsor with bank accounts and banking
services. Events such as these that impact the wider digital asset ecosystem are
continuing to develop and change at a rapid pace and it is not possible to
predict at this time all of the risks that they may pose to the Sponsor, the
Trust, their affiliates and/or the Trust's third-party service providers, or on
the digital asset industry as a whole.
Continued
disruption and instability in the digital asset markets as these events develop,
including declines in the trading prices and liquidity of BNB, or the failure of
service providers to the Trust, could have a material adverse effect on the
value of the Shares and the Shares could lose all or substantially all of their
value.
The
Value Of The Shares Relates Directly To The Value Of BNB, The Value Of Which May
Be Highly Volatile And Subject To Fluctuations Due To A Number Of
Factors.
The
value of the Shares relates directly to the value of the BNB held by the Trust
and fluctuations in the price of BNB could adversely affect the value of the
Shares. The market price of BNB may be highly volatile, and subject to a number
of factors, including:
•an
increase in the global BNB supply or a decrease in global BNB
demand;
•market
conditions of, and overall sentiment towards, the digital assets and blockchain
technology industry;
•trading
activity on digital asset trading platforms, which, in many cases, are largely
unregulated or may be subject to manipulation;
•the
adoption of BNB as a medium of exchange, store-of-value or other consumptive
asset and the maintenance and development of the open-source software protocol
of the BNB Chain, and their ability to meet user demands;
•manipulative
trading activity on digital asset exchanges, which, in many cases, are largely
unregulated;
•the
needs of decentralized applications, smart contracts, their users, and users of
the BNB Chain generally for BNB to pay gas fees to execute
transactions;
•forks
in the BNB Chain, particularly where changes to the BNB Chain source code are
either not well-received by key constituencies within the BNB community or are
not successfully executed or implemented and fail to achieve the functionality
such changes were intended to bring about;
•governmental
or regulatory actions by, or investigations or litigation in, countries around
the world targeting well-known decentralized applications or smart contracts
that are built on the BNB Chain, or other developments or problems, and
associated publicity, involving or affecting such decentralized applications or
smart contracts;
•Increased
competition from other forms of digital assets or payment services, including
digital currencies constituting legal tender that may be issued in the future by
central banks, or digital assets meant to serve as a medium of exchange by major
private companies or other institutions;
•increased
competition from other blockchain networks combining smart contracts,
programmable scripting languages, and an associated runtime environment, with
blockchain-based recordkeeping, particularly where such other blockchain
networks are able to offer users access to a larger consumer user base, greater
efficiency, reliability, or processing speed, or more economical transaction
processing fees than the BNB Chain;
•investors'
expectations with respect to interest rates, the rates of inflation of fiat
currencies or BNB, and digital asset exchange rates;
•consumer
preferences and perceptions of BNB specifically and digital assets generally,
the BNB Chain relative to competing blockchain protocols, and BNB relative to
competing digital assets;
•negative
events, publicity, and social media coverage relating to the digital assets and
blockchain technology industry;
•fiat
currency withdrawal and deposit policies on digital asset trading
platforms;
•the
liquidity of digital asset markets and any increase or decrease in trading
volume or market making on digital asset markets;
•business
failures, bankruptcies, hacking, fraud, crime, government investigations, or
other negative developments affecting digital asset businesses, including
digital asset trading platforms, or banks or other financial institutions and
service providers which provide services to the digital assets
industry;
•the
use of leverage in digital asset markets, including the unwinding of positions,
"margin calls", collateral liquidations and similar events;
•investment
and trading activities of large or active consumer and institutional users,
speculators, miners, and investors in BNB;
•a
"short squeeze" resulting from speculation on the price of BNB, if aggregate
short exposure exceeds the number of shares available for purchase;
•an
active derivatives market for BNB or for digital assets generally;
•monetary
policies of governments, legislation or regulation, tariffs, trade restrictions,
currency devaluations and revaluations and regulatory measures or enforcement
actions, if any, that restrict the use of BNB as a form of payment or the
purchase of BNB on the digital asset markets;
•global
or regional political, economic or financial conditions, events and situations,
such as the novel coronavirus outbreak;
•fees
associated with processing a BNB transaction and the speed at which BNB
transactions are settled;
•the
maintenance, troubleshooting, and development of (or lack thereof) the BNB Chain
including by validators and developers worldwide;
•the
ability for the BNB Chain to attract and retain validators to secure and confirm
transactions accurately and efficiently;
•ongoing
technological viability and security of the BNB Chain and BNB transactions,
including vulnerabilities against hacks and scalability;
•financial
strength of market participants;
•the
availability and cost of funding and capital;
•the
liquidity and credit risk of digital asset trading platforms;
•interruptions
in service from or closures or failures of major digital asset trading platforms
or their banking partners, or outages or system failures affecting the BNB
Chain;
•decreased
confidence in digital assets and digital assets trading platforms;
•poor
risk management or fraud by entities in the digital assets
ecosystem;
•increased
competition from other forms of digital assets or payment services;
and
•the
Trust's own acquisitions or dispositions of BNB, since there is no limit on the
number of BNB that the Trust may acquire.
Although
returns from investing in BNB have at times diverged from those associated with
other asset classes to a greater or lesser extent, there can be no assurance
that there will be any such divergence in the future, either generally or with
respect to any particular asset class, or that price movements will not be
correlated. In addition, there is no assurance that BNB will maintain its value
in the long, intermediate, short, or any other term. In the event that the price
of BNB declines, the Sponsor expects the value of the Shares to decline
proportionately.
The
value of the Shares of the Trust are represented by the MarketVectorTM
[ ] that may also be subject to momentum pricing
due to speculation regarding future appreciation in value of BNB, leading to
greater volatility
that
could adversely affect the value of the Shares. Momentum pricing typically is
associated with growth stocks and other assets whose valuation, as determined by
the investing public, accounts for future appreciation in value, if any. The
Sponsor believes that momentum pricing of BNB has resulted, and may continue to
result, in speculation regarding future appreciation in the value of BNB,
inflating and making the MarketVectorTM
[ ] more volatile. As a result, BNB may be more
likely to fluctuate in value due to changing investor confidence, which could
impact future appreciation or depreciation in the MarketVectorTM
[ ] and could adversely affect the value of the
Trust.
The
Trust is not actively managed and does not and will not have any strategy
relating to the development of the BNB Chain, nor will the Trust seek to avoid
or mitigate losses from declines in the BNB price. Furthermore, the impact of
the expansion of the Trust's BNB holdings on the digital asset industry and the
BNB Chain is uncertain. A decline in the popularity or acceptance of the BNB
Chain, or the value of BNB, would harm the value of the Trust.
Digital
Asset Networks Face Significant Scaling Challenges And Efforts To Increase The
Volume and Speed Of Transactions May Not Be Successful.
Many
digital asset networks, including the BNB Chain, face significant scaling
challenges due to the fact that public blockchains generally face a tradeoff
between security and scalability. One means through which public blockchains
achieve security is decentralization, meaning that no intermediary is
responsible for securing and maintaining these systems. For example, a greater
degree of decentralization generally means a given digital asset network is less
susceptible to manipulation or capture. Achieving decentralization may mean that
every single node on a given digital asset network is responsible for securing
the system by processing every transaction and every single full node is
responsible for maintaining a copy of the entire state of the network. However,
this may involve tradeoffs from an efficiency perspective, and impose
constraints on throughput. A digital asset network may be limited in the number
of transactions it can process by the fact that all validators participate in
validating in each block and the capabilities of each single fully participating
node. Many developers are actively researching and testing scalability solutions
for public blockchains that do not necessarily result in lower levels of
security or decentralization, such as off-chain payment channels. Off-chain
payment channels would allow parties to transact without requiring the full
processing power of a blockchain.
As
of September 17, 2025, the BNB Chain handled approximately
[ ] transactions per second. In an effort to
increase the volume of transactions that can be processed on a given digital
asset network, many digital assets are being upgraded with various features to
increase the speed and throughput of digital asset transactions.
As
corresponding increases in throughput lag behind growth in the use of digital
asset networks, average fees and settlement times may increase considerably.
Since inception, BNB transaction fees have stood at a fixed rate of
[ ] BNB per transaction. Increased fees and
decreased settlement speeds could preclude certain uses for BNB (e.g.,
micropayments) and could reduce demand for, and the price of, BNB, which could
adversely impact the value of the Shares.
There
is no guarantee that any of the mechanisms in place or being explored for
increasing the scale of settlement of BNB Chain transactions will be effective,
or how long these mechanisms will take to become effective, which could
adversely impact the value of the Shares.
The
rapid development of other competing scalability solutions, such as those which
would rely on handling the bulk of computational work relating to transactions
or smart contracts and DApps outside of the main BNB Chain and BNB Chain, has
caused alternatives to sharding to emerge. "Layer 2" is a collective term for
solutions which are designed to help increase throughput and reduce transaction
fees by handling or validating transactions off the main BNB Chain (known as
"Layer 1") and then attempting to take advantage of the perceived security and
integrity advantages of the Layer 1 BNB Chain by uploading the transactions
validated on the Layer 2 protocol back to the Layer 1 BNB Chain. The details of
how this is done vary significantly between different Layer 2 technologies and
implementations. For example, "rollups" perform transaction execution outside
the Layer 1 BNB Chain and then post the data, typically in batches, back to the
Layer 1 BNB Chain where consensus is reached. "Zero knowledge rollups" are
generally designed to run the computation needed to validate the transactions
off- chain, on the Layer 2 protocol, and submit a proof of validity of a batch
of transactions (not the entire transactions themselves) that is recorded on the
Layer 1 BNB Chain. By contrast, "optimistic rollups" assume transactions are
valid by default and
only
run computation, via a fraud proof, in the event of a challenge. Other proposed
Layer 2 scaling solutions include, among others, "state channels", which are
designed to allow participants to run a large number of transactions on the
Layer 2 side channel protocol and only submit two transactions to the main Layer
1 BNB Chain (the transaction opening the state channel, and the transaction
closing the channel), "side chains", in which an entire Layer 2 blockchain
network with similar capabilities to the existing Layer 1 BNB Chain runs in
parallel with the existing Layer 1 BNB Chain and allows smart contracts and
DApps to run on the Layer 2 side chain without burdening the main Layer 1
network, and others. To date, the BNB Chain community has not coalesced
overwhelmingly around any particular Layer 2 solution, though this could
change.
Many
developers are actively researching and testing scalability solutions for public
blockchains. However, there is no guarantee that any of the mechanisms in place
or being explored for increasing speed and throughput of settlement of the BNB
Chain transactions will be effective, which could cause the BNB Chain to not
adequately resolve scaling challenges and adversely impact the adoption of BNB
and the BNB Chain and the value of the Shares. There is no guarantee that any
potential scaling solution, whether a change to the Layer 1 BNB Chain like
sharding or the introduction of a Layer 2 solution like rollups, state channels
or side chains, will achieve widespread adoption. Alternatively, in theory, the
widespread adoption of Layer 2 solutions could succeed in reducing congestion on
the Layer 1 BNB Chain by moving transactions and computational work to the Layer
2 level and thereby reduce direct transactions on the Layer 1 BNB Chain, but by
reducing transactions on the Layer 1 BNB Chain, could reduce demand for BNB on
the Layer 1 BNB Chain, which could in theory negatively impact the price of BNB.
It is possible that proposed changes to the Layer 1 BNB Chain could divide the
community, potentially even causing a hard fork, or that the decentralized
governance of the BNB Chain causes network participants to fail to coalesce
overwhelmingly around any particular solution, causing the BNB Chain to suffer
reduced adoption or causing nodes, users or validators to migrate to other
blockchain networks. It is possible that proposed changes to the Layer 1 BNB
Chain could divide the community, potentially even causing a hard fork, or that
the decentralized governance of the BNB Chain causes network participants to
fail to coalesce overwhelmingly around any particular solution, causing the BNB
Chain to suffer reduced adoption or causing users or validators to migrate to
other blockchain networks. It is also possible that scaling solutions could fail
to work as intended, could suffer from centralization concerns, or could
introduce bugs, coding defects or flaws, security risks, or other problems that
could cause them to suffer operational disruptions. Alternatively, if a
widely-used Layer 2 network were to fail, it could reduce demand for BNB because
it would eliminate a source of demand for using BNB to record transactions from
the Layer 2 onto the Layer 1 BNB Chain. Any of the foregoing could adversely
affect the price of BNB or the value of the Shares of the Trust.
If
The Digital Asset Award Or Transaction Fees For Recording Transactions On The
BNB Chain Are Not Sufficiently High To Incentivize Validators, Or If Certain
Jurisdictions Continue To Limit Or Otherwise Regulate Validating Activities,
Validators May Cease Expanding Validating Power Or Demand High Transaction Fees,
Which Could Negatively Impact The Value Of BNB And The Value Of The
Shares.
If
the digital asset awards for validating blocks or the transaction fees for
recording transactions on the BNB Chain are not sufficiently high to incentivize
validators, or if certain jurisdictions continue to limit or otherwise regulate
validating activities, validators may cease expending validating power to
validate blocks and confirmations of transactions on the BNB Chain could be
slowed. For example, the realization of one or more of the following risks could
materially adversely affect the value of the Shares:
•A
reduction in the processing power expended by validators on the BNB Chain could
increase the likelihood of a malicious actor or botnet (a volunteer or hacked
collection of computers controlled by networked software coordinating the
actions of the computers) obtaining control. See "—The BNB Chain could be
vulnerable to attacks on transaction finality and consensus processes, which
could adversely affect an investment in the trust or the ability of the trust to
operate."
•Validators
have historically accepted relatively low transaction confirmation fees on most
digital asset networks. If validators demand higher transaction fees for
recording transactions in the BNB Chain or a software upgrade automatically
charges fees for all transactions on the BNB Chain, the cost of using BNB may
increase and the marketplace may be reluctant to accept BNB as a means of
payment. Alternatively, validators could collude in an anti-competitive manner
to reject low transaction fees on the BNB Chain and
force
users to pay higher fees, thus reducing the attractiveness of the BNB Chain.
Higher transaction confirmation fees resulting through collusion or otherwise
may adversely affect the attractiveness of the BNB Chain, the value of BNB and
the value of the Shares.
•To
the extent that any validators cease to record transactions that do not include
the payment of a transaction fee in blocks or do not record a transaction
because the transaction fee is too low, such transactions will not be recorded
on the BNB Chain until a block is validated by a validator who does not require
the payment of transaction fees or is willing to accept a lower fee. Any
widespread delays or disruptions in the recording of transactions could result
in a loss of confidence in the BNB Chain and could prevent the Trust from
completing transactions associated with the day-to-day operations of the Trust,
including creations and redemptions of the Shares in exchange for BNB or cash
with Authorized Participants.
•During
the course of ordering transactions and validating blocks, validators may be
able to prioritize certain transactions in return for increased transaction
fees, an incentive system known as "Maximal Extractable Value" or MEV. For
example, in blockchain networks that facilitate DeFi protocols in particular,
such as the BNB Chain, users may attempt to gain an advantage over other users
by increasing offered transaction fees. Certain software solutions, such as
Flashbots, have been developed which facilitate validators in capturing MEV
produced by these increased fees. The MEV incentive system may lead to an
increase in transaction fees on the BNB Chain, which may diminish its use. Users
or other stakeholders on the BNB Chain could also view the existence of MEV as
unfair manipulation of decentralized digital asset networks, and refrain from
using DeFi protocols or the BNB Chain generally. In addition, it's possible
regulators or legislators could enact rules which restrict the use of MEV, which
could diminish the popularity of the BNB Chain among users and validators. Any
of these or other outcomes related to MEV may adversely affect the value of BNB
and the value of the Shares.
Due
To The Unregulated Nature And Lack Of Transparency Surrounding The Operations Of
BNB Trading Platforms, Which May Be Subject To Regulation In a Relevant
Jurisdiction But May Not Be Complying, They May Experience Fraud, Manipulation,
Security Failures Or Operational Problems, Which May Adversely Affect The Value
Of BNB And, Consequently, The Value Of The Shares.
Digital
asset trading platforms are relatively new and, in some cases, unregulated. Many
operate outside the United States. Furthermore, while many prominent digital
asset trading platforms provide the public with significant information
regarding their ownership structure, management teams, corporate practices and
regulatory compliance, many digital asset trading platforms do not provide this
information. Digital asset trading platforms may not be subject to, or may not
comply with, regulation in a similar manner as other regulated trading
platforms, such as national securities exchanges or designated contract markets.
As a result, the marketplace may lose confidence in digital asset trading
platforms, including prominent trading platforms that handle a significant
volume of BNB trading.
Many
digital asset trading platforms are unlicensed, unregulated, may be subject to
regulation in a relevant jurisdiction but may not be complying, may operate
without extensive supervision by governmental authorities, and do not provide
the public with significant information regarding their ownership structure,
management team, corporate practices, cybersecurity, and regulatory compliance.
In particular, those located outside the United States may be subject to
significantly less stringent regulatory and compliance requirements in their
local jurisdictions, and may take the position that they are not subject to laws
and regulations that would apply to a national securities exchange or designated
contract market in the United States, or may, as a practical matter, be beyond
the ambit of U.S. regulators. As a result, trading activity on or reported by
these digital asset trading platforms is generally significantly less regulated
than trading in regulated U.S. securities and commodities markets, and may
reflect behavior that would be prohibited in regulated U.S. trading venues. For
example, in 2019 there were reports claiming that 80.95% of bitcoin trading
volume on digital asset trading platforms was false or noneconomic in nature,
with specific focus on unregulated trading platforms located outside of the
United States. Such reports alleged that certain overseas trading platforms have
displayed suspicious trading activity suggestive of a variety of manipulative or
fraudulent practices, such as fake or artificial trading volume or trading
volume based on non- economic "wash trading" (where offsetting trades are
entered into for other than bona fide reasons, such as the desire
to
inflate reported trading volumes), and attributed such manipulative or
fraudulent behavior to motives like the incentive to attract listing fees from
token issuers who seek the most liquid and high-volume trading platforms on
which to list their coins. Although these reports concerned bitcoin, it is
possible that similar concerns are present for BNB markets as well.
Other
academics and market observers have put forth evidence to support claims that
manipulative trading activity has occurred on certain digital asset trading
platforms. For example, in a 2017 paper titled "Price Manipulation in the
Bitcoin Ecosystem" sponsored by the Interdisciplinary Cyber Research Center at
Tel Aviv University, a group of researchers used publicly available trading
data, as well as leaked transaction data from a 2014 Mt. Gox security breach, to
identify and analyze the impact of "suspicious trading activity" on Mt. Gox
between February and November 2013, which, according to the authors, caused the
price of bitcoin to increase from around $150 to more than $1,000 over a
two-month period.
In
August 2017, it was reported that a trader or group of traders nicknamed
"Spoofy" was placing large orders on Bitfinex without actually executing them,
presumably in order to influence other investors into buying or selling by
creating a false appearance that greater demand existed in the market. In
December 2017, an anonymous blogger (publishing under the pseudonym Bitfinex'd)
cited publicly available trading data to support his or her claim that a trading
bot nicknamed "Picasso" was pursuing a paint-the-tape-style manipulation
strategy by buying and selling bitcoin and bitcoin cash between affiliated
accounts in order to create the appearance of substantial trading activity and
thereby influence the price of such assets. Although bitcoin and BNB are
different assets, BNB prices may be subject to similar activity. Even in the
United States, there have been allegations of wash trading even on regulated
venues. Any actual or perceived false trading in the digital asset exchange
market, and any other fraudulent or manipulative acts and practices, could
adversely affect the value of digital assets and/or negatively affect the market
perception of digital assets.
The
BNB market globally and in the United States is not subject to comparable
regulatory guardrails as exist in regulated securities markets. Furthermore,
many BNB trading venues lack certain safeguards put in place by exchanges for
more traditional assets to enhance the stability of trading on the exchanges and
prevent "flash crashes," such as limit-down circuit breakers. As a result, the
prices of BNB on trading venues may be subject to larger and/or more frequent
sudden declines than assets traded on more traditional exchanges. Tools to
detect and deter fraudulent or manipulative trading activities such as market
manipulation, front-running of trades, and wash-trading may not be available to
or employed by digital asset trading platforms, or may not exist at
all.
BNB
Trading Platforms May Be Exposed To Fraud And Manipulation
The
SEC has identified possible sources of fraud and manipulation in the BNB market
generally, including, among others (1) "wash trading"; (2) persons with a
dominant position in BNB manipulating BNB pricing; (3) hacking of the BNB
network and trading platforms; (4) malicious control of the BNB Chain; (5)
trading based on material, non-public information (for example, plans of market
participants to significantly increase or decrease their holdings in BNB, new
sources of demand for BNB) or based on the dissemination of false and misleading
information; (6) manipulative activity involving purported "stablecoins,"
including Tether (for more information, see "Risk Factors—Risk Factors Related
to Digital Assets—Prices of BNB may be affected due to stablecoins (including
Tether and US Dollar Coin ("USDC")), the activities of stablecoin issuers and
their regulatory treatment"); and (7) fraud and manipulation at BNB trading
platforms. The effect of potential market manipulation, front-running,
wash-trading, and other fraudulent or manipulative trading practices may inflate
the volumes actually present in crypto market and/or cause distortions in price,
which could adversely affect the Trust or cause losses to
Shareholders.
Over
the past several years, some digital asset trading platforms have been closed
due to fraud and manipulative activity, business failure or security breaches.
In many of these instances, the customers of such digital asset trading
platforms were not compensated or made whole for the partial or complete losses
of their account balances in such digital asset trading platforms. While,
generally speaking, smaller digital asset trading platforms are less likely to
have the infrastructure and capitalization that make larger digital asset
trading platforms more stable, larger digital asset trading platforms are more
likely to be appealing targets for hackers and malware and their shortcomings or
ultimate failures are more likely to have contagion effects on the digital asset
ecosystem, and may be more likely to
be
targets of regulatory enforcement action. For example, the collapse of Mt. Gox,
which filed for bankruptcy protection in Japan in late February 2014,
demonstrated that even the largest digital asset trading platforms could be
subject to abrupt failure with consequences for both users of digital asset
exchanges and the digital asset industry as a whole. In particular, in the two
weeks that followed the February 7, 2014 halt of bitcoin withdrawals from Mt.
Gox, the value of one bitcoin fell on other trading platforms from around $795
on February 6, 2014 to $578 on February 20, 2014. Additionally, in January 2015,
Bitstamp announced that approximately 19,000 bitcoin had been stolen from its
operational or "hot" wallets. Further, in August 2016, it was reported that
almost 120,000 bitcoins worth around $78 million were stolen from Bitfinex. The
value of bitcoin and other digital assets immediately decreased over 10%
following reports of the theft at Bitfinex. In July 2017, FinCEN assessed a $110
million fine against BTC-E, a now defunct digital asset trading platform, for
facilitating crimes such as drug sales and ransomware attacks. In addition, in
December 2017, Yapian, the operator of Seoul-based cryptocurrency trading
platform Youbit, suspended digital asset trading and filed for bankruptcy
following a hack that resulted in a loss of 17% of Yapian's assets. Following
the hack, Youbit users were allowed to withdraw approximately 75% of the digital
assets in their platform accounts, with any potential further distributions to
be made following Yapian's pending bankruptcy proceedings. In addition, in
January 2018, the Japanese digital asset trading platform, Coincheck, was
hacked, resulting in losses of approximately $535 million, and in February 2018,
the Italian digital asset trading platform, Bitgrail, was hacked, resulting in
approximately $170 million in losses. In May 2019, one of the world's largest
digital asset trading platform, Binance, was hacked, resulting in losses of
approximately $40 million. In November 2022, FTX Trading Ltd. ("FTX"), one of
the largest digital asset trading platform by volume at the time, halted
customer withdrawals amid rumors of the company's liquidity issues and likely
insolvency, which were subsequently corroborated by its CEO. Shortly thereafter,
FTX's CEO resigned and FTX and many of its affiliates filed for bankruptcy in
the United States, while other affiliates have entered insolvency, liquidation,
or similar proceedings around the globe. The U.S. Department of Justice brought
criminal fraud and other charges, and the SEC and CFTC brought civil securities
and commodities fraud charges, against certain of FTX's and its affiliates'
senior executives, including its former CEO. Around the same time, there were
reports that approximately $300-600 million of digital assets were removed from
FTX and the full facts remain unknown, including whether such removal was the
result of a hack, theft, insider activity, or other improper behavior. On
February 21, 2025, Bybit, a centralized platform for exchanging digital assets,
announced that more than $1.4 billion in ether had been stolen from its
platform. Hackers were able to manipulate Bybit's transfer process to authorize
and complete the illicit transaction. On September 8, 2025, SwissBorg, a digital
asset platform, experienced a security breach resulting in the unauthorized
withdrawal of approximately 193,000 SOL (valued at approximately $41 million).
The incident was attributed to a compromise in the API of Kiln, SwissBorg’s
staking infrastructure provider. The breach enabled attackers to manipulate
staking-related API requests, leading to the loss of funds from SwissBorg’s
Solana Earn program. Kiln, a SOC 2 Type II certified staking provider, responded
by pausing SOL staking operations and initiating a full incident response. These
incidents have resulted in renewed concerns over the security of digital asset
platforms.
The
potential consequences of a digital asset trading platform failure or failure to
prevent market manipulation could adversely affect the value of the Shares.
Manipulative trading or market abuse could create artificial or distorted
prices, cause a loss of investor confidence in BNB, adversely impact pricing
trends in BNB markets broadly, and cause losses from an investment in Shares of
the Trust.
In
addition, negative perception, a lack of stability and standardized regulation
in the digital asset markets and the closure or temporary shutdown of digital
asset trading platforms due to fraud, business failure, security breaches or
government mandated regulation, and associated losses by customers, may reduce
confidence in the BNB Chain and result in greater volatility or decreases in the
prices of BNB. Furthermore, the closure or temporary shutdown of a digital asset
exchange used in calculating the Index may result in a loss of confidence in the
Trust's ability to determine its NAV on a daily basis. The potential
consequences of a digital asset exchange's failure could adversely affect the
value of the Shares.
BNB
Trading Platforms May Be Exposed To Front-Running
BNB
trading platforms on which BNB trades may be susceptible to "front-running,"
which refers to the process when someone uses access to confidential
information, or technology or market advantage to get prior knowledge of
upcoming transactions. Front-running is a frequent activity on centralized as
well as decentralized exchanges. By
using
bots functioning on a millisecond-scale timeframe, bad actors are able to take
advantage of the forthcoming price movement and make economic gains at the cost
of those who had introduced these transactions. The objective of a front runner
is to buy a chunk of tokens at a low price and later sell them at a higher price
while simultaneously exiting the position. Front-running can occur via
manipulation of transaction validation and mining processes, or the theft or
misappropriation of confidential information by insiders. To extent that
front-running occurs in BNB markets, it may result in concerns as to the price
integrity of digital asset exchanges and digital assets more
generally.
BNB
Trading Platforms May Be Exposed To Wash Trading
BNB
trading platforms on which BNB trades may be susceptible to wash trading. Wash
trading occurs when offsetting trades are entered into for other than bona fide
reasons, such as the desire to inflate reported trading volumes. Wash trading
may be motivated by non-economic reasons, such as a desire for increased
visibility on popular websites that monitor markets for digital assets so as to
improve their attractiveness to investors who look for maximum liquidity, or it
may be motivated by the ability to attract listing fees from token issuers who
seek the most liquid and high-volume exchanges on which to list their coins.
Results of wash trading may include unexpected obstacles to trade and erroneous
investment decisions based on false information.
Even
in the United States, there have been allegations of wash trading even on
regulated venues. Any actual or perceived false trading in the global digital
asset trading market, and any other fraudulent or manipulative acts and
practices, could adversely affect the value of BNB and/or negatively affect the
market perception of BNB. If they were to affect trading at a trading platform
which is used to calculate the MarketVectorTM
[ ], they could cause the Trust's NAV to be
calculated incorrectly and cause Shareholders to suffer losses. See "—The
MarketVectorTM
[ ] may be affected by manipulative or fraudulent
practices in the global BNB market or at constituent platforms."
To
the extent that wash trading either occurs or appears to occur in BNB trading
platforms on which BNB trades, investors may develop negative perceptions about
BNB and the digital assets industry more broadly, which could adversely impact
the price of BNB and, therefore, the price of Shares. Wash trading also may
place more legitimate digital asset trading platforms at a relative competitive
disadvantage.
Competition
From Central Bank Digital Currencies And Emerging Payments Initiatives Involving
Financial Institutions Could Adversely Affect The Value Of BNB And Other Digital
Assets.
Central
banks in various countries have introduced digital forms of legal tender
("CBDCs"). Whether or not they incorporate blockchain or similar technology,
CBDCs, as legal tender in the issuing jurisdiction, could have an advantage in
competing with, or replace, BNB and other cryptocurrencies as a medium of
exchange or store of value. Central banks and other governmental entities have
also announced cooperative initiatives and consortia with private sector
entities, with the goal of leveraging blockchain and other technology to reduce
friction in cross-border and interbank payments and settlement, and commercial
banks and other financial institutions have also recently announced a number of
initiatives of their own to incorporate new technologies, including blockchain
and similar technologies, into their payments and settlement activities, which
could compete with, or reduce the demand for, BNB. As a result of any of the
foregoing factors, the value of BNB could decrease, which could adversely affect
an investment in the Trust.
Prices
Of BNB May Be Affected Due To Stablecoins (Including Tether And US Dollar Coin
("USDC")), The Activities Of Stablecoin Issuers And Their Regulatory
Treatment.
While
the Trust does not invest in and will not hold stablecoins, it may nonetheless
be exposed to risks that stablecoins pose for the BNB market and other digital
asset markets. Stablecoins are digital assets designed to have a stable value
over time as compared to typically volatile digital assets, and are typically
marketed as being pegged to a fiat currency, such as the U.S. dollar, at a
certain value. Although the prices of stablecoins are intended to be stable,
their market value may fluctuate. This volatility has in the past apparently
impacted the price of BNB. Stablecoins are a relatively new phenomenon, and it
is impossible to know all of the risks that they could pose to participants in
the BNB market. In addition, some have argued that some stablecoins,
particularly Tether, are improperly issued without sufficient backing in a way
that, when the stablecoin is used to pay for BNB, could cause artificial rather
than genuine demand for BNB, artificially inflating the price of BNB, and also
argue that those
associated
with certain stablecoins may be involved in laundering money. On February 17,
2021 the New York Attorney General entered into an agreement with Tether's
operators, including Bitfinex, requiring them to cease any further trading
activity with New York persons and pay $18.5 million in penalties for false and
misleading statements made regarding the assets backing Tether (the "NYAG
Settlement Order"). The NYAG Settlement Order states that Bitfinex and Tether
are under common ownership and management. Among other things, the NYAG
Settlement Order asserts that Tether's operators made a series of loans of some
of the fiat currency reserves backing Tether stablecoins to Bitfinex, which
Bitfinex used in its business, including to bridge liquidity difficulties it
faced after Bitfinex lost a substantial amount of customer cash due to the
actions of a payment processor it employed. In return, Bitfinex gave Tether a
receivable promising to pay the funds back. The NYAG Settlement Order finds,
among other things, that representations Tether's operators made that each
Tether stablecoin was backed 1:1 by fiat currency reserves were fraudulent under
New York's Martin Act, because some of the fiat currency reserves were replaced
by a receivable issued by an affiliate (Bitfinex) without disclosure to the
market. On October 15, 2021, the CFTC announced a settlement with Tether's
operators, Tether Holdings Limited, Tether Operations Limited, Tether Limited,
and Tether International Limited, in which they agreed to pay $42.5 million in
fines to settle charges that, among others, Tether's claims that it maintained
sufficient U.S. dollar reserves to back every Tether stablecoin in circulation
with the "equivalent amount of corresponding fiat currency" held by Tether were
untrue. Bitfinex also agreed to pay the CFTC a $1.5 million fine to settle
charges that Bitfinex offered off-exchange leveraged, margined, or financed
transactions involving cryptocurrencies with U.S. customers who were not
eligible contract participants and accepted funds (including in the form of
Tether stablecoins) and orders in connection with such illegal off-exchange
transactions, triggering an obligation to register with the CFTC, which the CFTC
order asserts it violated. The CFTC previously fined Bitfinex in 2016 on similar
charges.
USDC
is a reserve-backed stablecoin issued by Circle Internet Financial that is
commonly used as a method of payment in digital asset markets, including the BNB
market. While USDC is designed to maintain a stable value at 1 U.S. dollar at
all times, on March 10, 2023, the value of USDC fell below $1.00 for multiple
days after Circle Internet Financial disclosed that US$3.3 billion of the USDC
reserves were held at Silicon Valley Bank, which had entered Federal Deposit
Insurance Corporation ("FDIC") receivership earlier that day. Stablecoins are
reliant on the U.S. banking system and U.S. treasuries, and the failure of
either to function normally could impede the function of stablecoins, and
therefore could adversely affect the value of the Shares.
Given
the foundational role that stablecoins play in global digital asset markets,
their fundamental liquidity can have a dramatic impact on the broader digital
asset market, including the market for BNB. Because a large portion of the
digital asset market still depends on stablecoins such as Tether and USDC, there
is a risk that a disorderly de-pegging or a run on Tether or USDC could lead to
dramatic market volatility in digital assets more broadly. Volatility in
stablecoins, operational issues with stablecoins (for example, technical issues
that prevent settlement), concerns about the sufficiency of any reserves that
support stablecoins or potential manipulative activity when unbacked stablecoins
are used to pay for other digital assets (including BNB), or regulatory concerns
about stablecoin issuers or intermediaries, such as exchanges, that support
stablecoins, or new legislation, such as the Guiding and Establishing National
Innovation for U.S. Stablecoins Act which prohibits the use of payment
stablecoins unless the issuers obtain certain licenses and comply with various
regulatory and other requirements, or the removal or migration of prominent
stablecoins away from the BNB Chain, could impact individuals' willingness to
trade on trading venues that rely on stablecoins, reduce liquidity in the BNB
market, and affect the value of BNB, and in turn impact an investment in the
Shares. Given Bitfinex has in the past been, and is currently, a component of
the MarketVectorTM
[ ] and Bitfinex and Tether are understood to be
under common ownership and management, problems with Tether specifically could
potentially affect pricing of transactions on Bitfinex or otherwise disrupt
Bitfinex's operations.
Competition
From The Emergence Or Growth Of Other Digital Assets Or Methods Of Investing In
BNB Could Have A Negative Impact On The Price Of BNB And Adversely Affect The
Value Of The Shares.
As
of September 23, 2025, BNB was the [ ]th
largest digital asset by market capitalization, as tracked by CoinMarketCap.com.
As of September 23, 2025, the alternative digital assets tracked by
CoinMarketCap.com had a total market capitalization of approximately $3.87
trillion (including the approximately $[ ] market
cap of BNB), as calculated using market prices and total available supply of
each digital asset, excluding tokens pegged to other assets. BNB faces
competition from a wide range of digital assets, including Bitcoin and Ethereum.
BNB is also
supported
by fewer regulated trading platforms than more established digital assets, such
as Bitcoin and Ethereum, which could impact its liquidity. In addition, BNB is
in direct competition to other smart contract platforms, such as Ethereum,
Polkadot, Avalanche and Cardano. Competition from the emergence or growth of
alternative digital assets and smart contracts platforms, such as EOS, Tezos,
Tron, and numerous others, could have a negative impact on the demand for, and
price of, BNB and thereby adversely affect the value of the Shares. If other
blockchain networks with smart contracts or similar capabilities better meet the
needs of users, application developers, and/or validators, whether due to higher
performance or otherwise, or prove to be more popular than BNB for any reason,
it could lead to less activity on the BNB Chain and lower demand for BNB,
causing the price of BNB and the value of the Shares to decline.
In
addition, some digital asset networks, including the BNB Chain, may be the
target of ill will from users of other digital asset networks. For example, in
July 2016, the Ethereum Network underwent a contentious hard fork that resulted
in the creation of a new digital asset network called Ethereum Classic. As a
result, some users of the Ethereum Classic network may harbor ill will toward
the Ethereum Network.
Investors
may invest in BNB through means other than the Shares, including through direct
investments in BNB and other potential financial vehicles, possibly including
securities backed by or linked to BNB and digital asset financial vehicles
similar to the Trust, or other futures-based products. Market and financial
conditions, and other conditions beyond the Sponsor's control, may make it more
attractive to invest in other financial vehicles or to invest in BNB directly,
which could limit the market for, and reduce the liquidity of, the Shares. In
addition, to the extent digital asset financial vehicles other than the Trust
tracking the price of BNB are formed and represent a significant proportion of
the demand for BNB, large purchases or redemptions of the securities of these
digital asset financial vehicles, or private funds holding BNB, could negatively
affect the Index, the Trust's BNB holdings, the price of the Shares, the net
asset value of the Trust and the NAV.
The
Digital Asset Markets Follow Trends, Certain Trends May Favor Certain
Blockchains Over Others, A Trend Change Could Affect The Popularity Of The BNB
Chain.
There
are periods in which certain activities or products in the digital asset markets
experience heightened popularity. For example in 2021 there was an increased
interest around Non-fungible tokens and high-ticket sales, such as the $69
million dollar sale of digital artist Beeple's work at Christies helped to bring
attention to the Ethereum blockchain.
Similarly,
meme coins have experienced exponential growth with the market capitalization of
meme coins increasing from $20 billion in January 2024 to $120 billion by early
December 2024. Although the Sponsor is not aware of any affiliation between the
BNB Chain itself and memecoins that are issued by third party applications built
on the BNB Chain, memecoin applications, like any other application built on the
BNB Chain, create demand for BNB to pay transaction fees to record changes of
state within the application on the BNB Chain. Accordingly, if the memecoin
trend were to slow or stop for any reason, it could negatively impact the demand
for BNB and thus the BNB price.
Congestion
Or Delay On The BNB Chain May Delay Purchases Or Sales Of BNB By The
Trust.
Increased
transaction volume could result in delays in the recording of transactions due
to congestion on the BNB Chain. Moreover, unforeseen system failures,
disruptions in operations, or poor connectivity may also result in delays in the
recording of transactions on the BNB Chain. Any delay in the BNB Chain could
affect an Authorized Participant's ability to buy or sell BNB at an advantageous
price resulting in decreased confidence in the BNB Chain. Over the longer term,
delays in confirming transactions could reduce the attractiveness to merchants
and other commercial parties as a means of payment. As a result, the BNB Chain
and the value of the Trust would be adversely affected.
The
SEC may approve applications under Rule 19b-4 of the Exchange Act to list
competing digital assets as exchange-traded products, which could reduce demand
for, and the price of, BNB and adversely impact the value of the
Shares.
To
date, the SEC has only approved applications under Rule 19b-4 of the Exchange
Act to list spot digital asset exchange-traded products which hold Bitcoin and
Ether. However, applications for competing digital assets have been filed and
are currently pending, and there can be no guarantee the SEC will not one day
approve any such application. If applications to list spot digital asset
exchange-traded products, other than those which hold BNB, are approved, to the
extent such competing digital asset exchange-traded products come to represent a
significant proportion of the demand for digital assets generally, demand for,
and the price of, BNB could be reduced. Such reduced demand could in turn
negatively affect the Index Price, the NAV, the NAV per Share, the value of the
Shares, the Principal Market NAV and the Principal Market NAV per Share.
Accordingly, there can be no assurance that the Trust will be able to maintain
its scale and achieve its intended competitive positioning relative to
competitors, which could adversely affect the performance of the Trust and the
value of the Shares.
Failure
Of Funds That Hold Digital Assets To Receive SEC Approval To List Their Shares
On Exchanges Could Adversely Affect The Value Of The Shares.
There
have been a growing a number of attempts to list on national securities
exchanges the shares of funds that hold digital assets. These investment
vehicles attempt to provide institutional and retail investors exposure to
markets for digital assets and related products. The exchange listing of shares
of digital asset funds would create more opportunities for institutional and
retail investors to invest in the digital asset market. However, the SEC has
repeatedly denied such requests. If exchange-listing requests continue to be
denied by the SEC, increased investment interest by institutional or retail
investors could fail to materialize, which could reduce the demand for digital
assets generally and therefore adversely affect the value of the
Shares.
Digital
asset treasury companies risk.
In
recent times, a number of companies engaged in businesses outside the digital
assets industry have begun to hold their corporate treasuries in digital assets
instead of in fiat currency ("digital asset treasury companies"). In some cases
these companies have raised funds through financing or securities offerings and
applied the proceeds to purchase digital assets, including BNB.
Digital
asset treasury companies are a relatively new phenomenon and it is impossible to
predict all of the risks they could pose to the Trust. On the one hand, digital
asset treasury companies may increase procyclical dynamics in the market because
they may purchase digital assets, such as BNB, when prices are rising and they
may sell such assets when prices are decreasing, potentially making BNB more
expensive in a rising market and then causing downward pressure on BNB prices in
a falling market (causing prices to fall faster than they otherwise would).
Digital asset treasury companies could cause greater volatility in digital asset
markets, including markets for BNB. Negative events or sentiment surrounding
digital asset treasury companies could affect the market for BNB. On the other
hand, digital asset treasury companies may compete with the Trust in the
marketplace as a perceived alternative means of achieving exposure to the price
of BNB (to a greater or lesser extent) through investing in securities. The
foregoing or similar events involving digital asset treasury companies could
adversely affect holders of Shares in the Trust.
Risks
Associated with the MarketVectorTM
[ ]
The
MarketVectorTM
[ ]
Has A Limited History.
The
MarketVectorTM
[ ] was developed by MarketVector and has a limited
history. MarketVector has substantial discretion at any time to change the
methodology used to calculate the MarketVectorTM
[ ], including the constituent trading platforms
that contribute prices to the Trust's NAV. MarketVector does not have any
obligation to take the needs of the Trust, the Trust's Shareholders, or anyone
else into consideration in connection with such changes. There is no guarantee
that the methodology currently used in calculating the MarketVectorTM
[ ] will appropriately track the price of BNB in
the future.
The
MarketVectorTM
[ ] is based on various inputs which may include
price data from various third-party trading platforms and markets. MarketVector
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. The MarketVectorTM
[ ] could be calculated now or in the future in a
way that adversely affects an investment in the Trust.
The
MarketVectorTM
[ ] Could Fail To Track The Global BNB Price, And A
Failure Of The MarketVectorTM
[ ] Could Adversely Affect The Value Of The
Shares.
Although
the MarketVectorTM
[ ] is intended to accurately capture the market
price of BNB, third parties may be able to purchase and sell BNB on public or
private markets not included among the BNB trading platforms used in calculating
the MarketVectorTM
[ ], and such transactions may take place at prices
materially higher or lower than the MarketVectorTM
[ ]. Moreover, there may be variances in the prices
of BNB on the various BNB trading platforms used in calculating the
MarketVectorTM
[ ], including as a result of differences in fee
structures or administrative procedures on different trading platforms. While
the MarketVectorTM
[ ] provides a U.S. dollar-denominated composite
index for the price of BNB based on, at any given time, the prices on each such
constituent trading Platform or pricing source may not be equal to the value of
a BNB as represented by the Index. It is possible that the price of BNB on the
BNB trading platforms could be materially higher or lower than the
MarketVectorTM
[ ] price. To the extent the
MarketVectorTM
[ ] price differs materially from the actual prices
available on a BNB trading platforms used to calculate it, or the global market
price of BNB, the price of the Shares may no longer track, whether temporarily
or over time, the global market price of BNB, which could adversely affect an
investment in the Trust by reducing investors' confidence in the Shares' ability
to track the market price of BNB. To the extent such prices differ materially
from the MarketVectorTM[ ],
investors may lose confidence in the Shares' ability to track the market price
of BNB, which could adversely affect the value of the Shares.
If
the MarketVectorTM
[ ] is not available, the Trust's holdings may be
fair valued in accordance with the policy approved by the Sponsor. To the extent
the valuation determined in accordance with the policy approved by the Sponsor
differs materially from the actual market price of BNB, the price of the Shares
may no longer track, whether temporarily or over time, the global market price
of BNB, which could adversely affect an investment in the Trust by reducing
investors' confidence in the Shares' ability to track the global market price of
BNB. To the extent such prices differ materially from the market price for BNB,
investors may lose confidence in the Shares' ability to track the market price
of BNB, which could adversely affect the value of the Shares.
MarketVector
Has Analyzed BNB Trading Platform Data And Developed Insights That Have Informed
MarketVector's Understanding Of The BNB Market And The Design Of The Trust. If
Such Data Or Insights Are Inaccurate Or Incorrect, The Value Of An Investment In
The Trust May Be Adversely Affected.
MarketVector
has relied upon BNB market data in developing its analysis of the BNB market.
This analysis has informed MarketVector's understanding of the BNB market, the
design of the Trust and the design of the MarketVectorTM
[ ]. The continued viability of the Trust relies
upon access to accurate data, and MarketVector's continued ability to
effectively analyze such data. If data is inaccurate or becomes unavailable, or
if MarketVector's analysis of such data is incorrect, the value of an investment
in the Trust may be adversely affected.
The
MarketVectorTM
[ ] Used To Calculate The Value Of The Trust's BNB
May Be Volatile, Adversely Affecting The Value Of The Shares.
The
price of BNB on public digital asset trading platforms has a limited history,
and during this history, BNB prices on the digital asset markets more generally,
and on digital asset exchanges individually, have been volatile and subject to
influence by many factors, including operational interruptions. While the
MarketVectorTM
[ ] is designed to limit exposure to the
interruption of individual digital asset trading platforms, the
MarketVectorTM
[ ], and the price of BNB generally, remains
subject to volatility experienced by digital asset trading platforms, and such
volatility could adversely affect the value of the Shares.
Furthermore,
because the number of liquid and credible BNB trading platforms is limited, the
MarketVectorTM
[ ] will necessarily be composed of a limited
number of BNB trading platforms. If a BNB trading platform were subjected to
regulatory, volatility or other pricing issues, in the case of the
MarketVectorTM
[ ], the calculation
agent
would have limited ability to remove such BNB trading platform from the
MarketVectorTM
[ ], which could skew the price of BNB as
represented by the MarketVectorTM
[ ]. Trading on a limited number of BNB trading
platform may result in less favorable prices and decreased liquidity of BNB and,
therefore, could have an adverse effect on the value of the Shares.
Purchasing
activity associated with acquiring BNB required for the creation of Baskets may
increase the market price of BNB on the digital asset markets, which will result
in higher prices for the Shares. Increases in the market price of BNB may also
occur as a result of the purchasing activity of other market participants. Other
market participants may attempt to benefit from an increase in the market price
of BNB that may result from increased purchasing activity of BNB connected with
the issuance of Baskets. Consequently, the market price of BNB may decline
immediately after Baskets are created. Decreases in the market price of BNB may
also occur as a result of sales in secondary markets by other market
participants. If the Index price declines, the value of the Shares will
generally also decline.
The
MarketVectorTM
[ ]
May Be Affected By Manipulative Or Fraudulent Practices In The Global BNB Market
Or At Constituent Trading Platforms.
The
global BNB market may be subject to fraud and manipulation, see "—Due to the
unregulated nature and lack of transparency surrounding the operations of BNB
trading platforms, which may be subject to regulation in a relevant
jurisdiction, but may not be complying, they may experience fraud, manipulation,
security failures or operational problems, which may adversely affect the value
of BNB and, consequently, the value of the Shares," and the
MarketVectorTM
[ ] may be affected to the extent they cause global
prices of BNB to be subject to factors other than bona fide market
forces.
Fraud
or manipulation may also affect the constituent trading platforms used to
calculate the MarketVectorTM
[ ]. For example, Coinbase paid $6.5 million in
2021 to settle a CFTC enforcement action for reckless false, misleading, or
inaccurate reporting as well as wash trading by a former employee on Coinbase's
GDAX platform. According to the CFTC's order, during the relevant period prior
to the enforcement action, Coinbase operated at least two trading programs which
generated orders that, at times, matched with one another. Coinbase included the
transactional information for these transactions, such as price and volume data,
on its website and provided that information to reporting services, either
directly or through access to its website, resulting in a perceived volume and
level of liquidity of digital assets, on GDAX that was false, misleading or
inaccurate. Additionally, between August and September 2016, the CFTC order
finds that a former Coinbase employee intentionally placed buy and sell orders
in the Litecoin/Bitcoin trading pair on GDAX, which he intended to match with
one another and result in no loss or gain while creating the appearance of
liquidity and trading interest in Litecoin. Ultimately, the transactions
resulted in wash transactions that depicted a misleading picture of the
Litecoin/Bitcoin market. It is possible that similar phenomena could affect
trading platforms facilitating trading in BNB.
Fraudulent
and manipulative trading practices remain a risk at many cryptocurrency trading
platforms. To the extent they occur at constituent trading platforms used to
calculate the MarketVectorTM
[ ], they could cause the MarketVectorTM
[ ] to report inaccurate prices of BNB, causing the
NAV of the Trust to be calculated incorrectly and thereby causing Shareholders
to suffer losses.
The
Index Administrator Could Experience System Failures Or Errors.
If
the computers or other facilities of the index administrator, data providers
and/or relevant constituent BNB platforms malfunction for any reason,
calculation and dissemination of the MarketVectorTM
[ ] may be delayed. Errors in the
MarketVectorTM
[ ] data, the MarketVectorTM
[ ] computations and/or construction may occur from
time to time and may not be identified and/or corrected for a period of time or
at all, which may have an adverse impact on the Trust and the Shareholders. Any
of the foregoing may lead to the errors in the MarketVectorTM
[ ], which may lead to a different investment
outcome for the Trust and the Shareholders than would have been the case had
such events not occurred.
The
MarketVectorTM
[ ] Price Being Used To Determine The Net Asset
Value Of The Trust May Not Be Consistent With GAAP. To The Extent That The
Trust's Financial Statements Are Determined Using A Different Pricing Source
That Is Consistent With GAAP, The Net Asset Value Reported In The Trust's
Periodic Financial
Statements
May Differ, In Some Cases Significantly, From The Trust's Net Asset Value
Determined Using The MarketVectorTM
[ ] Pricing.
The
Trust will determine the net asset value of the Trust on each Business Day based
on the value of BNB as reflected by the MarketVectorTM
[ ]. The methodology used to calculate the
MarketVectorTM
[ ] to value BNB in determining the net asset value
of the Trust may not be deemed consistent with GAAP. To the extent the
methodology used to calculate the MarketVectorTM
[ ] is deemed inconsistent with GAAP, the Trust
will utilize a GAAP-consistent pricing source for purposes of the Trust's
periodic financial statements. Creation and redemption of Baskets, the Sponsor's
management fee and other expenses borne by the Trust will be determined using
the Trust's net asset value determined daily based on the
MarketVectorTM
[ ]. Such net asset value of the Trust determined
using the MarketVectorTM
[ ] may differ, in some cases significantly, from
the net asset value reported in the Trust's periodic financial
statements.
The
Sponsor Can Remove The MarketVectorTM
[ ] And Use A Different Pricing Or Valuation
Methodology Instead.
Under
the Trust Agreement, the Sponsor has the exclusive authority to select, remove,
change, or replace the pricing or valuation methodology or policies used to
value the Trust's assets and determine NAV and NAV per Share, in its sole
discretion. The Sponsor has the right to change the pricing source used to
determine NAV and NAV per Share from the MarketVectorTM
[ ] to a different source or index. To the extent
that there are material changes to the pricing or valuation methodology or
policies or the pricing source described within this paragraph, notification
will be made to Shareholders via a prospectus supplement and/or a current report
filed with the SEC.
Intellectual
Property Rights Claims May Adversely Affect The Trust And The Value Of The
Shares.
The
Sponsor is not aware of any intellectual property rights claims that may prevent
the Trust from operating and holding BNB. However, third parties may assert
intellectual property rights claims relating to the operation of the Trust and
the mechanics instituted for the investment in, holding of and transfer of BNB.
Regardless of the merit of an intellectual property or other legal action, any
legal expenses to defend or payments to settle such claims would be
extraordinary expenses that would be borne by the Trust through the sale or
transfer of its BNB. Additionally, a meritorious intellectual property rights
claim could prevent the Trust from operating and force the Sponsor to terminate
the Trust and liquidate its BNB. As a result, an intellectual property rights
claim against the Trust could adversely affect the value of the
Shares.
Risks
Associated with Investing in the Trust
The
Value Of The Shares May Be Influenced By A Variety Of Factors Unrelated To The
Value Of BNB.
The
value of the Shares may be influenced by a variety of factors unrelated to the
price of BNB and the BNB trading platforms included in the
MarketVectorTM
[ ] that may have an adverse effect on the price of
the Shares. These factors include the following factors:
•Unanticipated
problems or issues with respect to the mechanics of the Trust's operations and
the trading of the Shares may arise, including the Clearing Services, in
particular due to the fact that the mechanisms and procedures governing the
creation and redemption of the Shares and storage of BNB have been developed
specifically for this product;
•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;
•The
Trust could experience unforeseen issues relating to the performance and
effectiveness of the security procedures used to protect the Trust's accounts
with the BNB Custodian or the Additional BNB Custodian, or the security
procedures may not protect against all errors, software flaws or other
vulnerabilities in the Trust's technical infrastructure, which could result in
theft, loss or damage of its assets;
•service
providers may default on or fail to perform their obligations or deliver
services under their contractual agreements with the Trust, or decide to
terminate their relationships with the Trust, for a variety of reasons, which
could affect the Trust's ability to operate; or
•if
the BNB Chain introduces privacy enhancing features in the future, service
providers may decide to terminate their relationships with the Trust due to
concerns that the introduction of privacy enhancing features to the BNB Chain
may increase the potential for BNB to be used to facilitate crime, exposing such
service providers to potential reputational harm.
Any
of these factors could affect the value of the Shares, either directly or
indirectly through their effect on the Trust's assets.
The
Trust Is Subject To Market Risk.
Market
risk refers to the risk that the market price of BNB held by the Trust will rise
or fall, sometimes rapidly or unpredictably. An investment in the Shares is
subject to market risk, including the possible loss of the entire principal of
the investment.
An
Investment In Shares Of The Trust Is Different From Directly Owning
BNB.
The
market value of Shares of the Trust may not have a direct relationship with the
prevailing price of BNB, and changes in the prevailing price of BNB similarly
will not necessarily result in a comparable change in the market value of Shares
of the Trust. The performance of the Trust will not reflect the specific return
an investor would realize if the investor actually held or purchased BNB
directly. The differences in performance may be due to factors such as fees,
transaction costs, proceeds from staking activities, operating hours of the
Exchange and index tracking risk. Investors will also forgo certain rights
conferred by owning BNB directly, such as the right to claim
airdrops.
Redemption
Liquidity Risk
The
Trust may be unable to satisfy redemption requests in a timely manner if the
volume of such requests exceeds the portion of its BNB holdings that remains
un-staked and readily available. Since a significant proportion of Trust's BNB
may be allocated to staking, which is subject to "activation" and "deactivation"
and lock-up periods, the Trust may not be able to immediately access or
liquidate the staked BNB to meet large or unexpected redemption demands. In such
circumstances, investors seeking to redeem their shares may experience delays,
particularly during periods of heightened market volatility, Exchange disruption
or substantial redemption activity. This could adversely affect the liquidity of
the Trust and may result in a material impact on the value of investors'
holdings.
Although
the Sponsor monitors and manages liquidity risk pursuant to the Staking Policy,
there remains a possibility that redemption requests could exceed the un-staked
BNB available for immediate withdrawal. In such cases, the Authorized
Participant will have the option to cancel the redemption order or the Sponsor
may delay settlement (i.e.,
long settle the redemption request) or use an alternative execution method for
the Trust to deliver cash in lieu of BNB. Monitoring and risk management
procedures, while designed to mitigate such risks, cannot eliminate them
entirely—particularly in the event of extreme or unforeseen market conditions,
sudden spikes in redemption activity, or operational disruptions. As a result,
investors may still face delays or restrictions on redemptions if the volume of
requests surpasses the Trust's available un-staked BNB, which could adversely
affect the value and liquidity of their investment.
The
NAV May Not Always Correspond To The Market Price Of BNB And, As A Result,
Baskets May Be Created Or Redeemed At A Value That Is Different From The Market
Price Of The Shares.
The
NAV of the Trust will change as fluctuations occur in the market price of the
Trust's BNB holdings. Shareholders should be aware that the public trading price
per Share may be different from the NAV for a number of reasons, including price
volatility, trading activity, the closing of BNB trading platforms due to fraud,
failure, security breaches or otherwise, and the fact that supply and demand
forces at work in the secondary trading market for Shares are related, but not
identical, to the supply and demand forces influencing the market price of
BNB.
An
Authorized Participant may be able to create or redeem a Basket at a discount or
a premium to the public trading price per Share, and the Trust will therefore
maintain its intended fractional exposure to a specific amount of BNB per
Share.
Shareholders
also should note that the size of the Trust in terms of total BNB held may
change substantially over time and as Baskets are created and
redeemed.
Authorized
Participants' Buying And Selling Activity Associated With The Creation And
Redemption Of Baskets May Adversely Affect An Investment In The Shares Of The
Trust.
Liquidity
Provider's purchases and Authorized Participants' and their designees' transfers
of BNB in connection with Basket creation orders may cause the price of BNB to
increase, which will result in higher prices for the Shares. Increases in the
BNB prices may also occur as a result of BNB purchases by other market
participants who attempt to benefit from an increase in the market price of BNB
when Baskets are created. The market price of BNB may therefore decline
immediately after Baskets are created.
Selling
activity associated with sales of BNB by Liquidity Providers or Authorized
Participants and their designees in connection with redemption orders may
decrease the BNB prices, which will result in lower prices for the Shares.
Decreases in BNB prices may also occur as a result of selling activity by other
market participants.
In
addition to the effect that purchases and sales of BNB by Liquidity Providers
and Authorized Participants' and their designees' transfers may have on the
price of BNB, sales and purchases of BNB by similar investment vehicles,
including competing exchange-traded products in the U.S. and other global
markets that do or seek to hold BNB, could impact the price of BNB. If the price
of BNB declines, the trading price of the Shares will generally also
decline.
The
Inability Of Liquidity Providers, And Authorized Participants Or Their Designees
To Hedge Their BNB Exposure May Adversely Affect The Liquidity Of Shares And The
Value Of An Investment In The Shares.
Liquidity
Providers and Authorized Participants or their designees will generally want to
hedge their BNB exposure in connection with Basket creation and redemption
orders, while Authorized Participants would generally want to hedge their
exposure to the Trust's Shares to the extent possible. To the extent Authorized
Participants, their designees, and/or Liquidity Providers are unable to hedge
their exposure to the Trust's Shares or BNB respectively due to market
conditions (e.g., insufficient BNB liquidity in the market, inability to locate
an appropriate hedge counterparty, etc.), such conditions may make it difficult
to create or redeem Baskets or cause them to not participate in creating or
redeeming Baskets. In addition, the hedging mechanisms employed by Authorized
Participants, their designees, and/or Liquidity Providers and Authorized
Participants or their designees to hedge their exposure to the Trust's Shares or
BNB, as applicable, may not function as intended, which may make it more
difficult for them to enter into such transactions. Such events could negatively
impact the market price of the Trust and the spread at which the Trust trades on
the open market. To the extent Liquidity Providers and Authorized Participants
or their designees turn to the market for exchange-traded futures contracts for
BNB ("BNB Futures") as well as the non-exchange traded BNB derivatives markets
for their hedging needs in connection with their BNB sales or transfers to and
purchases or transfers from the Trust, both the exchange-traded BNB Futures
market and the non-exchange traded BNB derivatives markets have limited trading
history and operational experience and may be less liquid, more volatile and
more vulnerable to economic, market and industry changes than more established
futures and derivatives markets. The liquidity of the market will depend on,
among other things, the adoption of BNB and the commercial and speculative
interest in the market for the ability to hedge against the price of BNB with
exchange-traded BNB Futures and non-exchange traded BNB derivatives. There can
be no assurance that such markets will be able to meet the hedging needs of
Liquidity Providers and Authorized Participants or their designees, which could
cause such Liquidity Providers and Authorized Participants or their designees to
refrain from participation in the Trust's creation and redemption processes,
which could have adverse effects on Shareholders such as wider spreads, a
breakdown of the arbitrage mechanism used to keep the Trust's Shares trading in
line with NAV of the Trust's BNB holdings, and potentially a disruption of the
creation or redemption processes altogether, as described in the following Risk
Factors.
If
The Process Of Creation And Redemption Of Baskets Encounters Any Unanticipated
Difficulties, The Possibility For Arbitrage Transactions By Authorized
Participants Intended To Keep The Price Of The Shares Closely Linked To The
Price Of BNB May Not Exist And, As A Result, The Price Of The Shares May Fall Or
Otherwise Diverge From NAV.
The
processes of creation and redemption of Shares (which depend on timely transfers
of BNB to and by the BNB Custodian and through the Clearing Services) could be
disrupted or encounter challenges due to, for example, the price volatility of
BNB, the insolvency, business failure or interruption, default, failure to
perform, security breach, or other problems affecting the BNB Custodian, in its
capacity as BNB Custodian under the Custody Agreement and the provider of
Clearing Services under the Clearing Agreement. Authorized Participants and
Liquidity Providers, who would otherwise be willing to purchase or redeem
Baskets or BNB, as applicable, to take advantage of any arbitrage opportunity
arising from discrepancies between the price of the Shares and the price of the
underlying BNB, may decide not to take the risk that, as a result of those
difficulties, they may not be able to realize the profit they expect, and reduce
their transactions with or even refrain entirely from transacting with the
Trust, which could disrupt the processes of creation and redemption of Shares.
If such events rise to the level of an emergency or cause creations and
redemptions of Shares to be impracticable, the Sponsor may suspend the process
of creation and redemption of Baskets. Any disruptions to the process of
creating and redeeming Shares could cause trading spreads, and the resulting
premium or discount, on Shares compared to NAV to widen. Alternatively, in the
case of a BNB Chain outage or other problems affecting the BNB Chain, the
processing of transactions on the BNB Chain may be disrupted, which in turn may
prevent Liquidity Providers, or Authorized Participants or their designees from
depositing or withdrawing BNB from their accounts at the BNB Custodian, which in
turn could affect the creation or redemption of Baskets. If this is the case,
the liquidity of the Shares may decline and the price of the Shares may
fluctuate independently of the price of BNB and may fall or otherwise diverge
from NAV. Furthermore, in the event that the market for BNB should become
relatively illiquid and thereby materially restrict opportunities for
arbitraging, the price of the Shares may diverge from the value of
BNB.
Creation
Baskets may be created or redeemed in exchange for BNB or cash. At present, only
certain Authorized Participants have the ability to support in-kind creation and
redemption activity. The use of cash creations and redemptions, as opposed to
in-kind creations and redemptions, creates transaction costs of buying and
selling BNB that are not present in an in-kind model. These costs include the
bid-ask spread along with the operational costs from the labor and overhead
involved in calculating, executing, monitoring, and accounting for transactions
in the BNB markets and related cash movements. Furthermore, there are timing
costs involved in the risk that the BNB price moves between the time when the
NAV is established for a creation/ redemption and the time when the BNB is
traded ("slippage"). In addition, Liquidity Providers must settle BNB
transactions with the Trust within a contractually specified time period,
subject to customary exceptions. If the Liquidity Provider fails to perform its
obligations within the contractually specified time period, the Trust would seek
to use an alternate BNB Trading Counterparty to execute the BNB transaction.
However, the pricing or terms of the ultimate BNB transaction conducted through
the alternate Liquidity Provider, if one is available, after the failure of the
original Liquidity Provider to perform its obligations could deviate,
potentially significantly, from the pricing or terms of the transaction that the
Trust originally entered with the original Liquidity Provider. Transaction costs
and slippage would be reduced if the Trust were able to use an in-kind creation
and redemption model. The Trust's Authorized Participant Agreement provides that
transaction costs and slippage related to Basket creation and redemption are the
responsibility of the Authorized Participant. Whether Authorized Participants
who are unable to support in-kind creation and redemption activity and Liquidity
Providers as market participants will find it economically viable or
commercially attractive to participate in a cash creation and redemption model
for a BNB exchange-traded product like the Trust, including a cash creation and
redemption model where the Trust selects the Liquidity Provider with whom it
executes transactions to buy or sell BNB and the Authorized Participant is not
permitted to designate the Liquidity Provider from whom BNB is purchased or sold
in connection with the Authorized Participant's Basket subscription or
redemption, is not known; however, there is a risk they will not. If the Trust
is unable to attract sufficient Authorized Participants and Liquidity Providers,
it will be unable to maintain an efficient arbitrage mechanism for keeping the
trading price of the Shares in line with NAV and the value of the underlying BNB
held by the Trust, which could negatively affect Shareholders and cause them to
purchase or sell Shares at a premium or discount to the value of the underlying
BNB, causing losses; alternatively, it could be unable to operate, as there
would no parties who would be able to create new Shares or redeem existing
Shares, leading to the Trust being
unsuccessful
commercially and the Sponsor deciding to terminate and wind up the Trust's
operations. In addition, a failure to settle BNB transactions with Liquidity
Providers could disrupt the calculation of the Trust's NAV or potentially cause
inaccuracies in NAV calculation, which could disrupt the Trust's operations or
cause Shareholders to suffer losses.
The
Lack Of Ability To Facilitate In-Kind Creations And Redemptions Of Shares Could
Have Adverse Consequences For The Trust.
Authorized
Participants must be registered broker-dealers. Registered broker-dealers are
subject to various requirements of the federal securities laws and rules,
including financial responsibility rules such as the customer protection rule,
the net capital rule and recordkeeping requirements. On May 15, 2025, the SEC’s
Division of Trading and Markets and FINRA’s Office of General Counsel of FINRA
stated that broker-dealers are permitted to facilitate in-kind creations and
redemptions in connection with spot crypto exchange-traded products; however,
there has yet to be definitive regulatory guidance on the specific details of
how registered broker-dealers can comply with SEC rules with regard to
transacting in or holding spot BNB. Until further regulatory clarity emerges
regarding whether registered broker-dealers can hold and deal in BNB under such
rules, there is a risk that registered broker-dealers participating in the
in-kind creation or redemption of Shares for BNB may be unable to demonstrate
compliance with such requirements. While compliance with rules such as the
customer protection rule, the net capital rule and recordkeeping requirements
would be the broker-dealer's responsibility, a national securities exchange is
required to enforce compliance by its member broker-dealers with applicable
federal securities law and rules. Only certain Authorized Participants, at
present, have the ability to also, through their affiliates, support in-kind
creation and redemption activity.
Even
with the SEC staff's recent statement that in-kind creations and redemptions are
not prohibited by SEC regulations, the Trust's limited ability to facilitate
in-kind creations and redemptions could result in the exchange-traded product
arbitrage mechanism failing to function as efficiently as it otherwise would,
leading to the potential for the Shares to trade at premiums or discounts to the
NAV, and such premiums or discounts could be substantial. Furthermore, if cash
creations or redemptions are unavailable, either due to the Sponsor's decision
to reject or suspend such orders, the unavailability of Liquidity Provider or
otherwise, Authorized Participants will be limited in their ability to redeem or
create Shares, in which case the arbitrage mechanism may not function as
efficiently. This could result in impaired liquidity for the Shares, wider
bid/ask spreads in secondary trading of the Shares and greater costs to
investors and other market participants. In addition, the Trust's limited
ability to facilitate in-kind creations and redemptions, and resulting relative
reliance on cash creations and redemptions, could cause the Sponsor to halt or
suspend the creation or redemption of Shares during times of market volatility
or turmoil, among other consequences.
Further,
there can be no assurance that broker-dealers would be willing to serve as
Authorized Participants with respect to the in-kind creation and redemption of
Shares. Any of these factors could adversely affect the performance of the Trust
and the value of the Shares.
The
Liquidity Of The Shares May Also Be Affected By The Withdrawal From
Participation Of Authorized Participants Or Liquidity Providers.
In
the event that one or more Authorized Participants or Liquidity Providers
withdraw from or cease participation in creation and redemption activity or BNB
transactions with the Trust for any reason, the liquidity of the Shares will
likely decrease, which could adversely affect the market price of the Shares and
result in your incurring a loss on your investment in Shares.
The
Trust Is Subject To Risks Due To Its Concentration Of Investments In A Single
Asset Class.
Unlike
other funds that may invest in diversified assets, the Trust's investment
strategy is concentrated in a single asset class: BNB. This concentration
maximizes the degree of the Trust's exposure to a variety of market risks
associated with BNB. By concentrating its investment strategy solely in BNB, any
losses suffered as a result of a decrease in the value of BNB can be expected to
reduce the value of an interest in the Trust and will not be offset by other
gains if the Trust were to invest in underlying assets that were
diversified.
An
investment in the Trust may be deemed speculative and is not intended as a
complete investment program. An investment in Shares should be considered only
by persons financially able to maintain their investment and who can bear the
risk of total loss associated with an investment in the Trust. Investors should
review closely the objective and strategy of the Trust and redemption rights, as
discussed herein, and familiarize themselves with the risks associated with an
investment in the Trust.
The
Lack Of Active Trading Markets For The Shares Of The Trust May Result In Losses
On Shareholders' Investments At The Time Of Disposition Of Shares.
Although
Shares of the Trust are expected to be publicly listed and traded on an
exchange, there can be no guarantee that an active trading market for the Trust
will develop or be maintained. If Shareholders need to sell their Shares at a
time when no active market for them exists, the price Shareholders receive for
their Shares, assuming that Shareholders are able to sell them, likely will be
lower than the price that Shareholders would receive if an active market did
exist and, accordingly, a Shareholder may suffer losses.
Any
of these factors could adversely affect the performance of the Trust and the
value of the Shares.
Possible
Illiquid Markets May Exacerbate Losses, Increase The Variability Between The
Trust's NAV And Its Market Price Or Affect the Trust's Ability to Meet Cash
Creation Orders and Redemption Orders.
BNB
is a relatively new asset with a limited trading history. Therefore, the markets
for BNB may be less liquid and more volatile than other markets for more
established products. It may be difficult to execute a BNB trade at a specific
price when there is a relatively small volume of buy and sell orders in the BNB
market. A market disruption can also make it more difficult to liquidate a
position or find a suitable counterparty at a reasonable cost.
Market
illiquidity may cause losses for the Trust. The large size of the positions that
the Trust may acquire will increase the risk of illiquidity by both making the
positions more difficult to liquidate and increasing the losses incurred while
trying to do so should the Trust need to liquidate its BNB, or making it more
difficult for Authorized Participants to acquire or liquidate BNB as part of the
creation and/or redemption of Shares of the Trust. To the extent that the Trust
conducts creation and redemption transactions for cash, such illiquidity may
affect the Trust's ability to meet such cash creation and redemption orders. Any
type of disruption or illiquidity will potentially be exacerbated due to the
fact that the Trust will typically invest in BNB, which is highly
concentrated.
The
Shares May Trade At A Price That Is At, Above Or Below The Trust's NAV Per Share
As A Result Of The Non-Current Trading Hours Between The Exchange And The
Digital Asset Market.
The
Trust's NAV per Share will fluctuate with changes in the market value of BNB,
and the Sponsor expects the trading price of the Shares to fluctuate in
accordance with changes in the Trust's NAV per Share, as well as market supply
and demand. However, the Shares may trade on the Exchange at a price that is at,
above or below the Trust's NAV per Share for a variety of reasons. For example,
the Exchange is open for trading in the Shares for a limited period each day,
but the digital asset market is a 24-hour marketplace. During periods when the
Exchange is closed but constituent trading platforms are open, significant
changes in the price of BNB on the digital asset market could result in a
difference in performance between the value of BNB as measured by the Index and
the most recent NAV per Share or closing trading price. For example, if the
price of BNB on the digital asset market, and the value of BNB as measured by
the Index, move significantly in a negative direction after the close of the
Exchange, the trading price of the Shares may "gap" down to the full extent of
such negative price shift when the Exchange reopens. If the price of BNB on the
digital asset market drops significantly during hours the Exchange is closed,
shareholders may not be able to sell their Shares until after the "gap" down has
been fully realized, resulting in an inability to mitigate losses in a negative
market. Even during periods when the Exchange is open, large constituent trading
platforms (or a substantial number of smaller constituent trading platforms) may
be lightly traded or closed for any number of reasons, which could increase
trading spreads and widen any premium or discount on the Shares.
The
Trust Is An "Emerging Growth Company" And It Cannot Be Certain If The Reduced
Disclosure Requirements Applicable To Emerging Growth Companies Will Make The
Shares Less Attractive To Investors.
The
Trust is an "emerging growth company" as defined in the JOBS Act. For as long as
the Trust continues to be an emerging growth company it may choose to take
advantage of certain exemptions from various reporting requirements applicable
to other public companies but not to emerging public companies, which include,
among other things:
•exemption
from the auditor attestation requirements under Section 404(b) of the
Sarbanes-Oxley Act;
•reduced
disclosure obligations regarding executive compensation in the Trust's periodic
reports and audited financial statements in this Prospectus; exemptions from the
requirements of holding advisory "say-on-pay" votes on executive compensation
and shareholder advisory votes on "golden parachute" compensation;
and
•exemption
from any rules requiring mandatory audit firm rotation and auditor discussion
and analysis and, unless otherwise determined by the SEC, any new audit rules
adopted by the Public Company Accounting Oversight Board.
The
Trust could be an emerging growth company until the last day of the fiscal year
following the fifth anniversary after its initial public offering, or until the
earliest of (1) the last day of the fiscal year in which it has annual gross
revenue of $1.235 billion or more, (2) the date on which it has, during the
previous three year period, issued more than $1 billion in non-convertible debt
or (3) the date on which it is deemed to be a large accelerated filer under the
federal securities laws. The Trust will qualify as a large accelerated filer as
of the first day of the first fiscal year after it has (A) more than $700
million in outstanding equity held by nonaffiliates, (B) been public for at
least 12 months and (C) filed at least one annual report on Form
10-K.
Under
the JOBS Act, emerging growth companies are also permitted to elect to delay
adoption of new or revised accounting standards until companies that are not
subject to periodic reporting obligations are required to comply, if such
accounting standards apply to non-reporting companies. However, the Trust has
chosen to opt out of this extended transition period for complying with new or
revised accounting standards. Section 107 of the JOBS Act provides that the
decision to opt out of the extended transition period for complying with new or
revised accounting standards is irrevocable.
The
Trust cannot predict if investors will find an investment in the Trust less
attractive if it relies on these exemptions.
Several
Factors May Affect The Trust's Ability To Achieve Its Investment Objective On A
Consistent Basis.
There
is no guarantee that the Trust will meet its investment objective. Factors that
may affect the Trust's ability to meet its investment objective include, without
limitation: (1) Liquidity Providers' or Authorized Participants' or their
designees' ability and willingness to purchase and sell or transfer or receive
BNB in an efficient manner to effectuate creation and redemption orders; (2)
transaction fees associated with the BNB Chain; (3) the BNB market becoming
illiquid or disrupted; (4) the Trust's Share prices being rounded to the nearest
cent and/or valuation methodologies; (5) the need to conform the Trust's
portfolio holdings to comply with investment restrictions or policies or
regulatory or tax law requirements; (6) early or unanticipated closings of the
markets on which BNB trades, resulting in the inability of Liquidity Providers
or Authorized Participants' or their designees' to execute intended portfolio
transactions; (7) accounting standards; (8) Authorized Participants refraining
from participating in creation and redemption of Baskets; (9) the
MarketVectorTM
[ ] becoming disrupted or unavailable; and (10) the
Staking Services Providers' willingness to provide staking services to the Trust
and to do so on the terms of its agreement with the Trust.
The
Amount Of BNB Represented By Each Share Will Decline Over Time As The Trust pays
the Sponsor's Fee And Extraordinary Trust Expenses, And As A Result, The Value
Of The Shares May Decrease Over Time.
The
amount of BNB represented by the Shares will continue to be reduced during the
life of the Trust due to the transfer of the Trust's BNB to pay for the Sponsor
Fee and extraordinary Trust expenses. This dynamic will occur irrespective of
whether the trading price of the Shares rises or falls in response to changes in
the price of BNB.
Although
the Sponsor has agreed to assume all fees and other expenses incurred by the
Trust in the ordinary course of its affairs incurred by the Trust, not all Trust
expenses have been assumed by the Sponsor. For example, any taxes and other
governmental charges that may be imposed on the Trust's property will not be
paid by the Sponsor.
Each
outstanding Share represents a fractional, undivided interest in the BNB held by
the Trust. The Trust does not generate any income and transfers BNB to pay for
the Sponsor Fee, and to pay for litigation expenses or other extraordinary
expenses. Therefore, the amount of BNB represented by each Share will gradually
decline over time. This is also true with respect to Shares that are issued in
exchange for additional deposits of BNB over time, as the amount of BNB required
to create Shares proportionally reflects the amount of BNB represented by the
Shares outstanding at the time of such creation unit being created. Assuming a
constant BNB price, the trading price of the Shares is expected to gradually
decline relative to the price of BNB as the amount of BNB represented by the
Shares gradually declines.
Shareholders
should be aware that the gradual decline in the amount of BNB represented by the
Shares will occur regardless of whether the trading price of the Shares rises or
falls in response to changes in the price of BNB.
The
Trust Is A Passive Investment Vehicle. The Trust Is Not Actively Managed And
Will Be Affected By A General Decline In The Price Of BNB.
The
Sponsor does not actively manage the BNB held by the Trust. This means that the
Sponsor does not sell BNB at times when its price is high, or acquire BNB at low
prices in the expectation of future price increases. It also means that the
Sponsor does not make use of any of the hedging techniques available to
professional BNB investors to attempt to reduce the risks of losses resulting
from price decreases. Any losses sustained by the Trust will adversely affect
the value of your Shares.
The
Development And Commercialization Of The Trust Is Subject To Competitive
Pressures.
The
Trust and the Sponsor face competition with respect to the creation of competing
products, including with respect to the potential creation of competing
exchange-traded BNB products. If the SEC were to approve many or all of the
currently pending applications for such exchange-traded BNB products, many or
all of such products, including the Trust, could fail to acquire substantial
assets, initially or at all. Such competing products may become available for
public exchange trading before the Trust and/or have a lower expense ratio than
the Trust, which could have a detrimental effect on the scale and sustainability
of the Trust. The Sponsor's competitors may have greater financial, technical
and human resources than the Sponsor. These competitors may also charge a
substantially lower fee than the Sponsor's Fee in order to achieve initial
market acceptance and scale and compete with the Sponsor in recruiting and
retaining qualified personnel. Smaller or early stage companies may also prove
to be effective competitors, particularly through collaborative arrangements
with large and established companies. Accordingly, the Sponsor's competitors may
commercialize a product involving BNB more rapidly or effectively than the
Sponsor is able to, which could adversely affect the Sponsor's competitive
position, the likelihood that the Trust will achieve initial market acceptance
and the Sponsor's ability to generate meaningful revenues from the Trust. If the
Trust fails to achieve sufficient scale due to competition, the Sponsor may have
difficulty raising sufficient revenue to cover the costs associated with
launching and maintaining the Trust and such shortfalls could impact the
Sponsor's ability to properly invest in robust ongoing operations and controls
of the Trust to minimize the risk of operating events, errors, or other forms of
losses to the Shareholders. In addition, the Trust may also fail to attract
adequate liquidity in the secondary market due to such competition, resulting in
a sub-standard number of Authorized Participants willing to make a market in the
Shares, which in turn could result in a significant premium or discount in the
Shares for extended periods and the Trust's failure to reflect the performance
of the price of BNB.
Security
Threats To The Trust's Accounts With The BNB Custodian or the Additional BNB
Custodian Could Result In The Halting Of Trust Operations And A Loss Of Trust
Assets Or Damage To The Reputation Of The Trust, Each Of Which Could Result In A
Reduction In The Price Of The Shares.
Security
breaches, computer malware and computer hacking attacks have been a prevalent
concern in relation to digital assets. The Sponsor believes that the Trust's BNB
held in the Trust's BNB Account and Clearing Account with the BNB Custodian and
the Additional BNB Account with the Additional BNB Custodian will be an
appealing target to hackers or malware distributors seeking to destroy, damage
or steal the Trust's BNB and will only become more appealing as the Trust's
assets grow. To the extent that the Trust, the Sponsor, BNB Custodian or the
Additional BNB Custodian is unable to identify and mitigate or stop new security
threats or otherwise adapt to technological changes in the digital asset
industry, the Trust's BNB may be subject to theft, loss, destruction or other
attack.
The
Sponsor has evaluated the security procedures in place for safeguarding the
Trust's BNB. Nevertheless, the security procedures cannot guarantee the
prevention of any loss due to a security breach, hack, software defect or act of
God that may be borne by the Trust and the security procedures may not protect
against all errors, software flaws or other vulnerabilities in the Trust's
technical infrastructure, which could result in theft, loss or damage of its
assets. The Sponsor does not control the BNB Custodian's or the Additional BNB
Custodian's operations or implementation of such security procedures and there
can be no assurance that such security procedures will actually work as designed
or prove to be successful in safeguarding the Trust's assets against all
possible sources of theft, loss or damage.
The
security procedures and operational infrastructure may be breached due to the
actions of outside parties, error or malfeasance of an employee of the Sponsor,
the BNB Custodian, the Additional BNB Custodian or otherwise, and, as a result,
an unauthorized party may obtain access to the Trust's account with the BNB
Custodian, the private keys (and therefore BNB) or other data of the Trust.
Additionally, outside parties may attempt to fraudulently induce employees of
the Sponsor, the BNB Custodian, the Additional BNB Custodian or the Trust's
other service providers to disclose sensitive information in order to gain
access to the Trust's infrastructure. As the techniques used to obtain
unauthorized access, disable or degrade service, or sabotage systems change
frequently, or may be designed to remain dormant until a predetermined event and
often are not recognized until launched against a target, the Sponsor, BNB
Custodian and the Additional BNB Custodian may be unable to anticipate these
techniques or implement adequate preventative measures. The BNB Custodian is
also dependent on key service providers, including, without limitation, its data
centers, and if these were to cease operation or be the subject of operational
problems or security threats, it could affect the Trust's BNB Account or
Clearing Account with the BNB Custodian.
An
actual or perceived breach of the Trust's BNB Account or Clearing Account with
the BNB Custodian or Additional BNB Account with the Additional BNB Custodian
could harm the Trust's operations, result in partial or total loss of the
Trust's assets, damage the Trust's reputation and negatively affect the market
perception of the effectiveness of the Trust, all of which could in turn reduce
demand for the Shares, resulting in a reduction in the price of the Shares. The
Trust may also cease operations, the occurrence of which could similarly result
in a reduction in the price of the Shares.
The
Clearing Account Permits Hot Storage Which Is Less Secure Than Cold
Storage.
Although
the Custody Agreement requires the BNB Custodian to hold the Trust's BNB in its
BNB Account in cold storage, BNB may be temporarily stored in an omnibus hot
storage wallet associated with the Trust's Clearing Account in connection with
both creations and redemptions, as well as in connection with transfers of BNB
out of the Trust to pay the Sponsor Fee and to reimburse the Sponsor in BNB for
payment of reimbursable extraordinary expenses paid by the Sponsor. Cold storage
is a safeguarding method by which the private key(s) corresponding to BNB is
(are) generated and stored in an offline manner. Private keys are generated in
offline computers or devices that are not connected to the internet so that they
are more resistant to being hacked. By contrast, in hot storage, the private
keys are held online, where they are more accessible, leading to more efficient
transfers, though they are potentially more vulnerable to being hacked or
stolen.
If
A Liquidity Provider Agreement, The Custody Agreement, The Additional BNB
Custody Agreement an Authorized Participant Agreement, Staking Services
Agreement Or Clearing Agreement Is Terminated Or A Liquidity Provider, an
Authorized Participant, The BNB Custodian, The Additional BNB Custodian Or The
Staking Services Provider Fails To Participate In The Creation Or Redemption
Processes Of The Trust Or Fails To Provide Services As Required, The Sponsor May
Need To Find And Appoint A Replacement Liquidity Provider, Authorized
Participant, BNB Custodian, The Additional BNB Custodian Or The Staking Services
Provider Quickly, Which Could Pose A Challenge To The Trust's Ability To Create
And Redeem Shares Or The Safekeeping Of The Trust's BNB, And The Trust's Ability
To Continue To Operate May Be Adversely Affected.
The
Trust is dependent on the BNB Custodian to operate, pursuant to the Custody
Agreement and the Clearing Agreement. The BNB Custodian performs essential
functions in terms of safekeeping the Trust's BNB and, via the Clearing
Services, facilitates the transfer of BNB to the Trust by Liquidity Providers
and Authorized Participants and their designees and from the Trust in connection
with creations and redemptions and to pay the Sponsor Fee and extraordinary
Trust expenses, and in extraordinary circumstances, to liquidate the Trust. If
the BNB Custodian fails to perform the functions it performs for the Trust, the
Trust may be unable to operate or create or redeem Baskets, which could force
the Trust to liquidate or adversely affect the price of the Shares.
The
Sponsor could decide to replace the BNB Custodian as the custodian of the
Trust's BNB, pursuant to the Custody Agreement. Similarly, the BNB Custodian
under the Custody Agreement and Clearing Agreement may terminate the Custody
Agreement and Clearing Agreement respectively upon providing the applicable
notice to the Trust for any reason, or immediately, upon the occurrence of a
Termination Event (as defined below) that is incapable of being cured within ten
business days or if it determines in its sole discretion it is necessary to take
such action to comply with applicable laws and regulations or in connection with
[ ]'s fraud or other compliance program. Under the
Custody Agreement, a "Termination Event" occurs when (i) any representation,
warranty, certification or statement made by the Trust was or becomes incorrect
in any material respect when made; (ii) the Trust materially breaches, or fails
in any material respect to perform any of its obligations under the Custody
Agreement; (iii) the Trust requests a postponement of maturity or a moratorium
with respect to any indebtedness or is adjudged bankrupt or insolvent, or there
is commenced against the Trust a case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or the Trust files a
petition for bankruptcy or an application for an arrangement with its creditors,
seeks or consents to the appointment of a receiver, administrator or other
similar official for all or any substantial part of its property, admits in
writing its inability to pay its debts as they mature, or takes any corporate
action in furtherance of any of the foregoing, or fails to meet applicable legal
minimum capital requirements; or (iv) a change of control of the Trust, or an
event, change or development that causes or is likely to cause a material
adverse effect on the Trust, or in the ability of the Trust to fulfill its
responsibilities under the Custody Agreement, occurs. Transferring maintenance
responsibilities of the Trust's account at the BNB Custodian to another
custodian may be complex and could subject the Trust's BNB to the risk of loss
during the transfer, which could have a negative impact on the performance of
the Shares or result in loss of the Trust's assets. Also, if the BNB Custodian
becomes insolvent, suffers business failure, ceases business operations,
defaults on or fails to perform its obligations under the Custody Agreement or
Clearing Agreement with the Trust, or abruptly discontinues the services it
provides to the Trust for any reason, the Trust's operations would be adversely
affected.
Alternatively,
the Sponsor could decide to replace the Additional BNB Custodian as a custodian
of the Trust's BNB, pursuant to the Additional Custodial Services Agreement (the
"Additional BNB Custody Agreement"). Similarly, the Additional BNB Custodian
could terminate services under the Additional BNB Custody Agreement for any
reason and without Cause upon providing the applicable notice to the Trust for
any reason, or immediately for Cause ("Cause" is defined in the Additional BNB
Custody Agreement as (i) the Trust breaches any provision of the Additional BNB
Custody Agreement and such breach is not cured within three (3) business days
after notice of such breach is given to the Trust in the case of a
payment-related breach or is not cured within ten (10) business days after
notice of such breach is given to the Trust; (ii) the Trust takes any action to
dissolve or liquidate (iii) the Trust becomes insolvent, makes an assignment for
the benefit of creditors, becomes subject to direct control of a trustee,
receiver or similar authority; (iv) the Trust becomes subject to any bankruptcy
or insolvency proceeding; (v) the Additional BNB Custodian becomes aware of any
facts or circumstances with respect to the Trust's financial, legal, regulatory
or reputational position which reasonably would materially adversely affect The
Trust's ability to comply
with
its obligations under the Additional BNB Custody Agreement, and such facts and
circumstances cannot be cured within five (5) business days; (vi) termination is
required pursuant to a facially valid subpoena, court order or binding order of
a government authority; (vii) the Trust's Additional BNB Account is subject to
any pending litigation, investigation or government proceeding; or (viii) the
Additional BNB Custodian reasonably suspects the Trust of attempting to
circumvent the Additional BNB Custodian's controls in a manner the Additional
BNB Custodian otherwise deems inappropriate or potentially harmful to itself or
third parties.) Transferring maintenance responsibilities of the Trust's account
at the Additional BNB Custodian to another custodian may be complex and could
subject the Trust's BNB to the risk of loss during the transfer, which could
have a negative impact on the performance of the Shares or result in loss of the
Trust's assets. Also, if the Additional BNB Custodian becomes insolvent, suffers
business failure, ceases business operations, default on or fail to perform
their obligations under its contractual agreement with the Trust, or abruptly
discontinue the services it provides to the Trust for any reason, the Trust's
operations including its creation and redemption processes would be adversely
affected.
The
Sponsor may not be able to find a party willing to serve as the custodian or
perform clearing services under the same terms as the current Custody Agreement,
Additional BNB Custody Agreement and Clearing Agreement. To the extent that
Sponsor is not able to find a suitable party willing to serve as the custodian
or to perform clearing services, the Sponsor may be required to terminate the
Trust and liquidate the Trust's BNB. In addition, to the extent that the Sponsor
finds a suitable party but must enter into a modified Custody Agreement,
Additional BNB Custody Agreement or Clearing Agreement that is less favorable
for the Trust or Sponsor, the value of the Shares could be adversely
affected.
Additionally,
the Trust depends on Staking Services Provider(s) to execute staking. Staking
rewards proceeds will depend on the success of the Staking Services Provider(s),
including the technology used by such parties. If the BNB Custodian, Additional
BNB Custodian or a Staking Provider experiences technical difficulties or
service outages, or is otherwise unable to optimally execute the staking
program, the Trust's receipt of staking rewards and the value of the Shares may
be adversely affected.
If
an Authorized Participant or a Liquidity Provider suffers insolvency, business
failure or interruption, default, failure to perform, security breach, or if an
Authorized Participant or a Liquidity Provider chooses not to participate in the
creation and redemption processes of the Trust due to the risks described in
"--The Inability Of Liquidity Providers To Hedge Their BNB Exposure May
Adversely Affect The Liquidity Of Shares And The Value Of An Investment In The
Shares" And "-- If The Process Of Creation And Redemption Of Baskets Encounters
Any Unanticipated Difficulties, The Possibility For Arbitrage Transactions By
Authorized Participants Intended To Keep The Price Of The Shares Closely Linked
To The Price Of BNB May Not Exist And, As A Result, The Price Of The Shares May
Fall Or Otherwise Diverge From NAV," or for any other reason, and the Trust is
unable to engage replacement Authorized Participants or Liquidity Providers on
commercially acceptable terms or at all, then the creation and redemption
processes of the Trust or the arbitrage mechanism used to keep the Trust's
Shares trading in line with NAV could be negatively affected.
Loss
Of A Critical Banking Relationship For, Or The Failure Of A Bank Used By, The
Trust Could Adversely Impact The Trust's Ability To Create Or Redeem Baskets, Or
Could Cause Losses To The Trust.
The
Cash Custodian and BNB Custodian, under the Clearing Agreement (as defined
below), facilitate the creation and redemption of Baskets (in exchange for cash
subscriptions by Authorized Participants, or in exchange for redemptions of
Shares by Authorized Participants), and other cash movements, including in
connection with the purchase of BNB by the Trust to effectuate subscriptions for
cash and the selling of BNB by the Trust to effect redemptions for cash or pay
the Sponsor Fee and, to the extent applicable, other Trust expenses, and in
extraordinary circumstances, to effect the liquidation of the Trust's BNB. The
Trust relies on the Cash Custodian and BNB Custodian, in connection with the
Trust's Fiat Account, to hold any cash related to the purchase or sale of BNB.
To the extent that the Trust faces difficulty establishing or maintaining
banking relationships, the loss of the Trust's banking partners, including the
Cash Custodian or the banks at which the BNB Custodian, in connection with the
Trust's Fiat Account, maintains customer cash balances (including the cash
balance of the Trust held in the Fiat Account), or the imposition of operational
restrictions by these banking partners and the inability for the Trust to
utilize other financial institutions may result in a disruption of creation and
redemption activity of the Trust, or cause other operational disruptions or
adverse effects for the Trust. In the future, it is possible that the Trust
could be
unable
to establish accounts at new banking partners or establish new banking
relationships, or that the banks with which the Trust is able to establish
relationships may not be as large or well-capitalized or subject to the same
degree of prudential supervision as the existing providers.
The
Trust could also suffer losses in the event that a bank or money market fund in
which the Trust holds cash, including the cash associated with the Trust's
account at the Cash Custodian or the Trust's Fiat Account with the BNB Custodian
(which is held at the BNB Custodian's Banks (as defined below) or Money Market
Funds (as defined below) for the benefit of its customers, including the Trust),
fails, becomes insolvent, enters receivership, is taken over by regulators,
enters financial distress, or otherwise suffers adverse effects to its financial
condition or operational status. Recently, some banks have experienced financial
distress. For example, on March 8, 2023, the California Department of Financial
Protection and Innovation ("DFPI") announced that Silvergate Bank had entered
voluntary liquidation, and on March 10, 2023, Silicon Valley Bank, ("SVB"), was
closed by the DFPI, which appointed the FDIC, as receiver. Similarly, on March
12, 2023, the New York Department of Financial Services took possession of
Signature Bank and appointed the FDIC as receiver. A joint statement by the
Department of the Treasury, the Federal Reserve and the FDIC on March 12, 2023,
stated that depositors in Signature and SVB will have access to all of their
funds, including funds held in deposit accounts, in excess of the insured
amount. On May 1, 2023, First Republic Bank was closed by the California
Department of Financial Protection and Innovation, which appointed the FDIC as
receiver. Following a bidding process, the FDIC entered into a purchase and
assumption agreement with JPMorgan Chase Bank, National Association, to acquire
the substantial majority of the assets and assume certain liabilities of First
Republic Bank from the FDIC.
If
the Cash Custodian, the BNB Custodian, the Additional BNB Custodian or the Banks
or Money Market Funds at which the BNB Custodian holds customer cash balances,
including those associated with the Trust's Fiat Account, were to experience
financial distress or its financial condition is otherwise affected, the Cash
Custodian's, BNB Custodian's or Additional BNB Custodian's ability to provide
services to the Trust could be affected. Moreover, the future failure of a bank
or money market fund at which the Trust (including through the Fiat Account)
maintains cash, could result in losses to the Trust, to the extent the balances
are not subject to deposit insurance, notwithstanding the regulatory
requirements to which the Cash Custodian is subject or other potential
protections. In addition, the Trust may maintain cash balances with the Cash
Custodian in the Fiat Account with the that are not insured or are in excess of
the FDIC's insurance limits, or which are maintained by the Cash Custodian or
BNB Custodian at money market funds (in the case of the Fiat Account) and
subject to the attendant risks (e.g., "breaking the buck"). As a result, the
Trust could suffer losses.
The
lack of full insurance and Shareholders' limited rights of legal recourse
against the Trust, Trustee, Sponsor, Administrator, Cash Custodian, BNB
Custodian and Additional BNB Custodian expose the Trust and its Shareholders to
the risk of loss of the Trust's BNB for which no person or entity is
liable.
Neither
the Trust not the Sponsor insure the Trust's BNB. The Trust is not a banking
institution or otherwise a member of the FDIC or Securities Investor Protection
Corporation ("SIPC") and, therefore, deposits held with or assets held by the
Trust are not subject to the protections enjoyed by depositors with FDIC or SIPC
member institutions. The BNB Custodian currently maintains digital asset
insurance consisting of a $100 million specie policy and a $25 million crime
policy. Such insurance is shared with all other customers and clients of the BNB
Custodian and is not specific to the Trust. Shareholders cannot be assured that
either the BNB Custodian or the Additional BNB Custodian will maintain adequate
insurance in respect of the BNB they hold for the Trust, that such coverage will
cover losses with respect to the Trust's BNB, or that sufficient insurance
proceeds will be available to cover the Trust's losses in full. The BNB
Custodian's insurance may not cover the type of losses experienced by the Trust.
Alternatively,
the Trust may be forced to share such insurance proceeds with other clients or
customers of the BNB Custodian, which could reduce the amount of such proceeds
that are available to the Trust. The Trust is not a named insured under the BNB
Custodian's insurance policies, though the BNB Custodian has represented to the
Sponsor that the insurance covers customer losses, including losses suffered by
the Trust, arising from specified events, including fraud, theft, and
cybersecurity breaches. In addition, the BNB insurance market is limited, and
the level of insurance maintained by the BNB Custodian may be substantially
lower than the assets of the Trust, or the amount of claims against the BNB
Custodian of all of the customers whose losses are covered by the BNB
Custodian's
insurance coverage. While the BNB Custodian maintains certain capital reserve
requirements depending on the assets under custody, and such capital reserves
may provide additional means to cover client asset losses, the Trust cannot be
assured that the BNB Custodian will maintain capital reserves sufficient to
cover actual or potential losses with respect to the Trust's digital
assets.
Furthermore,
under the Custody Agreement, the BNB Custodian's liability is limited in various
ways, including that the BNB Custodian cannot be held responsible for any
failure or delay to act by the BNB Custodian, its service providers, or its
banks that is within the time limits permitted by the Custody Agreement, or that
is caused by the Trust's negligence or is required to comply with applicable
laws and regulations. The BNB Custodian is not liable for any System Failure or
Downtime (both as defined in the Custody Agreement), which prevents the BNB
Custodian from fulfilling its obligations under the Custody Agreement, provided
that BNB Custodian took reasonable care and used commercially reasonable efforts
to prevent or limit such System Failures or Downtime and otherwise complied with
the Custody Agreement. The Custody Agreement provides that "Downtime" means
scheduled maintenance and a "System Failure" shall mean a failure of any
computer hardware, software, computer systems, or telecommunications lines or
devices used by the BNB Custodian, or interruption, loss, or malfunction of
utility, data center, Internet or network provider services used by the BNB
Custodian; provided, however, that a cybersecurity attack, data breach, hack, or
other intrusion, or unauthorized disclosure by a third party, the BNB Custodian,
a service provider to the BNB Custodian, or an agent or subcontractor of the BNB
Custodian, shall not be deemed a System Failure, to the extent such events or
any losses arising therefrom are due to the BNB Custodian's failure to comply
with its obligations under the Custody Agreement. The BNB Custodian cannot be
held responsible for any circumstances beyond the BNB Custodian's reasonable
control, provided the BNB Custodian took reasonable care and used commercially
reasonable efforts in executing its responsibilities to the Trust pursuant to
the Custody Agreement, which includes exercising the degree of care, diligence
and skill that a prudent and competent professional provider of services similar
to the custodial services would exercise in the circumstances, or such higher
care where required by law or the Custody Agreement (collectively, the "Standard
of Care"). The BNB Custodian makes no guarantees regarding the BNB Chain's
security, functionality, or availability, and will not be liable for or in
connection with any acts, decisions, or omissions made by developers of the BNB
Chain. The BNB Custodian is not liable for any losses or claims arising out of
actions that are in the Trust's control and related to the Trust's use of the
BNB Custodian's online platform, including but not limited to, the Trust's
failure to follow security protocols, the BNB Custodian's platform controls,
improper instructions, failure to secure the Trust's credentials from third
parties, or anything else in the Trust's control and is also not liable for any
amount greater than the value of the assets on deposit in Trust's account at the
BNB Custodian at the time of, and directly relating to, the events giving rise
to the liability occurred, the value of which shall be determined in accordance
with the Chicago Mercantile Exchange [ ] or any
successor thereto. The BNB Custodian is not liable to the Trust (whether under
contract, tort (including negligence) or otherwise) for any indirect,
incidental, special, punitive or consequential losses suffered or incurred by
the Trust (whether or not any such losses were foreseeable). The BNB Custodian
is not liable to the Trust or anyone else for any loss or injury resulting
directly or indirectly from any damage or interruptions caused by any computer
viruses, spyware, scamware, trojan horses, worms, or other malware that may
affect the Trust's computer or other equipment, provided such malware did not
originate from the BNB Custodian or its agents. The Custody Agreement's "Force
Majeure" provision provides that the BNB Custodian is not liable for delays,
suspension of operations, failure in performance, or interruption of service to
the extent it is directly due to a cause or condition beyond the reasonable
control of the BNB Custodian including, but not limited to, any act of God,
nuclear or natural disaster, epidemic, action or inaction of civil or military
authorities, act of war, terrorism, sabotage, civil disturbance, strike or other
labor dispute, accident, or state of emergency; provided, however, that for the
avoidance of doubt, the Custody Agreement's Force Majeure provision shall not
apply in respect of System Failures or Downtime, which are subject to other
respective provisions of the Custody Agreement. The occurrence of an event
described in the Force Majeure provision shall not affect the validity and
enforceability of any remaining provisions of the Custody
Agreement.
In
the event of potential losses incurred by the Trust as a result of the BNB
Custodian losing control of the Trust's BNB or failing to properly execute
instructions on behalf of the Trust, the BNB Custodian's liability with respect
to the Trust will be subject to certain limitations which may allow it to avoid
liability for potential losses or may be insufficient to cover the value of such
potential losses. Furthermore, the insurance maintained by the BNB
Custodian
may be insufficient to cover its liabilities to the Trust. Both the Trust and
the BNB Custodian are required to indemnify each other under certain
circumstances.
Subject
to the Force Majeure provision and as limited by the limitations of liability in
the Custody Agreement, the BNB Custodian shall be liable to the Trust for the
Loss (defined below) of any of the Trust's BNB or fiat currency to the extent
that such Loss was caused by the negligence, fraud, willful or reckless
misconduct of the BNB Custodian or breach by the BNB Custodian of its Standard
of Care. The Custody Agreement provides that "Loss" means if, at any time the
Trust's BNB Account or Fiat Account, as applicable, does not hold the BNB or
fiat currency that had been (1) received by BNB Custodian in connection with the
Trust's BNB Account or Fiat Account pursuant to the Custody Agreement, or (2)
duly sent to the BNB Custodian by the Trust or Authorized Participants in
connection with the Trust's BNB Account pursuant to the Custody Agreement but
not received because of a failure caused by the BNB Custodian. The Custody
Agreement provides that "Loss" shall include situations where the BNB Custodian
fails to execute a valid withdrawal request, BNB are withdrawn from the Trust's
BNB Account other than pursuant to a withdrawal request, or the Trust is not
able to timely withdraw BNB from the BNB Account pursuant to a withdrawal
request, in each case due to a failure caused by the BNB Custodian; provided,
however, that the BNB Custodian's failure to permit timely withdrawals because
it has determined that it cannot do so due to the requirements of applicable
laws and regulations or because of the operation of its fraud detection controls
shall not be considered a Loss, provided the BNB Custodian is acting reasonably
and in good faith. The Custody Agreement provides that should a Loss of the
Trust's BNB or fiat currency due to the negligence, fraud, willful or reckless
misconduct of the BNB Custodian or a breach by the BNB Custodian of its Standard
of Care occur, the BNB Custodian will, as soon as practicable, return to the
Trust a quantity of the same digital asset that is equal to the quantity of
digital assets involved in the Loss, or return to the Trust a quantity of the
same fiat currency that is equal to the quantity of fiat currency involved in
the Loss (if the Loss involved the Fiat Account). However, the Trust does not
control the BNB Custodian and cannot guarantee that the BNB Custodian will
perform its obligations to the Trust under the Custody Agreement, in a timely
manner or at all. The Custody Agreement provides that (i) the BNB Custodian does
not own or control the underlying software protocols of networks which govern
the operation of digital assets (including the BNB Chain), (ii) the BNB
Custodian makes no guarantees regarding their security, functionality, or
availability, and (iii) in no event shall the BNB Custodian be liable for or in
connection with any acts, decisions, or omissions made by developers or
promoters of digital assets, including BNB.
Similarly,
under the Clearing Agreement, the BNB Custodian's liability in connection with
the Clearing Services is limited as follows, among others: the BNB Custodian
does not have any responsibility for any sale or purchase of BNB for cash to a
Liquidity Provider or Authorized Participant or their designee through the
Clearing Services (such a transaction, a "Clearing Transaction"), other than as
specifically identified in the Clearing Agreement. The BNB Custodian may rely
upon, without liability on its part, any clearing request submitted through
[ ]'s platform. Absent gross negligence, willful
misconduct or fraud, the BNB Custodian shall not be liable for any loss
resulting from a clearing request or the use of Clearing Services. Validation
and confirmation procedures used by [ ] are
designed only to verify the source of clearing requests and that each party has
met its respective obligations in respect of a clearing request and not to
detect errors in the content of a clearing request or to prevent duplicate
clearing requests. The Trust is responsible for losses resulting from clearing
requests provided by it and for any errors made by or on behalf of the Trust,
any errors resulting, directly or indirectly, from fraud or the duplication of
any clearing request by or on behalf of the Trust, or any losses resulting from
the malfunctioning of any devices used by the Trust or loss or compromise of
credentials used by the Trust to deliver clearing requests. The BNB Custodian
may reject, refuse to settle or otherwise not complete any request to settle a
BNB transaction through the Clearing Services for any reason necessary to comply
with applicable laws and regulations or in connection with its fraud or other
compliance controls and systems, and the BNB Custodian shall have no liability
whatsoever to the Trust, any transaction counterparty or any other party in
connection with or arising out of the BNB Custodian rejecting, refusing or
otherwise not completing the settlement of a transaction through the Clearing
Services. The BNB Custodian will not settle transactions through the Clearing
Services: (i) if either party to a Clearing Transaction has not fully funded its
accounts held with the BNB Custodian and used in connection with the Clearing
Services (in the Trust's case, the Clearing Account and Fiat Account), as
applicable, with the required fiat currency amount or BNB amount, as applicable,
prior to the agreed expiration time; (ii) if either party to a Clearing
Transaction has not confirmed its acceptance of the clearing request to the BNB
Custodian prior to the agreed expiration time; (iii) if either party to a
transaction is not a [ ] customer; or (iv) for any
other reason as determined by the BNB Custodian
in
its sole discretion to comply with applicable laws and regulation or in
connection with the BNB Custodian's fraud or other compliance controls and
systems. Although the BNB Custodian has represented to the Sponsor that Clearing
Transactions ordinarily settle automatically within minutes once the BNB and
cash have been funded by both the Trust and the Liquidity Provider or Authorized
Participant or their designee in their respective accounts at the BNB Custodian
used in connection with the Clearing Services (in the Trust's case, the Clearing
Account and Fiat Account), the BNB Custodian is not required by the Clearing
Agreement to settle the Clearing Transaction that quickly. These and the other
limitations on the BNB Custodian's liability may allow it to avoid liability for
potential losses, even if the BNB Custodian directly caused such
losses.
The
Clearing Agreement provides that it is subject to
[ ]'s user agreement (the "User Agreement").
Pursuant to the User Agreement, [ ] agrees to take
reasonable care and use commercially reasonable efforts in executing
[ ]'s responsibilities to the Trust pursuant to the
User Agreement, or such higher care where required by law or as specified by the
User Agreement. [ ] uses commercially reasonable
efforts to provide the Trust with a reliable and secure platform. From time to
time, interruptions, errors or other deficiencies in service may occur due to a
variety of factors, some of which are outside of our control. These factors can
contribute to delays, errors in service, or system outages, creating
difficulties in accessing the Trust's account, withdrawing fiat currency or BNB,
depositing fiat currency or BNB, and/or placing and/or canceling
orders.
Under
the User Agreement, [ ] is not liable for any
delays, failure in performance or interruption of service which result directly
or indirectly from any cause or condition, whether or not foreseeable, beyond
[ ]'s reasonable control, including, but not
limited to, any act of God, nuclear or natural disaster, epidemic, action or
inaction of civil or military authorities, act of war, terrorism, sabotage,
civil disturbance, strike or other labor dispute, accident, state of emergency
or interruption, loss, or malfunction of equipment or utility, communications,
computer (hardware or software), Internet or network provider
services.
Except
to the extent required by law, [ ] is not liable
under the User Agreement, whether in contract or tort, for any punitive,
special, indirect, consequential, incidental, or similar damages, including lost
trading or other profits, diminution in asset value, or lost business
opportunities (even if [ ] have been advised of the
possibility thereof) in connection with the transactions subject to the User
Agreement. [ ]'s total liability for breach of the
User Agreement shall be limited by the value of any of the Trust's allegedly
lost fiat currency and digital assets in the custody of
[ ] at the time of loss. Under the User Agreement,
[ ] is not liable for delays or interruptions in
service caused by automated or other compliance checks or for other reasonable
delays or interruptions in service, by definition to include any delay or
interruption shorter than one week, or delays or interruptions in service beyond
the control of [ ] or its service providers. The
limitation on liability under the User Agreement includes, but is not limited to
any damage or interruptions caused by any computer viruses, spyware, scamware,
trojan horses, worms, or other malware that may affect the Trust's computer or
other equipment, or any phishing, spoofing, domain typosquatting, or other
attacks, failure of mechanical or electronic equipment or communication lines,
telephone or other interconnect problems (e.g., you cannot access your internet
service provider), unauthorized access, theft, operator errors, strikes or other
labor problems, or any force majeure. [ ] does not
guarantee continuous, uninterrupted, or secure access to
[ ]. [ ] is not
responsible for any failure or delay to act by any
[ ] service provider, including
[ ]'s banks, or any other participant that is
within the time limits permitted by the User Agreement or prescribed by law, or
that is caused by the Trust's negligence.
Under
the User Agreement, [ ] is not responsible for any
"System Failure" (defined as a failure of any computer hardware or software used
by [ ], a [ ] service
provider, or any telecommunications lines or devices used by
[ ] or a [ ] service
provider), or scheduled or unscheduled maintenance or downtime, which prevents
[ ] from fulfilling its obligations under the User
Agreement, provided that [ ] used commercially
reasonable efforts to prevent or limit such System Failures, or downtime.
[ ] cannot be held responsible for any other
circumstances beyond [ ]'s reasonable
control.
The
Additional BNB Custodian's parent, [ ] maintains a
commercial crime insurance policy of up to $320 million, which is intended to
cover the loss of client assets held by [ ] and all
of its subsidiaries, including the Additional BNB Custodian (collectively,
[ ] and its subsidiaries are referred to as the
"[ ]"), including from employee collusion or fraud,
physical loss including theft, damage of key material, security breach or hack,
and fraudulent transfer. The insurance maintained by
[ ] is shared among all of
[ ]'s customers, is not specific to the
Trust
or to customers of the Additional BNB Custodian and may not be available or
sufficient to protect the Trust from all possible losses or sources of losses.
[ ]'s insurance may not cover the type of losses
experienced by the Trust. Alternatively, the Trust may be forced to share such
insurance proceeds with other clients or customers of the
[ ], which could reduce the amount of such proceeds
that are available to the Trust. In addition, the BNB insurance market is
limited, and the level of insurance maintained by
[ ] may be substantially lower than the assets of
the Trust. While the Additional BNB Custodian maintains certain capital reserve
requirements depending on the assets under custody, and such capital reserves
may provide additional means to cover Trust asset losses, the Trust cannot be
assured that the Additional BNB Custodian will maintain capital reserves
sufficient to cover actual or potential losses with respect to the Trust's
digital assets.
Additionally,
under the Additional BNB Custody Agreement, the Additional BNB Custodian's
liability is limited as follows, among others: (i) in respect of any incidental,
indirect, special, punitive, consequential or similar losses, the Additional BNB
Custodian is not liable, even if the Additional BNB Custodian has been advised
of or knew or should have known of the possibility thereof; (ii) the Additional
BNB Custodian, its affiliates or its respective officers, directors, agents,
employees and representatives shall in no event have any liability with respect
to any breach of its obligations under the Additional BNB Custody Agreement
which does not result from its negligence, fault, fraud or willful misconduct;
and (iii) except for the: (i) Excluded Liabilities; (ii) fraud; or (iii) willful
misconduct, in no event shall any [ ] entity's
aggregate liability with respect to any breach of its obligations under the
Additional BNB Custody Agreement exceed the greater of (a) the value of the BNB
involved in the transaction giving rise to such liability and (b) the aggregate
amount of fees paid by the Trust to such [ ] entity
in respect of services relating to custody, trade execution, lending or
post-trade credit (if applicable) and other services in the 12-month period
prior to the event giving rise to such liability, and solely in respect of
custodial services provided pursuant to the Additional BNB Custody Agreement,
the liability of the Additional BNB Custodian shall not exceed the greater of
(i) the aggregate amount of fees paid by the Trust to the Additional BNB
Custodian in respect of the custodial services in the 12-month period prior to
the event giving rise to such liability; or (ii) the value of the BNB on deposit
in Trust's Additional BNB Account(s) involved in the event giving rise to such
liability; provided, that in no event shall the Additional BNB Custodian's
aggregate liability in respect of each cold storage address exceed one hundred
million US dollars ($100,000,000.00 USD).
"Excluded
Liabilities" means (x) with respect to the Trust, (1) the Trust's defense and
indemnity obligations under the Additional BNB Custody Agreement; (2) any
outstanding commissions or fees owed by the Trust under the Additional BNB
Custody Agreement and (3) the Trust's breach of representations and warranties
under the Additional BNB Custody Agreement; and (y) with respect to the
Additional BNB Custodian, its defense and indemnity obligations under the
Additional BNB Custody Agreement. With respect to the Excluded Liabilities, the
Additional BNB Custodian's liability to the Trust for any losses arising out of
or in connection with the Additional BNB Custodian's defense and indemnity
obligations under the Additional BNB Custody Agreement will be limited, in the
aggregate, to an amount equal to five million U.S. dollars ($5,000,000.00
USD).
In
general, the Additional BNB Custodian is not liable under the Additional BNB
Custody Agreement unless in the event of its negligence, fraud, material
violation of applicable law or willful misconduct. The Additional BNB Custodian
is not liable for delays, suspension of operations, failure in performance, or
interruption of service to the extent it is directly due to a cause or condition
beyond the reasonable control of the Additional BNB Custodian. Furthermore, the
insurance maintained by the Additional BNB Custodian may be insufficient to
cover its liabilities to the Trust.
The
Additional BNB Custodian requires up to twenty-four (24) hours between any
request to withdraw BNB from the Trust's Additional BNB Account and submission
of the Trust's withdrawal to the BNB Chain. It may be necessary to retrieve
certain information from offline storage in order to facilitate a withdrawal in
accordance with the Trust's instructions, which may delay the initiation or
crediting of such withdrawal from the Trust's Additional BNB Account. BNB shall
not be deposited or withdrawn upon less than twenty-four (24) hours' notice
initiated from the Trust's Additional BNB Account. The time of such request
shall be the time such notice is transmitted from the Trust's Additional BNB
Account. In the context of the foregoing and during such twenty-four (24) hours'
notice period, the Additional BNB Custodian makes no representations or
warranties with respect to the availability and/or accessibility of (1) the BNB,
(2) a Custody Transaction (as defined in the Additional BNB Custody Agreement,
which includes a deposit or withdrawal), (3) the Additional BNB Account, or (4)
the Custodial Services (as defined
in
the Additional BNB Custody Agreement). While the Additional BNB Custodian will
make reasonable efforts to process client initiated deposits in a timely manner,
the Additional BNB Custodian makes no representations or warranties regarding
the amount of time needed to complete processing of deposits as such processing
is dependent upon many factors outside of the Additional BNB Custodian's
control.
Moreover,
in the event of an insolvency or bankruptcy of the BNB Custodian or the
Additional BNB Custodian in the future, given that the contractual protections
and legal rights of customers with respect to digital assets held on their
behalf by third parties are relatively untested in a bankruptcy of an entity
such as the BNB Custodian and the Additional BNB Custodian in the virtual
currency industry, there is a risk that customers' assets – including the
Trust's assets – may be considered the property of the bankruptcy estate of the
BNB Custodian or the Additional BNB Custodian, and customers – including the
Trust – may be at risk of being treated as general unsecured creditors of such
entities and subject to the risk of total loss or markdowns on value of such
assets.
Each
of the Custody Agreement and the Additional BNB Custody Agreement contain an
agreement by the parties to treat the BNB credited to the Trust's Custody
Account (as defined in the Custody Agreement) and the Trust's Custodial Account
(as defined in the Additional BNB Custody Agreement) as financial assets under
Article 8 of the New York Uniform Commercial Code ("Article 8"), in addition to
stating that the BNB Custodian and the Additional BNB Custodian will serve as
fiduciary and custodian on the Trust's behalf. It is possible that a court would
not treat custodied digital assets as part of the BNB Custodian's or the
Additional BNB Custodian's general estate in the event the BNB Custodian or the
Additional BNB Custodian were to experience insolvency. However, due to the
novelty of digital asset custodial arrangements courts have not yet considered
this type of treatment for custodied digital assets and it is not possible to
predict with certainty how they would rule in such a scenario. In the case of
the Clearing Account, because it is an omnibus account in which the assets of
multiple customers – including the Trust's assets – are held together, it is
likely the Trust would be treated as a general unsecured creditor in respect of
the Clearing Account held with the BNB Custodian in the event of the BNB
Custodian's insolvency. The Clearing Agreement does not contain an Article 8
opt-in. If the BNB Custodian or the Additional BNB Custodian became subject to
insolvency proceedings and a court were to rule that the custodied BNB were part
of the BNB Custodian's or the Additional BNB Custodian's general estate and not
the property of the Trust, then the Trust would be treated as a general
unsecured creditor in the BNB Custodian's or the Additional BNB Custodian's
insolvency proceedings and the Trust could be subject to the loss of all or a
significant portion of its assets. Moreover, in the event of the bankruptcy of
the BNB Custodian or the Additional BNB Custodian, an automatic stay could go
into effect and protracted litigation could be required in order to recover the
assets held with the BNB Custodian or the Additional BNB Custodian, all of which
could significantly and negatively impact the Trust's operations and the value
of the Shares.
Under
the Trust Agreement, the Trustee and the Sponsor will not be liable for any
liability or expense incurred, including, without limitation, as a result of any
loss of BNB by the BNB Custodian, absent gross negligence or bad faith on the
part of the Trustee or the Sponsor or breach by the Sponsor of the Trust
Agreement, as the case may be. As a result, the recourse of the Trust or the
Shareholders to the Trustee or the Sponsor, including in the event of a loss of
BNB by the BNB Custodian, is limited.
The
Shareholders' recourse against the Sponsor, the Trustee, and the Trust's other
service providers for the services they provide to the Trust, including, without
limitation, those relating to the holding of BNB or the provision of
instructions relating to the movement of BNB, is limited. For the avoidance of
doubt, neither the Sponsor, the Trustee, nor any of their affiliates, nor any
other party has guaranteed the assets or liabilities, or otherwise assumed the
liabilities, of the Trust, or the obligations or liabilities of any service
provider to the Trust, including, without limitation, the BNB Custodian or the
Additional BNB Custodian. Consequently, a loss may be suffered with respect to
the Trust's BNB that is not covered by the BNB Custodian's or the Additional BNB
Custodian's insurance and for which no person is liable in damages. As a result,
the recourse of the Trust or the Shareholders, under applicable law, is
limited.
The
Trust May Be Required, Or The Sponsor May Deem It Appropriate, To Terminate And
Liquidate At A Time That Is Disadvantageous To Shareholders.
Pursuant
to the terms of the Trust Agreement, the Trust is required to dissolve under
certain circumstances. In addition, the Sponsor may, in its sole discretion,
dissolve the Trust for a number of reasons, including if the Sponsor determines,
in its sole discretion, that it is desirable or advisable for any reason to
discontinue the affairs of the Trust.
If
the Trust is required to terminate and liquidate, or the Sponsor determines in
accordance with the terms of the Trust Agreement that it is appropriate to
terminate and liquidate the Trust, such termination and liquidation could occur
at a time that is disadvantageous to Shareholders, such as when the actual
exchange rate of BNB is lower than the Index was at the time when Shareholders
purchased their Shares. In such a case, when the Trust's BNB is sold as part of
its liquidation, the resulting proceeds distributed to Shareholders will be less
than if the actual exchange rate at such time were higher at the time of
sale.
The
Sponsor Is Solely Responsible For Determining The Value Of The BNB Holdings And
BNB Holdings Per Share, And Any Errors, Discontinuance Or Changes In Such
Valuation Calculations May Have An Adverse Effect On The Value Of The
Shares.
The
Sponsor has the exclusive authority to determine the Trust's NAV and the Trust's
NAV per share, which it has delegated to the Administrator. The Administrator
will determine the Trust's BNB holdings and BNB holdings per Share on a daily
basis as soon as practicable after 4:00 p.m. Eastern time on each business day.
The Administrator's determination is made utilizing data from the operations of
the Trust and the MarketVectorTM
[ ], calculated at 4:00 p.m. Eastern time on such
day. To the extent that the BNB holdings or BNB holdings per Share are
incorrectly calculated, the Sponsor will not be liable (absent gross negligence
or willful misconduct) for any error and such misreporting of valuation data
could adversely affect the value of the Shares.
If
the Sponsor determines in good faith that the MarketVectorTM
[ ] does not reflect an accurate BNB price, then
the Sponsor will instruct the Administrator to employ an alternative method to
determine the fair value of the Trust's assets. There are no predefined criteria
to make a good faith assessment as to which of the rules the Sponsor will apply
and the Sponsor may make this determination in its sole discretion. The
Administrator may calculate the NAV in a manner that ultimately inaccurately
reflects the price of BNB. To the extent that the Trust's NAV and the Trust's
NAV per share, the MarketVectorTM
[ ], or the Administrator's or the Sponsor's other
valuation methodology are incorrectly calculated, neither the Sponsor, the
Administrator nor the Trustee may be liable for any error and such misreporting
of valuation data could adversely affect the value of the Shares and investors
could suffer a substantial loss on their investment in the Trust. Moreover, the
terms of the Trust Agreement do not prohibit the Sponsor from changing the index
used to calculate NAV or other valuation method used to calculate the net asset
value of the Trust. Any such change in the index or other valuation method could
affect the value of the Shares and investors could suffer a substantial loss on
their investment in the Trust.
To
the extent the methodology used to calculate the MarketVectorTM
[ ] is deemed not to be consistent with GAAP, the
Trust's periodic financial statements may not utilize the Trust's NAV or the
Trust's NAV per share. For purposes of the Trust's financial statements, the
Trust will utilize a pricing source that is consistent with GAAP, as of the
financial statement measurement date. The Sponsor will determine in its sole
discretion the valuation sources and policies used to prepare the Trust's
financial statements. To the extent that such valuation sources and policies
used to prepare the Trust's financial statements result in an inaccurate price,
the value of the Shares could be adversely affected and investors could suffer a
substantial loss on their investment in the Trust. Moreover, the terms of the
Trust Agreement do not prohibit the Sponsor from changing the valuation method
used to calculate the net asset value to be reported in the Trust's financial
statements. Any such change in such valuation method could affect the value of
the Shares and investors could suffer a substantial loss on their investment in
the Trust.
Extraordinary
Expenses Resulting From Unanticipated Events May Become Payable By The Trust,
Adversely Affecting The Value Of The Shares.
In
partial consideration for the Sponsor's Fee, the Sponsor shall assume and pay
all fees and other expenses incurred by the Trust in the ordinary course of its
affairs, with the exception of those described in "Additional
Information
About The Trust — The Trust's Fees and Expenses." Expenses incurred by the Trust
but not assumed by the Sponsor, such as, among others, taxes and governmental
charges; 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 (including, for example, in connection
with any fork of the BNB Chain, any Incidental Rights and any IR Virtual
Currency); or extraordinary legal fees and expenses are not assumed by the
Sponsor and are borne by the Trust. The Sponsor may sell BNB to pay certain
expenses not assumed by the Sponsor. Accordingly, the Sponsor may be required to
sell or otherwise dispose of BNB at a time when the trading prices for those
assets are depressed.
The
sale or other disposition of assets of the Trust in order to pay extraordinary
expenses could have a negative impact on the value of the Shares for several
reasons. These include the following factors:
•The
Trust is not actively managed and no attempt will be made to protect against or
to take advantage of fluctuations in the price of BNB. Consequently, if the
Trust incurs expenses in U.S. dollars, the Trust's BNB may be sold at a time
when the values of the disposed assets are low, resulting in a negative impact
on the value of the Shares.
•Because
the Trust does not generate any income, every time that the Trust pays expenses,
it will deliver BNB to the Sponsor or sell BNB. Any sales of the Trust's assets
in connection with the payment of expenses will decrease the amount of the
Trust's assets represented by each Share each time its assets are sold by or
transferred to the Sponsor.
The
Value Of The Shares Will Be Adversely Affected If The Trust Is Required To
Indemnify The Sponsor, The Trustee, The Transfer Agent, The BNB Custodian, the
Additional BNB Custodian Or The Cash Custodian Under The Trust
Documents.
Under
the Trust Documents, each of the Sponsor, the Trustee, the Transfer Agent, the
BNB Custodian, the Additional BNB Custodian and the Cash Custodian has a right
to be indemnified by the Trust for certain liabilities or expenses that it
incurs without gross negligence, bad faith or wilful misconduct on its part.
Therefore, the Sponsor, Trustee, Transfer Agent, the BNB Custodian, the
Additional BNB Custodian or the Cash Custodian may require that the assets of
the Trust be used for indemnification in order to cover losses or liability
suffered by them. This would reduce the BNB holdings of the Trust and the value
of the Shares.
[
] Serves As The BNB Custodian For Several Competing Exchange-Traded BNB
Products, And The Trust's Cash Custodian And Liquidity Providers May Also
Transact With Competing Exchange-Traded BNB Products Or With Other Companies In
The Digital Assets Industry, Which Could Heighten Interconnectedness And
Contagion Risks And Adversely Affect Creation And Redemption Processes Of The
Trust.
By
virtue of its prominent market position and capabilities, and the relatively
limited number of institutionally-capable providers of cryptoasset brokerage and
custody services, [ ] serves as the BNB Custodian
for several competing exchange-traded BNB products. Therefore,
[ ]'s size and market share creates the risk that
[ ] may fail to properly resource its operations to
support all such products that use its services, and the broader risk that its
concentrated focus on the industry could adversely affect its financial
condition or disrupt its operations if its customers in the digital assets
industry experience problems or issues, which could harm the Trust, the
Shareholders and the value of the Shares. If [ ]
were to favor the interests of certain products over others, it could result in
inadequate attention or comparatively unfavorable commercial terms to less
favored products, which could adversely affect the Trust's operations and
ultimately the value of the Shares. Similarly, although the Sponsor presently
has no knowledge of the Cash Custodian's customer base, if and to the extent the
Cash Custodian serves other competing exchange-traded cryptocurrency products or
other similar investment vehicles, it could conceivably divert the Cash
Custodian's focus and resources away from serving the Trust, leading to harm to
the Trust and its Shareholders.
The
BNB Custodian is, and Liquidity Providers in many cases are, prominent companies
with active operations in the digital assets industry. As illustrated by the
2022 Events, many of the players in the digital assets markets are
interconnected – for example, certain market participants may be active in both
borrowing and lending, or engage in a wide variety of trading relationships and
transactions, with respect to many of the same counterparties, or with
respect
to the same digital assets or blockchain networks – which can heighten the
contagion risks if one of them defaults on its obligations to others or a given
digital blockchain network or digital asset were to stop functioning properly or
lose substantial value, as applicable, leading to correlated failures in a wider
market downturn or a disruption or market dislocation affecting that particular
blockchain network or that particular digital asset. It is possible that, in
circumstances similar to the 2022 Events, this interconnectedness risk affecting
the BNB Custodian and the Liquidity Providers to the Trust and Authorized
Participants and their designees could adversely affect the Trust or its
Shareholders, for instance by disrupting creation and redemption
processes.
[ ]
serves as the BNB Custodian for several competing exchange-traded BNB products,
which could adversely affect the trust's operations and ultimately the value of
the Shares.
The
Additional BNB Custodian is an affiliate of [ ]. As
of the date hereof, [ ] is the largest publicly
traded cryptoasset company in the world by market capitalization and is also the
largest cryptoasset custodian in the world by assets under custody. By virtue of
its leading market position and capabilities, and the relatively limited number
of institutionally-capable providers of cryptoasset brokerage and custody
services, [ ] serves as the BNB Custodian for
several competing exchange-traded BNB products. Therefore,
[ ] has a critical role in supporting the U.S. spot
BNB exchange-traded product ecosystem, and its size and market share creates the
risk that [ ] may fail to properly resource its
operations to adequately support all such products that use its services that
could harm the Trust, the Shareholders and the value of the Shares. If
[ ] were to favor the interests of certain products
over others, it could result in inadequate attention or comparatively
unfavorable commercial terms to less favored products, which could adversely
affect the Trust's operations and ultimately the value of the
Shares.
The
Trust's Authorized Participants Act in Similar or Identical Capacities for
Several Competing Exchange-Traded BNB Products, Which May Impact the Ability or
Willingness of One or More Authorized Participants to Participate in the
Creation and Redemption Process, Adversely Affect the Trust's Ability to Create
or Redeem Baskets and Adversely Affect the Trust's Operations and Ultimately the
Value of the Shares.
Many
of the Trust's Authorized Participants, now or in the future, act or may act in
the same capacity for several competing exchange- traded BNB products. Due to
balance sheet capacity or other concerns or constraints, Authorized
Participants, none of which are obligated to engage in creation and/or
redemption transactions, may not be able or willing to submit creation or
redemption orders with the Trust or may do so in limited capacities,
particularly during times of heightened market trading activity or market
volatility or turmoil. The inability or unwillingness of Authorized Participants
to do so could lead to the potential for the Shares to trade at premiums or
discounts to the NAV, and such premiums or discounts could be
substantial.
Furthermore,
if creations or redemptions are unavailable due the inability or unwillingness
of one or more of the Trust's Authorized Participants to submit creation or
redemption orders with the Trust (or do so in a limited capacity), the arbitrage
mechanism may fail to function as efficiently as it otherwise would or be
unavailable. This could result in impaired liquidity for the Shares, wider
bid/ask spreads in the secondary trading of the Shares and greater costs to
investors and other market participants, all of which could cause the Sponsor to
halt or suspend the creation or redemption of Shares during such times, among
other consequences.
Staking
Risk.
The
BNB trading market may be impacted by the supply of BNB that voluntarily elects
to commit to staking. The BNB Chain issues a fixed amount of rewards for voting
on blocks, which are divided among the participating validators. The less
validators and the less users staking their BNB, the more rewards, and vice
versa.
If
the Staking Services Provider experiences operational or other difficulties,
terminates their services, fails to comply with regulations, raises their prices
or disputes key intellectual property rights sold or licensed to, the Trust, the
Trust could suffer losses. The Fund may also suffer the consequences of such
Staking Services Provider's mistakes. For example, if the Trust's BNB Custodian
or Additional BNB Custodian or Staking Services Provider selected to act as
validators fail to behave as expected, default, fail to perform, suffer
cybersecurity attacks, experience security issues or encounter other problems,
the assets of the Trust may be irretrievably lost. The failure or capacity
restraints of vendors and services, a cybersecurity breach involving any service
providers or the termination or change in terms or price of a vendor,
third-party software license or service agreement on which the
Trust
relies, could disrupt the Trust's staking activities or cause losses. Replacing
the Staking Services Providers or addressing other issues with vendors and
service providers could entail significant delay, expense and disruption for the
Trust. As a result, if these vendors and service providers experience
difficulties, are subject to cybersecurity breaches, terminate their services,
dispute the terms of intellectual property agreements or raise their prices, and
the Sponsor is unable to replace them with other vendors and service providers,
particularly on a timely basis, the Trust's staking activities could be
interrupted or disrupted, or the Trust could suffer a loss.
The
BNB Chain dictates requirements for participation in the relevant decentralized
governance activity and may impose slashing penalties, which are generally
permanent, if the relevant activities are not performed correctly, such as if
the validator acts maliciously on the network. If any Staking Services Provider
selected to act as validator for the Trust is slashed by the BNB Chain, a
variable amount of assets of the Trust will be burned by the BNB Chain and
irretrievable by the Trust, causing loss. There is no assurance that any Staking
Services Providers will not act maliciously or be subject to slashing penalties
or that the Trust will be able to recover any percentage of BNB that has been
subject to slashing penalties. While slashing is not currently enabled on the
BNB Chain and as such, to date, there have not been any recorded incidents of
slashing, there are proposals for its implementation. It remains unclear exactly
how or when, if at all, slashing will be introduced.
Validator
downtime incurs a minor inactivity penalty by the BNB Chain not exceeding the
activity reward earned when a validator is functioning correctly. During a
period of extended downtime by the Staking Services Provider, the Trust may also
be prevented from obtaining rewards in respect of periods during which the
validator is inactive on the BNB Chain.
There
is no guarantee that the Trust will receive any rewards in respect of staked
BNB. Past rewards are not indicative of future returns. The staking rewards that
the Trust may receive from staking BNB, if any, may be affected by, among other
factors:
•the
total amount of BNB staked by users of the BNB Chain;
•the
total amount of BNB staked by the Trust;
•changes
to the BNB Chain as a result of protocol governance decisions;
•changes
to validator fees set by the validators, including the commission charged by the
Staking Services Provider (if any);
•anticipated
or unanticipated downtime by Staking Services Provider;
•halts,
outages or other anticipated or unanticipated interruptions affecting the BNB
Chain or third-party service providers involved in Trust's staking;
•"slashing"
of BNB as a result of a violation of BNB Chain rules by Staking Services
Provider;
•validators
ceasing to be eligible to participate in the BNB Chain's proof-of-stake
mechanism and earn rewards;
•"bonding",
"unbonding" or other lock-up periods specified by the BNB Chain;
•whether
staking rewards are re-staked, either automatically by the BNB Chain or as part
of the operational processes of the Trust; and
•delays
or other operational factors related to or otherwise impacting the Trust's
staking activities.
Regulatory
Risk
Digital
Asset Markets In The United States Exist In A State Of Regulatory Uncertainty,
And Adverse Legislative Or Regulatory Developments Could Significantly Harm The
Value Of BNB Or The Shares, Such As By Banning, Restricting Or Imposing Onerous
Conditions Or Prohibitions On The Use Of BNB, Mining Activity, Digital Wallets,
The Provision Of Services Related To Trading And Custodying BNB, The Operation
Of The BNB Chain, Or The Digital Asset Markets Generally.
There
is a lack of consensus regarding the regulation of digital assets, including
BNB, and their markets. As a result of the growth in the size of the digital
asset market, as well as the 2022 Events, the U.S. Congress and a number of U.S.
federal and state agencies (including FinCEN, SEC, Office of the Comptroller of
the Currency (the "OCC"), U.S. Commodity Futures Trading Commission (the
"CFTC"), FINRA, the Consumer Financial Protection Bureau ("CFPB"), the
Department of Justice, the Department of Homeland Security, the Federal Bureau
of Investigation, the IRS, state financial institution regulators, and others)
have been examining the operations of digital asset networks, digital asset
users and the digital asset markets. Congress is currently considering several
bills relating to the regulation of digital assets and stablecoins, which may
not pass and be enacted in their present form or at all.
Many
of state and federal agencies have brought enforcement actions or issued
consumer advisories regarding the risks posed by digital assets to investors.
Ongoing and future regulatory actions with respect to digital assets generally
or BNB in particular may alter, perhaps to a materially adverse extent, the
nature of an investment in the Shares or the ability of the Trust to continue to
operate.
The
2022 Events, including among others the bankruptcy filings of FTX and its
subsidiaries, Three Arrows Capital, Celsius Network, Voyager Digital, Genesis,
BlockFi and others, and other developments in the digital asset markets, have
resulted in calls for heightened scrutiny and regulation of the digital asset
industry, with a specific focus on intermediaries such as digital asset
exchanges, platforms, and custodians. Federal and state legislatures and
regulatory agencies may introduce and enact new laws and regulations to regulate
crypto asset intermediaries, such as digital asset exchanges and custodians. The
March 2023 collapses of Silicon Valley Bank, Silvergate Bank, and Signature
Bank, which in some cases provided services to the digital assets industry, may
amplify and/or accelerate these trends. On January 3, 2023, the federal banking
agencies issued a joint statement on crypto-asset risks to banking organizations
following events which exposed vulnerabilities in the crypto-asset sector,
including the risk of fraud and scams, legal uncertainties, significant
volatility, and contagion risk. Although banking organizations are not
prohibited from crypto- asset related activities, the agencies have expressed
significant safety and soundness concerns with business models that are
concentrated in crypto- asset related activities or have concentrated exposures
to the crypto-asset sector.
US
federal and state regulators, as well as the White House, have issued reports
and releases concerning crypto assets, including crypto asset markets. Further,
in 2023 the House of Representatives formed two new subcommittees: the Digital
Assets, Financial Technology and Inclusion Subcommittee and the Commodity
Markets, Digital Assets, and Rural Development Subcommittee, each of which were
formed in part to analyze issues concerning crypto assets and demonstrate a
legislative intent to develop and consider the adoption of federal legislation
designed to address the perceived need for regulation of and concerns
surrounding the crypto industry. However, the extent and content of any
forthcoming laws and regulations are not yet ascertainable with certainty, and
it may not be ascertainable in the near future. A divided Congress makes any
prediction difficult. We cannot predict how these and other related events will
affect us or the crypto asset business.
In
August 2021, the chair of the SEC stated that he believed investors using
digital asset trading platforms are not adequately protected, and that
activities on the platforms can implicate the securities laws, commodities laws
and banking laws, raising a number of issues related to protecting investors and
consumers, guarding against illicit activity, and ensuring financial stability.
The chair expressed a need for the SEC to have additional authorities to prevent
transactions, products, and platforms from "falling between regulatory cracks,"
as well as for more resources to protect investors in "this growing and volatile
sector." The chair called for federal legislation centering on digital asset
trading, lending, and decentralized finance platforms, seeking "additional
plenary authority" to write rules for digital asset trading and lending.
Moreover, President Biden's March 9, 2022 Executive Order, asserting that
technological
advances and the rapid growth of the digital asset markets "necessitate an
evaluation and alignment of the United States Government approach to digital
assets," signals an ongoing focus on digital asset policy and regulation in the
United States. A number of reports issued pursuant to the Executive Order have
focused on various risks related to the digital asset ecosystem, and have
recommended additional legislation and regulatory oversight. There have also
been several bills introduced in Congress that propose to establish additional
regulation and oversight of the digital asset markets.
It
is not possible to predict whether Congress will grant additional authorities to
the SEC or other regulators, what the nature of such additional authorities
might be, how they might impact the ability of digital asset markets to function
or how any new regulations that may flow from such authorities might impact the
value of digital assets generally and BNB held by the Trust specifically. The
consequences of increased federal regulation of digital assets and digital asset
activities could have a material adverse effect on the Trust and the
Shares.
FinCEN
requires any administrator or exchanger of convertible digital assets to
register with FinCEN as a money transmitter and comply with the anti-money
laundering regulations applicable to money transmitters. Entities which fail to
comply with such regulations are subject to fines, may be required to cease
operations, and could have potential criminal liability. For example, in 2015,
FinCEN assessed a $700,000 fine against a sponsor of a digital asset for
violating several requirements of the U.S. Bank Secrecy Act (as amended) ("BSA")
by acting as an MSB and selling the digital asset without registering with
FinCEN, and by failing to implement and maintain an adequate anti-money
laundering program. In 2017, FinCEN assessed a $110 million fine against BTC-e,
a now defunct digital asset exchange, for similar violations. The requirement
that exchangers that do business in the U.S. register with FinCEN and comply
with anti-money laundering regulations may increase the cost of buying and
selling BNB and therefore may adversely affect the price of BNB and an
investment in the Shares.
The
Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury
(the "U.S. Treasury Department") has added digital currency addresses, including
on the BNB Chain, to the list of Specially Designated Nationals whose assets are
blocked, and with whom U.S. persons are generally prohibited from dealing. Such
actions by OFAC, or by similar organizations in other jurisdictions, may
introduce uncertainty in the market as to whether BNB that has been associated
with such addresses in the past can be easily sold. This "tainted" BNB may trade
at a substantial discount to untainted BNB. Reduced fungibility in the BNB
markets may reduce the liquidity of BNB and therefore adversely affect their
price.
In
February 2020, then-U.S. Treasury Secretary Steven Mnuchin stated that digital
assets were a "crucial area" on which the U.S. Treasury Department has spent
significant time. Secretary Mnuchin announced that the U.S. Treasury Department
is preparing significant new regulations governing digital asset activities to
address concerns regarding the potential use for facilitating money laundering
and other illicit activities. In December 2020, FinCEN, a bureau within the U.S.
Treasury Department, proposed a rule that would require financial institutions
to submit reports, keep records, and verify the identity of customers for
certain transactions to or from so-called "unhosted" wallets, also commonly
referred to as self- hosted wallets. In January 2021, U.S. Treasury Secretary
nominee Janet Yellen stated her belief that regulators should "look closely at
how to encourage the use of digital assets for legitimate activities while
curtailing their use for malign and illegal activities."
Under
regulations from the New York State Department of Financial Services ("NYDFS"),
businesses involved in digital asset business activity for third parties in or
involving New York, excluding merchants and consumers, must apply for a license,
commonly known as a BitLicense, from the NYDFS and must comply with anti-money
laundering, cyber security, consumer protection, and financial and reporting
requirements, among others. As an alternative to a BitLicense, a firm can apply
for a charter to become a limited purpose trust company under New York law
qualified to engage in certain digital asset business activities. Other states
have considered or approved digital asset business activity statutes or rules,
passing, for example, regulations or guidance indicating that certain digital
asset business activities constitute money transmission requiring
licensure.
The
inconsistency in applying money transmitting licensure requirements to certain
businesses may make it more difficult for these businesses to provide services,
which may affect consumer adoption of BNB and its price. In an attempt to
address these issues, the Uniform Law Commission passed a model law in July
2017, the Uniform Regulation of Virtual Currency Businesses Act, which has many
similarities to the BitLicense and features a
multistate
reciprocity licensure feature, wherein a business licensed in one state could
apply for accelerated licensure procedures in other states. It is still unclear,
however, how many states, if any, will adopt some or all of the model
legislation.
Law
enforcement agencies have often relied on the transparency of blockchains to
facilitate investigations. However, certain privacy- enhancing features have
been, or are expected to be, introduced to a number of digital asset networks.
If the BNB Chain were to adopt any of these features, these features may provide
law enforcement agencies with less visibility into transaction-level data. For
example, "privacy pools," zero knowledge proofs, and other technologies that
could enhance privacy have been discussed by participants in the BNB Chain.
Europol, the European Union's law enforcement agency, released a report in
October 2017 noting the increased use of privacy-enhancing digital assets like
Zcash and Monero in criminal activity on the internet. In August 2022, OFAC
banned all U.S. citizens from using Tornado Cash, a digital asset protocol
designed to obfuscate blockchain transactions, by adding certain BNB wallet
addresses associated with the protocol to its Specially Designated Nationals
list. On October 19, 2023, FinCEN published a proposed rulemaking to apply the
authorities in Section 311 of the USA PATRIOT Act to impose requirements on
financial institutions that engage in convertible virtual currency ("CVC")
transactions with CVC mixers. The proposed rule, if adopted, would require
covered financial institutions to report to FinCEN any CVC transactions they
process that involves CVC mixing within or involving a jurisdiction outside the
United States. The term "CVC mixing" covers more than just transactions that
involve CVC mixers like Tornado Cash, and seemingly could cover a broader range
of conduct involving technologies, services, or methods that have the effect of
obfuscating the source, destination, or amount of a CVC transaction, whether or
not the obfuscation was intentional. If the rule were to be adopted as proposed
and if the BNB Chain were to be deemed to or were to adopt features which come
within the rule's ambit, it could cause covered financial institutions – such as
many virtual currency exchanges, or the Trust's service providers, such as the
Cash Custodian – to reduce support for or cease offering services for BNB or to
the Trust, which could impair the utility of BNB, the value of the Shares and
the Trust's ability to operate in compliance with new laws and
regulations.
A
Determination That BNB Or Any Other Digital Asset Is A "Security" May Adversely
Affect The Value Of BNB And The Value Of The Shares, And Result In Potentially
Extraordinary, Nonrecurring Expenses To, Or Termination Of, The
Trust.
Depending
on its characteristics, a digital asset may be considered a "security" under the
federal securities laws. The test for determining whether a particular digital
asset is a "security" is complex and difficult to apply, and the outcome is
difficult to predict.
Whether
a digital asset is a security under the federal securities laws depends on
whether it is included in the lists of instruments making up the definition of
"security" in the Securities Act, the Exchange Act and the Investment Company
Act. Digital assets as such do not appear in any of these lists, although each
list includes the terms "investment contract" and "note," and the SEC has
typically analyzed whether a particular digital asset is a security by reference
to whether it meets the tests developed by the federal courts interpreting these
terms, known as the Howey
and
Reves
tests,
respectively. For many digital assets, whether or not the Howey
or
Reves
tests
are met is difficult to resolve definitively, and substantial legal arguments
can often be made both in favor of and against a particular digital asset
qualifying as a security under one or both of the Howey
and
Reves
tests.
Adding to the complexity, the SEC staff has indicated that the security status
of a particular digital asset can change over time as the relevant facts
evolve.
As
part of determining whether BNB is a security for purposes of the federal
securities laws, the Sponsor takes into account a number of factors, including
the various definitions of "security" under the federal securities laws and
federal court decisions interpreting elements of these definitions, such as the
U.S. Supreme Court's decisions in the Howey
and
Reves
cases,
as well as reports, orders, press releases, public statements and speeches by
the SEC and its staff providing guidance on when a digital asset may be a
security for purposes of the federal securities laws, and other materials
relevant to the status of BNB as a security (or not). Finally, the Sponsor
discusses the security status of BNB with its external securities lawyers.
Through this process the Sponsor believes that it is applying the proper legal
standards in making a good faith determination that it believes BNB is not
presently a security under federal law in light of the uncertainties inherent in
the Howey
and
Reves
tests.
In light of these uncertainties and the fact-based nature of the analysis, the
Sponsor acknowledges that BNB may currently be a security, based on the facts as
they
exist today, or may in the future be found by the SEC or a federal court to be a
security under the federal securities laws notwithstanding the Sponsor's prior
conclusion; and the Sponsor's prior conclusion, even if reasonable under the
circumstances and made in good faith, would not preclude legal or regulatory
action based on the presence of a security.
The
Sponsor may dissolve the Trust if the Sponsor determines BNB is a security under
the federal securities laws, whether that determination is initially made by the
Sponsor itself, or because the SEC or a federal court subsequently makes that
determination. Because the legal tests for determining whether a digital asset
is or is not a security often leave room for interpretation, for so long as the
Sponsor believes there to be good faith grounds to conclude that the Trust's BNB
is not a security, the Sponsor does not intend to dissolve the Trust on the
basis that BNB could at some future point be determined to be a
security.
In
June 2023, the SEC brought charges against Binance and Coinbase, and in November
2023, the SEC brought charges against Kraken, alleging that they operated
unregistered securities exchanges, brokerages and clearing agencies. In its
complaints, the SEC asserted that several digital assets are securities under
the federal securities laws, including BNB. The outcomes of these proceedings,
as well as ongoing and future regulatory actions, have had a material adverse
effect on the digital asset industry as a whole and on the price of BNB, and may
alter, perhaps to a materially adverse extent, the nature of an investment in
the Shares and/or the ability of the Trust to continue to operate.
Any
enforcement action by the SEC or a state securities regulator finding that BNB
is a security, or a court decision to that effect would be expected to have an
immediate material adverse impact on the trading value of BNB, as well as the
Shares. This is because the business models behind most digital assets are
incompatible with regulations applying to transactions in
securities.
If
a digital asset is determined to be a security, it is likely to become difficult
or impossible for the digital asset to be traded, cleared or custodied in the
United States through the same channels used by non-security digital assets,
which in addition to materially and adversely affecting the trading value of the
digital asset is likely to significantly impact its liquidity and market
participants' ability to convert the digital asset into U.S. dollars. For
example, in 2020 the SEC filed a complaint against the issuer of XRP, Ripple
Labs, Inc., and two of its executives, alleging that they raised more than $1.3
billion through XRP sales that should have been registered under the federal
securities laws, but were not. In the years prior to the SEC's action, XRP's
market capitalization at times reached over $140 billion. However, in the weeks
following the SEC's complaint, XRP's market capitalization fell to less than $10
billion, which was less than half of its market capitalization in the days prior
to the complaint. The SEC's action against XRP's issuer underscores the
continuing uncertainty around which digital assets are securities, and
demonstrates that such factors as how long a digital asset has been in
existence, how widely held it is, how large its market capitalization is and
that it has actual usefulness in commercial transactions, ultimately may have no
bearing on whether the SEC or a court will find it to be a
security.
In
addition, if BNB is determined to be a security, the Trust could be considered
an unregistered "investment company" under SEC rules, which could necessitate
the Trust's liquidation. In this case, the Trust and the Sponsor may be deemed
to have participated in an illegal offering of securities and there is no
guarantee that the Sponsor will be able to register the Trust under the
Investment Company Act at such time or take such other actions as may be
necessary to ensure the Trust's activities comply with applicable law, which
could force the Sponsor to liquidate the Trust.
Moreover,
whether or not the Sponsor or the Trust were subject to additional regulatory
requirements as a result of any SEC or federal court determination that its
assets include securities, the Sponsor may nevertheless decide to terminate the
Trust, in order, if possible, to liquidate the Trust's assets while a liquid
market still exists. For example, in response to the SEC's action against the
issuer of XRP, certain significant market participants announced they would no
longer support XRP and announced measures, including the delisting of XRP from
major digital asset trading platforms. The sponsor of the Grayscale XRP Trust
subsequently dissolved this trust and liquidated its assets. If the SEC or a
federal court were to determine that BNB is a security, it is likely that the
value of the Shares of the Trust would decline significantly, and that the Trust
itself may be terminated and, if practical, its assets liquidated.
The
SEC is adopting new rules to interpret the statutory definitions of terms
including "dealer" under sections 3(a)(5) and 3(a)(44), respectively, of the
Exchange Act which are expected to expand the scope of market participants
required to register as a dealer with the SEC or become a member of FINRA. The
Sponsor is studying the impact these may have on the Trust and its arrangements
with Liquidity Providers and other service providers and counterparties. Among
others, if and to the extent that BNB is classified as a security, the
activities of any Liquidity Provider of the Trust might, under some
circumstances, cause it to be deemed as acting as a dealer under the new rules
and would thus require registration with the SEC. The Liquidity Provider may
instead decide to terminate its role as Liquidity Provider of the Trust and the
Trust's operations in relation to creations and redemptions of Baskets could be
significantly impacted, the Trust could dissolve (including at a time that is
potentially disadvantageous to Shareholders), and the value of the Shares or an
investment in the Trust could be affected. Further, if and to the extent that
BNB is classified as a security and the new rules require a broader range of
digital asset market participants to register with the SEC or cease operations
in the US market, there could be significant negative impacts on the broader
digital asset markets, the price of digital assets such as BNB and therefore the
value of the Shares.
Changes
In SEC Policy Could Adversely Impact The Value Of The Shares.
The
effect of any future regulatory change on the Trust or the digital assets held
by the Trust is impossible to predict, but such change could be substantial and
adverse to the Trust and the value of the Shares. In particular, with the
exception of funds that hold Bitcoin, Ether and certain Bitcoin-based
derivatives or Ether-based derivatives, the SEC has not yet approved the listing
on a national securities exchange of any non-futures based digital-asset focused
exchange-traded fund or exchange-traded product (such product, an "ETF"). If the
SEC were to approve any such ETF other than ours in the future, such an ETF may
be perceived to be a superior investment product offering exposure to digital
assets compared to the Trust because the value of the shares issued by such an
ETF would be expected to more closely track the ETF's net asset value than do
Shares of the Trust, and investors may therefore favor investments in such ETFs
over investments in the Trust. Any weakening in demand for the Shares compared
to digital asset ETF shares could cause the value of the Shares to
decline.
Competing
Industries May Have More Influence With Policymakers Than The Digital Asset
Industry, Which Could Lead To The Adoption Of Laws And Regulations That Are
Harmful To The Digital Asset Industry.
The
digital asset industry is relatively new and it does not have the same access to
policymakers and lobbying organizations in many jurisdictions compared to
industries with which digital assets may be seen to compete, such as banking,
payments and consumer finance. Competitors from other, more established
industries may have greater access to and influence with governmental officials
and regulators and may be successful in persuading these policymakers that
digital assets require heightened levels of regulation compared to the
regulation of traditional financial services. As a result, new laws and
regulations may be proposed and adopted in the United States and elsewhere, or
existing laws and regulations may be interpreted in new ways, that disfavor or
impose compliance burdens on the digital asset industry or digital asset
platforms, which could adversely impact the value of BNB and therefore the value
of the Shares.
Shareholders
Do Not Have The Protections Associated With Ownership Of Shares In An Investment
Company Registered Under The 1940 Act Or The Protections Afforded By The
CEA.
The
1940 Act is designed to protect investors by preventing insiders from managing
investment companies to their benefit and to the detriment of public investors,
such as: the issuance of securities having inequitable or discriminatory
provisions; the management of investment companies by irresponsible persons; the
use of unsound or misleading methods of computing earnings and asset value;
changes in the character of investment companies without the consent of
investors; and investment companies from engaging in excessive leveraging. To
accomplish these ends, the 1940 Act requires the safekeeping and proper
valuation of fund assets, restricts greatly transactions with affiliates, limits
leveraging, and imposes governance requirements as a check on fund
management.
The
Trust is not registered as an investment company under the 1940 Act, and the
Sponsor believes that the Trust is not required to register under such act.
Consequently, Shareholders do not have the regulatory protections provided to
investors in investment companies.
The
Trust will not hold or trade in commodity interests regulated by the CEA, as
administered by the CFTC. Furthermore, the Sponsor believes that the Trust is
not a commodity pool for purposes of the CEA, and that neither the Sponsor nor
the Trustee is subject to regulation by the CFTC as a commodity pool operator or
a commodity trading advisor in connection with the operation of the Trust.
Consequently, Shareholders will not have the regulatory protections provided to
investors in CEA-regulated instruments or commodity pools.
Future
Legal Or Regulatory Developments May Negatively Affect The Value Of BNB Or
Require The Trust Or The Sponsor To Become Registered With The SEC Or CFTC,
Which May Cause The Trust To Liquidate.
Current
and future legislation, SEC and CFTC rulemaking, and other regulatory
developments may impact the manner in which BNB are treated for classification
and clearing purposes. In particular, BNB itself in the future might be
classified by the CFTC as a "commodity interest" under the CEA, subjecting all
transactions in BNB to full CFTC regulatory jurisdiction. Alternatively, in the
future BNB might be classified by a court as a "security" under U.S. federal
securities laws. The Sponsor and the Trust cannot be certain as to how future
regulatory developments will impact the treatment of BNB under the law. In the
face of such developments, the required registrations and compliance steps may
result in extraordinary, nonrecurring expenses to the Trust. If the Sponsor
decides to terminate the Trust in response to the changed regulatory
circumstances, the Trust may be dissolved or liquidated at a time that is
disadvantageous to Shareholders.
The
SEC has stated that certain digital assets may be considered "securities" under
the federal securities laws. The test for determining whether a particular
digital asset is a "security" is complex and the outcome is difficult to
predict. If BNB is in the future determined to be a "security" under federal or
state securities laws by the SEC or any other agency, or in a proceeding in a
court of law or otherwise, it would likely have material adverse consequences
for the value of BNB. For example, it may become more difficult or impossible
for BNB to be traded, cleared and custodied in the United States as compared to
other digital assets that are not considered to be securities, which could in
turn negatively affect the liquidity and general acceptance of BNB and cause
users to migrate to other digital assets.
To
the extent that BNB is determined to be a security, the Trust and the Sponsor
may also be subject to additional regulatory requirements, including under the
1940 Act, and the Sponsor may be required to register as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). If
the Sponsor determines not to comply with such additional regulatory and
registration requirements, the Sponsor will terminate the Trust. Any such
termination could result in the liquidation of the Trust's BNB at a time that is
disadvantageous to Shareholders.
To
the extent that BNB is deemed to fall within the definition of a "commodity
interest" under the CEA, the Trust and the Sponsor may be subject to additional
regulation under the CEA and CFTC regulations. These additional requirements may
result in extraordinary, recurring and/or nonrecurring expenses of the Trust,
thereby materially and adversely impacting the Shares. If the Sponsor and/or the
Trust determines not to comply with such additional regulatory and registration
requirements, the Sponsor may terminate the Trust. Any such termination could
result in the liquidation of the Trust's BNB at a time that is disadvantageous
to Shareholders.
The
SEC has recently proposed amendments to the custody rules under Rule 406(4)-2 of
the Advisers Act. The proposed rule changes would amend the definition of a
"qualified custodian" under Rule 206(4)-2(d)(6) and expand the current custody
rule in 406(4)-2 to cover all digital assets, including BNB, and related
advisory activities. If enacted as proposed, these rules would likely impose
additional regulatory requirements with respect to the custody and storage of
digital assets, including BNB. The Sponsor is studying the impact that such
amendments may have on the Trust and its arrangements with the BNB Custodian and
the Additional BNB Custodian. It is possible that such amendments, if adopted,
could prevent the BNB Custodian and the Additional BNB Custodian from serving as
service providers to the Trust, or require potentially significant modifications
to existing arrangements under the Custody Agreement and the Additional BNB
Custody Agreement, which could cause the Trust to bear potentially significant
increased costs. If the Sponsor is unable to make such modifications or appoint
successor service providers to fill the role that the BNB Custodian or the
Additional BNB Custodian currently plays, the Trust's operations (including in
relation to creations and redemptions of Baskets and the holding of BNB) could
be
negatively
affected, the Trust could dissolve (including at a time that is potentially
disadvantageous to Shareholders), and the value of the Shares or an investment
in the Trust could be affected.
Further,
the proposed amendments could have a severe negative impact on the price of BNB
and therefore the value of the Shares if enacted, by, among other things, making
it more difficult for investors to gain access to BNB, or causing certain
holders of BNB to sell their holdings.
If
Regulatory Changes Or Interpretations Of An Authorized Participant's, Liquidity
Provider's, The Trust's Or The Sponsor's Activities Require The Regulation Of An
Authorized Participant, Liquidity Provider, The Trust Or The Sponsor As A Money
Service Business Under The Regulations Promulgated By FinCEN Under The Authority
Of The U.S. Bank Secrecy Act Or As A Money Transmitter Or Digital Asset Business
Under State Regimes For The Licensing Of Such Businesses, An Authorized
Participant, Liquidity Provide, The Trust Or The Sponsor May Be Required To
Register And Comply With Such Regulations, Which Could Result In Extraordinary,
Recurring And/Or Nonrecurring Expenses To The Authorized Participant, Trust Or
Sponsor Or Increased Commissions For The Authorized Participant's Clients,
Thereby Reducing The Liquidity Of The Shares.
To
the extent that the activities of any Authorized Participant (or their
designee), Liquidity Provider, the Trust or the Sponsor cause it to be deemed a
"money services business" under the regulations promulgated by FinCEN under the
authority of the BSA, such Authorized Participant (or their designee), Liquidity
Provider, the Trust or the Sponsor may be required to comply with FinCEN
regulations, including those that would mandate the Authorized Participant (or
their designee), Liquidity Provider, Trust or the Sponsor to implement
anti-money laundering programs, make certain reports to FinCEN and maintain
certain records. Similarly, the activities of an Authorized Participant (or
their designee), Liquidity Provider, the Trust or the Sponsor may require it to
be licensed as a money transmitter or as a digital asset business, such as under
NYDFS' BitLicense regulation.
Such
additional regulatory obligations may cause the Authorized Participant (or their
designee), Liquidity Provider, the Trust or the Sponsor to incur extraordinary
expenses. If the Authorized Participant (or their designee), Liquidity Provider,
the Trust or the Sponsor decide to seek the required licenses, there is no
guarantee that they will timely receive them. The Authorized Participant (or
their designee) or Liquidity Provider may also instead decide to terminate its
role as Authorized Participant (or their designee) or Liquidity Provider of the
Trust, or the Sponsor may decide to terminate the Trust. Termination by the
Authorized Participant (or their designee)may decrease the liquidity of the
Shares, which may adversely affect the value of the Shares, and any termination
of the Trust in response to the changed regulatory circumstances may be at a
time that is disadvantageous to the Shareholders.
Additionally,
to the extent the Authorized Participant (or their designee), Liquidity
Provider, the Trust or the Sponsor is found to have operated without appropriate
state or federal licenses by any regulator or court, it may be subject to
investigation, administrative or court proceedings, operating restrictions, and
civil or criminal monetary fines and penalties, all of which would harm the
reputation of the Authorized Participant (or their designee), Liquidity
Provider, the Trust or the Sponsor, disrupt their operations, and have a
material adverse effect on the price of the Shares. Although Liquidity Providers
represent to the Trust that they have obtained all necessary governmental
licenses, in the Liquidity Provider agreements, if such representations prove
inaccurate, such Liquidity Providers may suffer adverse consequences and be
unable to perform their obligations or engage in BNB transactions with the
Trust, or the Trust's operations could be adversely affected and decreased
liquidity for the Shares or losses for Shareholders could result.
Anonymity,
Sanctions, And Illicit Financing Risk.
Although
transaction details of peer-to-peer transactions are recorded on the BNB Chain,
a buyer or seller of digital assets on a peer-to-peer basis directly on the BNB
Chain may never know to whom the public key belongs or the true identity of the
party with whom it is transacting. Public key addresses are randomized sequences
of alphanumeric characters that, standing alone, do not provide sufficient
information to identify users. In addition, certain technologies, such as
tumbling or mixing services, may obscure the origin or chain of custody of
digital assets. In August 2022, OFAC banned all U.S. citizens from using Tornado
Cash, a digital asset protocol designed to obfuscate blockchain transactions, by
adding certain Ethereum wallet addresses associated with the protocol to its
Specially
Designated Nationals list. On October 19, 2023, FinCEN published a proposed
rulemaking under authorities in Section 311 of the USA PATRIOT Act that would
impose requirements on financial institutions that engage in CVC transactions
that involve CVC mixing within or involving a jurisdiction outside the United
States. FinCEN's rulemaking states that CVC mixing transactions can play a
central role in facilitating the laundering of CVC derived from a variety of
illicit activity, and are frequently used by criminals and state actors to
facilitate a range of illicit activity, including, but not limited to, money
laundering, sanctions evasion and weapons of mass destruction proliferation.
Given that the BNB Chain is global and anyone can validate transactions or
program DApps or smart contracts that will operate and record transactions on
the BNB Chain, and the fact that their operators, creators or programmers
sometimes remain anonymous, it is not inconceivable that bad actors, such as
those subject to sanctions, could seek to do so.
The
opaque nature of the market poses asset verification challenges for market
participants, regulators and auditors and gives rise to an increased risk of
manipulation and fraud, including the potential for Ponzi schemes, bucket shops
and pump and dump schemes. Digital assets have in the past been used to
facilitate illicit activities. If a digital asset was used to facilitate illicit
activities, or a digital asset, or prominent DApp or smart contract or network
participant, such as validators or users, were associated with bad actors or
illicit activity, businesses that facilitate transactions in such digital assets
could be at increased risk of potential criminal or civil lawsuits, or of having
banking or other services cut off, and such digital asset could be removed from
digital asset exchanges. Any of the aforementioned or similar occurrences could
adversely affect the price of the relevant digital asset, the attractiveness of
the respective blockchain network and an investment in the Shares. If the Trust
or 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.
The
Trust takes measures with the objective of reducing illicit financing risks in
connection with the Trust's activities. However, illicit financing risks are
present in the digital asset markets, including markets for BNB. There can be no
assurance that the measures employed by the Trust will prove successful in
reducing illicit financing risks, and the Trust is subject to the complex
illicit financing risks and vulnerabilities present in the digital asset
markets. If such risks eventuate, the Trust or the Sponsor or their affiliates
could face civil or criminal liability, fines, penalties, or other punishments,
be subject to investigation, have their assets frozen, lose access to banking
services or services provided by other service providers, or suffer disruptions
to their operations, any of which could negatively affect the Trust's ability to
operate or cause losses in value of the Shares.
The
Sponsor and the Trust have adopted and implemented policies and procedures that
are designed to ensure that they do not violate applicable anti-money laundering
and sanctions laws and regulations and to comply with any applicable KYC laws
and regulations. The Sponsor and the Trust will only interact with known third
party service providers with respect to whom it has engaged in a due diligence
process to ensure a thorough KYC process, such as the Authorized Participants,
Liquidity Providers, the BNB Custodian and the Additional BNB Custodian.
Authorized Participants, as broker-dealers, and the BNB Custodian and Additional
BNB Custodian, as limited purpose trust companies subject to New York Banking
Law, are subject to the BSA and U.S. economic sanctions laws.
In
addition, the Trust will only accept creations and redemption requests from
regulated Authorized Participants who themselves are subject to applicable
sanctions and anti-money laundering laws and have compliance programs that are
designed to ensure compliance with those laws. In addition, the Liquidity
Providers, Authorized Participant or their designee are contractually obligated
to have policies and procedures reasonably designed to comply with the money
laundering and related provisions of the BSA and implementing regulations, and
applicable sanctions laws. The Trust will not hold any BNB except those that
have been delivered by a Liquidity Provider, Authorized Participant or their
designee in connection with creation requests.
Each
of the BNB Custodian and the Additional BNB Custodian have adopted and
implemented an anti-money laundering and sanctions compliance program, which
provides additional protections to ensure that the Sponsor and the Trust do not
transact with a sanctioned party. Notably, the BNB Custodian performs
Know-Your-Transaction ("KYT") screening using blockchain analytics to identify,
detect, and mitigate the risk of transacting with a sanctioned or other unlawful
actor. Pursuant to the BNB Custodian's KYT program, any BNB that is delivered to
the Trust's Custody Account will undergo screening to ensure that the origins of
that BNB are not illicit. The Additional
BNB
Custodian's KYT program includes robust internal policies, procedures and
controls that combat the attempted use of the Additional BNB Custodian for
illegal or illicit purposes, including a customer identification program, annual
training of all employees and officers in anti-money laundering obligations and
requirements, filing of Suspicious Activity Reports with the U.S. Financial
Crimes Enforcement Network and annual independent audits of the Additional BNB
Custodian's anti-money laundering program.
There
is no guarantee that such procedures will always be effective. If the Authorized
Participants (or their designees) or Liquidity Providers have inadequate
policies, procedures and controls for complying with applicable anti-money
laundering and applicable sanctions laws or the Trust's diligence or procedures
are ineffective, violations of such laws could result, which could result in
regulatory liability for the Trust, the Sponsor, the Trustee or their affiliates
under such laws, including governmental fines, penalties, and other punishments,
as well as potential liability to or cessation of services by the BNB Custodian
or the Additional BNB Custodian Liquidity Providers, or the Trust's other
service providers and counterparties. Moreover, AML and related procedures by
the BNB Custodian and Additional BNB Custodian could result in the Trust's BNB
being blocked or frozen, and thus made unavailable to the Trust. Any of the
foregoing could result in losses to the Shareholders or negatively affect the
Trust's ability to operate.
Trading
On BNB Exchanges Outside The United States Is Not Subject To U.S. Regulation,
And May Be Less Reliable Than U.S. Exchanges.
Barring
cash creations and redemptions, or a liquidation of the Trust, the Trust does
not purchase or sell BNB. To the extent any of the Trust's trading is conducted
on BNB trading platforms outside the United States, trading on such exchanges is
not regulated by any U.S. governmental agency and may involve certain risks not
applicable to trading on U.S. exchanges. Certain foreign markets may be more
susceptible to disruption than U.S. exchanges. These factors could adversely
affect the performance of the Trust.
Regulatory
Changes Or Actions In Foreign Jurisdictions May Affect The Value Of The Shares
Or Restrict The Use Of BNB, Mining Activity Or The Operation Of Their Networks
Or The Global BNB Markets In A Manner That Adversely Affects The Value Of The
Shares.
Various
foreign jurisdictions have, and may continue to adopt laws, regulations or
directives that affect digital asset networks (including the BNB Chain), the
digital asset markets (including the BNB market), and their users, particularly
digital asset exchanges and service providers that fall within such
jurisdictions' regulatory scope. For example, if China or other foreign
jurisdictions were to ban or otherwise restrict validating activity, including
by regulating or limiting manufacturers' ability to produce or sell
semiconductors or hard drives in connection with BNB mining, it would have a
material adverse effect on digital asset networks (including the BNB Chain), the
digital asset market, and as a result, impact the value of the
Shares.
A
number of foreign jurisdictions have recently taken regulatory action aimed at
digital asset activities. China has made transacting in cryptocurrencies illegal
for Chinese citizens in mainland China, and additional restrictions may follow.
Both China and South Korea have banned initial coin offerings entirely and
regulators in other jurisdictions, including Canada, Singapore and Hong Kong,
have opined that initial coin offerings may constitute securities offerings
subject to local securities regulations. In May 2021, the Chinese government
announced renewed efforts to restrict cryptocurrency trading and mining
activities. Regulators in the Inner Mongolia and other regions of China have
proposed regulations that would create penalties for companies engaged in
cryptocurrency mining activities and introduce heightened energy saving
requirements on industrial parks, data centers and power plants providing
electricity to cryptocurrency miners. The United Kingdom's Financial Conduct
Authority published final rules in October 2020 banning the sale of derivatives
and exchange traded notes that reference certain types of digital assets,
contending that they are "ill- suited" to retail investors citing extreme
volatility, valuation challenges and association with financial crime. A new
bill, the Financial Services and Markets Bill ("FSMB"), became law in 2023. The
FSMB brings digital asset activities within the scope of existing laws governing
financial institutions, markets and assets. In addition, the European Council of
the European Union approved the text of Markets in Crypto-Assets ("MiCA") in
October 2022. MiCA came into effect in 2024, establishing a regulatory framework
for digital asset services across the European Union. MiCA is intended to serve
as a comprehensive regulation of digital asset markets and imposes various
obligations on digital asset issuers and service providers. The main aims of
MiCA
are
industry regulation, consumer protection, prevention of market abuse and
upholding the integrity of digital asset markets.
Foreign
laws, regulations or directives may conflict with those of the United States and
may negatively impact the acceptance of one or more digital assets by users,
merchants and service providers outside the United States and may therefore
impede the growth or sustainability of the digital asset economy in the European
Union, China, Japan, Russia and the United States and globally, or otherwise
negatively affect the value of BNB. Moreover, other events, such as the
interruption in telecommunications or internet services, cyber-related terrorist
acts, civil disturbances, war or other catastrophes, could also negatively
affect the digital asset economy in one or more jurisdictions. For example,
Russia's invasion of Ukraine on February 24, 2022 led to volatility in digital
asset prices, with an initial steep decline followed by a sharp rebound in
prices. The effect of any future regulatory change on the Trust or BNB is
impossible to predict, but such change could be substantial and adverse to the
Trust and the value of the Shares.
Tax
Risk
The
Treatment Of The Trust For U.S. Federal Income Tax Purposes Is
Uncertain.
The
Sponsor intends to take the position that the Trust is properly treated as a
grantor trust for U.S. federal income tax purposes. Assuming that the Trust is a
grantor trust, the Trust will not be subject to U.S. federal income tax. Rather,
if the Trust is a grantor trust, each beneficial owner of Shares will be treated
as directly owning its pro rata share of the Trust's assets and a pro rata
portion of the Trust's income, gain, losses and deductions will "flow through"
to each beneficial owner of Shares.
The
Trust may take certain positions with respect to the tax consequences of Staking
Activities, Incidental Rights and IR Virtual Currency. If the IRS were to
disagree with, and successfully challenge, any of these positions, the Trust
might not qualify as a grantor trust. The Trust intends to take the position
that Staking Activities, to the extent treated as conducted by the Trust by
reason of its relationship with Staking Services Provider or holding LSTs, are
consistent with its qualification as a grantor trust. If the IRS were to
successfully challenge this position, the Trust would not qualify as a grantor
trust for U.S. federal income tax purposes.
In
addition, the Sponsor has committed to cause the Trust to irrevocably abandon
any Incidental Rights and IR Virtual Currency to which the Trust may become
entitled in the future. However, there can be no assurance that these
abandonments would be treated as effective for U.S. federal income tax purposes,
or that the Sponsor will continue to cause the Trust to irrevocably abandon any
Incidental Rights and IR Virtual Currency if there are future regulatory
developments that would make it feasible for the Trust to retain those assets.
If the Trust were treated as owning any asset other than BNB as of any date on
which it creates or redeems Shares, it may likely cease to qualify as a grantor
trust for U.S. federal income tax purposes.
Because
of the evolving nature of digital currencies, it is not possible to predict
potential future developments that may arise with respect to digital currencies,
including forks, airdrops, and other similar occurrences. Assuming that the
Trust is currently a grantor trust for U.S. federal income tax purposes, certain
future developments could render it impossible, or impracticable, for the Trust
to continue to be treated as a grantor trust for such purposes.
If
the Trust is not properly classified as a grantor trust, the Trust might be
classified as a partnership for U.S. federal income tax purposes. However, due
to the uncertain treatment of digital currency for U.S. federal income tax
purposes, future developments regarding the treatment of digital currency for
U.S. federal income tax purposes could adversely affect the value of the Shares.
If the Trust were classified as a partnership for U.S. federal income tax
purposes, the tax consequences of owning Shares generally would not be
materially different from the tax consequences described herein, although there
might be certain differences, including with respect to timing of the
recognition of taxable income or loss and (in certain circumstances) withholding
taxes. In addition, tax information reports provided to beneficial owners of
Shares would be made in a different form. If the Trust were not classified as
either a grantor trust or a partnership for U.S. federal income tax purposes, it
generally would be classified as a corporation for such purposes. If it were
treated as a corporation, the Trust would be subject to entity-level U.S.
federal income tax (currently at the rate of 21%), plus possible state and/or
local taxes, on its net taxable income, and certain distributions made by the
Trust to Shareholders would be treated as taxable dividends to the extent of the
Trust's current and accumulated earnings and profits. Any such dividend
distributed to a beneficial owner of Shares
that
is a non-U.S. person for U.S. federal income tax purposes generally would be
subject to U.S. federal withholding tax at a rate of 30% (or such lower rate as
provided in an applicable tax treaty).
The
Treatment Of Digital Currency and Staking Activities For U.S. Federal Income Tax
Purposes Is Uncertain.
Assuming
that the Trust is properly treated as a grantor trust for U.S. federal income
tax purposes, each beneficial owner of Shares will be treated for U.S. federal
income tax purposes as the owner of an undivided interest in the BNB (and, if
applicable, any Incidental Rights and IR Virtual Currency) held in the Trust.
Due to the new and evolving nature of digital currencies and the absence of
comprehensive guidance with respect to digital currencies, many significant
aspects of the U.S. federal income tax treatment of digital currency are
uncertain.
In
2014, the IRS released a notice (the "Notice") discussing certain aspects of
"convertible virtual currency" (that is, digital currency that has an equivalent
value in fiat currency or that acts as a substitute for fiat currency) for U.S.
federal income tax purposes and, in particular, stating that such digital
currency (i) is "property" (ii) is not "currency" for purposes of the rules
relating to foreign currency gain or loss and (iii) may be held as a capital
asset. In 2019, the IRS released a revenue ruling and a set of "Frequently Asked
Questions" (the "Ruling & FAQs") that provide some additional guidance,
including guidance to the effect that, under certain circumstances, hard forks
of digital currencies are taxable events giving rise to ordinary income and
guidance with respect to the determination of the tax basis of digital currency.
Moreover, in 2023, the IRS released a revenue ruling that provided guidance on
digital currency staking, including guidance to the effect that staking rewards
will, under certain circumstances, be treated as giving rise to taxable income
(the “Staking Guidance”). However, the Notice, the Ruling & FAQs and the
Staking Guidance do not address other significant aspects of the U.S. federal
income tax treatment of digital currencies and staking activities. Moreover,
although the Ruling & FAQs address the treatment of hard forks, there
continues to be uncertainty with respect to the timing and amount of the income
inclusions.
Future
developments that may arise with respect to digital currencies may increase the
uncertainty with respect to the treatment of digital currencies for U.S. federal
income tax purposes. For example, the Notice addresses only digital currency
that is "convertible virtual currency," and it is conceivable that, as a result
of a fork, airdrop or similar occurrence, the Trust will hold certain types of
digital currency that are not within the scope of the Notice.
There
can be no assurance that the IRS will not alter its position with respect to
digital currencies in the future or that a court would uphold the treatment set
forth in the Notice, the Ruling & FAQs and the Staking Guidance. It is also
unclear what additional guidance on the treatment of digital currencies or
staking activities for U.S. federal income tax purposes may be issued in the
future. Any future guidance on the treatment of digital currencies or staking
activities for U.S. federal income tax purposes could increase the expenses of
the Trust and could have an adverse effect on the prices of digital currencies,
including on the price of BNB in the digital asset markets. As a result, any
such future guidance could have an adverse effect on the value of the
Shares.
Shareholders
are urged to consult their tax advisers regarding the tax consequences of owning
and disposing of Shares and digital currencies, as well as staking activities,
in general.
Future
Developments Regarding The Treatment Of Digital Currency and Staking Activities
For U.S. Federal Income Tax Purposes Could Adversely Affect The Value Of The
Shares.
As
discussed above, many significant aspects of the U.S. federal income tax
treatment of digital currency, such as BNB, are uncertain, and it is unclear
what guidance on the treatment of digital currency for U.S. federal income tax
purposes may be issued in the future. It is possible that any such guidance
would have an adverse effect on the prices of digital currency, including on the
price of BNB in digital asset exchanges, and therefore may have an adverse
effect on the value of the Shares.
Because
of the evolving nature of digital currencies, it is not possible to predict
potential future developments that may arise with respect to digital currencies,
including forks, airdrops and similar occurrences. Such developments may
increase the uncertainty with respect to the treatment of digital currencies for
U.S. federal income tax purposes. Moreover, certain future developments
(including the potential issuance of IRS guidance that is contrary or otherwise
adverse to the position taken by the Trust regarding the U.S. federal income tax
characterization
of staking activities) could render it impossible, or impracticable, for the
Trust to continue to be treated as a grantor trust for U.S. federal income tax
purposes.
Future
Developments In The Treatment Of Digital Currency For Tax Purposes Other Than
U.S. Federal Income Tax Purposes Could Adversely Affect The Value Of The
Shares.
The
taxing authorities of certain states, including New York, (i) have announced
that they will follow the Notice with respect to the treatment of digital
currencies for state income tax purposes and/or (ii) have issued guidance
exempting the purchase and/or sale of digital currencies for fiat currency from
state sales tax. Other states have not issued any guidance on these points, and
could take different positions (e.g., imposing sales taxes on purchases and
sales of digital currencies for fiat currency), and states that have issued
guidance on their tax treatment of digital currencies could update or change
their tax treatment of digital currencies. It is unclear what further guidance
on the treatment of digital currencies for state or local tax purposes may be
issued in the future. A state or local government authority's treatment of BNB
may have negative consequences, including the imposition of a greater tax burden
on investors in BNB or the imposition of a greater cost on the acquisition and
disposition of BNB generally.
The
treatment of digital currencies for tax purposes by non U.S. jurisdictions may
differ from the treatment of digital currencies for U.S. federal, state or local
tax purposes. It is possible, for example, that a non U.S. jurisdiction would
impose sales tax or value-added tax on purchases and sales of digital currencies
for fiat currency. If a foreign jurisdiction with a significant share of the
market of BNB users imposes onerous tax burdens on digital currency users, or
imposes sales or value-added tax on purchases and sales of digital currency for
fiat currency, such actions could result in decreased demand for BNB in such
jurisdiction.
Any
future guidance on the treatment of digital currencies for state, local or non
U.S. tax purposes could increase the expenses of the Trust and could have an
adverse effect on the prices of digital currencies, including on the price of
BNB in digital asset exchanges. As a result, any such future guidance could have
an adverse effect on the value of the Shares.
A
U.S. Tax-Exempt Shareholder May Recognize "Unrelated Business Taxable Income" As
A Consequence Of An Investment In Shares.
Under
the guidance provided in the Ruling & FAQs, hard forks, airdrops and similar
occurrences with respect to digital currencies will under certain circumstances
be treated as taxable events giving rise to ordinary income. Moreover, as
separately provided by the IRS in the Staking Guidance, staking rewards will,
under certain circumstances, be treated as giving rise to taxable income. In the
absence of guidance to the contrary, it is possible that any such income
recognized by a U.S. tax-exempt shareholder would constitute "unrelated business
taxable income" ("UBTI"). Tax-exempt shareholders should consult their tax
advisers regarding whether such Shareholder may recognize UBTI as a consequence
of an investment in Shares.
Shareholders
Could Incur A Tax Liability Without An Associated Distribution Of The
Trust.
In
the normal course of business, the Trust expects to receive certain staking
rewards, and it is possible that the Trust could incur a taxable gain in
connection with the sale of BNB (such as sales of BNB to obtain fiat currency
with which to pay the Sponsor Fee or Trust expenses, and including deemed sales
of BNB as a result of the Trust using BNB to pay the Sponsor Fee or its
expenses). In each case, such event may not be associated with a distribution to
Shareholders. Accordingly, shareholders may be subject to tax due to the grantor
trust status of the Trust even though there is not a corresponding distribution
from the Trust.
A
Hard "Fork" Of The BNB Chain Could Result In Shareholders Incurring A Tax
Liability.
If
a hard fork occurs in the BNB Chain, the Trust could hold both the original BNB
and the alternative new BNB. The IRS has held that a hard fork resulting in the
creation of new units of cryptocurrency is a taxable event giving rise to
ordinary income. Moreover, if such an event occurs, the Trust Agreement provides
that the Sponsor shall have the discretion to determine whether the original or
the alternative asset shall constitute BNB. The Trust shall treat whichever
asset the Sponsor determines is not BNB as Incidental Rights or IR Virtual
Currency, which it has committed to irrevocably abandon.
The
Ruling & FAQs do not address whether income recognized by a non-U.S. person
as a result of a fork, airdrop or similar occurrence could be subject to the 30%
withholding tax imposed on U.S.-source "fixed or determinable annual or
periodical" income. Non-U.S. shareholders should assume that, in the absence of
guidance, a withholding agent (including the Sponsor) is likely to withhold 30%
of any such income recognized by a Non-U.S. shareholder in respect of its
Shares, including by deducting such withheld amounts from proceeds that such
Non-U.S. shareholder would otherwise be entitled to receive in connection with a
distribution of Incidental Rights or IR Virtual Currency. The Sponsor has
committed to cause the Trust to irrevocably abandon any Incidental Rights and IR
Virtual Currency to which the Trust may become entitled in the future. However,
there can be no assurance that these abandonments would be treated as effective
for U.S. federal income tax purposes, or that the Sponsor will continue to cause
the Trust to irrevocably abandon any Incidental Rights and IR Virtual Currency
if there are future regulatory developments that would make it feasible for the
Trust to retain those assets.
The
receipt, distribution and/or sale of the alternative BNB may cause Shareholders
to incur a United States federal, state, and/or local, or non-U.S. tax
liability. Any tax liability could adversely impact an investment in the Shares
and may require Shareholders to prepare and file tax returns they would not
otherwise be required to prepare and file.
Other
Risks
Potential
Conflicts Of Interest May Arise Among The Sponsor Or Its Affiliates And The
Trust. The Sponsor And Its Affiliates Have No Fiduciary Duties To The Trust And
Its Shareholders Other Than As Provided In The Trust Agreement, Which May Permit
Them To Favor Their Own Interests To The Detriment Of The Trust And Its
Shareholders.
The
Sponsor will manage the affairs of the Trust. Conflicts of interest may arise
among the Sponsor and its affiliates, on the one hand, and the Trust and its
Shareholders, on the other hand. As a result of these conflicts, the Sponsor may
favor its own interests and the interests of its affiliates over the Trust and
its Shareholders. These potential conflicts include, among others, the
following:
•the
Sponsor has no fiduciary duties to, and is allowed to take into account the
interests of parties other than, the Trust and its Shareholders in resolving
conflicts of interest, provided the Sponsor does not act in bad
faith;
•the
Trust has agreed to indemnify the Sponsor, the Trustee and their respective
affiliates pursuant to the Trust Agreement;
•the
Sponsor is responsible for allocating its own limited resources among different
clients and potential future business ventures, to each of which it may owe
fiduciary duties;
•the
Sponsor and its staff also service affiliates of the Sponsor, and may also
service other digital asset investment vehicles, and their respective clients
and cannot devote all of its, or their, respective time or resources to the
management of the affairs of the Trust;
•MarketVector,
which is the index administrator of the MarketVectorTM
[ ], is an affiliate of the Sponsor;
•the
Sponsor, its affiliates and their officers and employees are not prohibited from
engaging in other businesses or activities, including those that might be in
direct competition with the Trust;
•affiliates
of the Sponsor may start to have substantial direct investments in BNB, or other
digital assets or companies in the digital assets ecosystem that they are
permitted to manage taking into account their own interests without regard to
the interests of the Trust or its Shareholders, and any increases, decreases or
other changes in such investments could affect the Index price and, in turn, the
value of the Shares;
•the
Sponsor decides whether to retain separate counsel, accountants or others to
perform services for the Trust;
•the
Sponsor may appoint an agent to act on behalf of the Shareholders, which may be
the Sponsor or an affiliate of the Sponsor.
By
purchasing the Shares, Shareholders agree and consent to the provisions set
forth in the Trust Agreement.
Shareholders
Cannot Be Assured Of The Sponsor's Continued Services, The Discontinuance Of
Which May Be Detrimental To The Trust.
Shareholders
cannot be assured that the Sponsor will be willing or able to continue to serve
as sponsor to the Trust for any length of time. If the Sponsor discontinues its
activities on behalf of the Trust and a substitute sponsor is not appointed, the
Trust will terminate and liquidate its BNB.
Appointment
of a substitute sponsor will not guarantee the Trust's continued operation,
successful or otherwise. Because a substitute sponsor may have no experience
managing a digital asset financial vehicle, a substitute sponsor may not have
the experience, knowledge or expertise required to ensure that the Trust will
operate successfully or continue to operate at all. Therefore, the appointment
of a substitute sponsor may not necessarily be beneficial to the Trust and the
Trust may terminate.
Although
The BNB Custodian And The Additional BNB Custodian Are Fiduciaries With Respect
To The Trust's Assets, They Could Resign Or Be Removed By The Sponsor, Which May
Trigger Early Dissolution Of The Trust.
The
BNB Custodian and the Additional BNB Custodian are fiduciaries under § 100 of
the New York Banking Law and qualified custodians for purposes of Rule
206(4)-2(d)(6) under the Advisers Act and are licensed to custody the Trust's
BNB in trust on the Trust's behalf. However, the BNB Custodian or the Additional
BNB Custodian may terminate the Custody Agreement or the Additional BNB Custody
Agreement, as the case may be, immediately or upon providing the applicable
notice provided under the Custody Agreement or the Additional BNB Custody
Agreement. If either the BNB Custodian or the Additional BNB Custodian resigns,
is removed, or is prohibited by applicable law or regulation to act as
custodian, and no successor custodian has been employed, the Sponsor may
dissolve the Trust in accordance with the terms of the Trust
Agreement.
Shareholders
May Be Adversely Affected By The Lack Of Independent Advisers Representing
Investors In The Trust.
The
Sponsor has consulted with counsel, accountants and other advisers regarding the
formation and operation of the Trust. No counsel was appointed to represent
investors in connection with the formation of the Trust or the establishment of
the terms of the Trust Agreement and the Shares. Moreover, no counsel has been
appointed to represent an investor in connection with the offering of the
Shares. Accordingly, an investor should consult his, her or its own legal, tax
and financial advisers regarding the desirability of the value of the Shares.
Lack of such consultation may lead to an undesirable investment decision with
respect to investment in the Shares.
Shareholders
And Authorized Participants Lack The Right Under The Custody Agreement To Assert
Claims Directly Against The BNB Custodian, Which Significantly Limits Their
Options For Recourse.
Neither
the Shareholders nor any Authorized Participant or Liquidity Provider have a
right under the Custody Agreement to assert a claim against the BNB Custodian.
Claims under the Custody Agreement may only be asserted by the Sponsor on behalf
of the Trust.
The
Exchange On Which The Shares Are Listed May Halt Trading In The Trust's Shares,
Which Would Adversely Impact A Shareholder's Ability To Sell
Shares.
The
Trust's Shares are expected to be approved for listing, subject to notice of
issuance, on the Exchange under the market symbol
[ ]. Trading in Shares may be halted due to market
conditions or, in light of the Exchange rules and procedures, for reasons that,
in the view of the Exchange, make trading in Shares inadvisable. In addition,
trading is subject to trading halts caused by extraordinary market volatility
pursuant to "circuit breaker" rules that require trading to be halted for a
specified period based on a specified market decline. Additionally, there can be
no assurance that the requirements necessary to maintain the listing of the
Trust's Shares will continue to be met or will remain unchanged.
The
Liquidity Of The Shares May Also Be Affected By The Withdrawal From
Participation Of Authorized Participants, Which Could Adversely Affect The
Market Price Of The Shares.
In
the event that one or more Authorized Participants or market makers that have
substantial interests in the Trust's Shares withdraw or "step away" from
participation in the purchase (creation) or sale (redemption) of the Trust's
Shares, the liquidity of the Shares will likely decrease, which could adversely
affect the market price of the Shares and result in Shareholders incurring a
loss on their investment.
The
Market Infrastructure Of The BNB Spot Market Could Result In The Absence Of
Active Authorized Participants Able To Support The Trading Activity Of The
Trust.
BNB
is extremely volatile, and concerns exist about the stability, reliability and
robustness of many trading platforms where BNB trade. In a highly volatile
market, or if one or more exchanges supporting the BNB market faces an issue, it
could be extremely challenging for any Authorized Participants to provide
continuous liquidity in the Shares. There can be no guarantee that the Sponsor
will be able to find an Authorized Participant to actively and continuously
support the Trust.
BNB
Spot Exchanges Are Not Subject To Same Regulatory Oversight As Traditional
Equity Exchanges, Which Could Negatively Impact The Ability Of Authorized
Participants To Implement Arbitrage Mechanisms.
The
trading for spot BNB occurs on multiple trading venues that have various levels
and types of regulation, but are not regulated in the same manner as traditional
stock and bond exchanges. If these exchanges do not operate smoothly or face
technical, security or regulatory issues, that could impact the ability of
Authorized Participants to make markets in the Shares. In such an event, trading
in the Shares could occur at a material premium or discount against the
NAV.
Shareholders
That Are Not Authorized Participants May Only Purchase Or Sell Their Shares In
Secondary Trading Markets, And The Conditions Associated With Trading In
Secondary Markets May Adversely Affect Shareholders' Investment In The
Shares.
Only
Authorized Participants may create or redeem Baskets. All other Shareholders
that desire to purchase or sell Shares must do so through the Exchange or in
other markets, if any, in which the Shares may be traded. Shares may trade at a
premium or discount to the NAV per Share.
As
The Sponsor And Its Management Have Limited History Of Operating Investment
Vehicles Like The Trust, Their Experience May Be Inadequate Or Unsuitable To
Manage The Trust.
The
past performances of the Sponsor's management in other investment vehicles are
no indication of their ability to manage an investment vehicle such as the
Trust. If the experience of the Sponsor and its management is inadequate or
unsuitable to manage an investment vehicle such as the Trust, the operations of
the Trust may be adversely affected.
Furthermore,
the Sponsor is currently engaged in the management of other investment vehicles
which could divert their attention and resources. If the Sponsor were to
experience difficulties in the management of such other investment vehicles that
damaged the Sponsor or its reputation, it could have an adverse impact on the
Sponsor's ability to continue to serve as Sponsor for the Trust.
Security
Threats To The Trust's Accounts With The BNB Custodian and the Additional BNB
Custodian Could Result In The Halting Of Trust Operations And A Loss Of Trust
Assets Or Damage To The Reputation Of The Trust, Each Of Which Could Result In A
Reduction In The Price Of The Shares.
Security
breaches, computer malware and computer hacking attacks have been a prevalent
concern in relation to digital assets. The Sponsor believes that the Trust's BNB
held in the Trust's accounts with the BNB Custodian and the Additional BNB
Custodian will be appealing targets to hackers or malware distributors seeking
to destroy, damage or steal the Trust's BNB and will only become more appealing
as the Trust's assets grow. To the extent that the Trust, the Sponsor, the BNB
Custodian or the Additional BNB Custodian is unable to identify and mitigate or
stop
new security threats or otherwise adapt to technological changes in the digital
asset industry, the Trust's BNB may be subject to theft, loss, destruction or
other attack.
The
Sponsor has evaluated the security procedures in place for safeguarding the
Trust's BNB, including, but not limited to, offline storage, or cold storage,
multiple encrypted private key "shards," and other measures. Nevertheless, the
security procedures cannot guarantee the prevention of any loss due to a
security breach, software defect or act of God that may be borne by the Trust
and the security procedures may not protect against all errors, software flaws
or other vulnerabilities in the Trust's technical infrastructure, which could
result in theft, loss or damage of its assets. The Sponsor does not control the
BNB Custodian's or the Additional BNB Custodian's operations or their
implementation of such security procedures and there can be no assurance that
such security procedures will actually work as designed or prove to be
successful in safeguarding the Trust's assets against all possible sources of
theft, loss or damage. Assets not held in cold storage, such as assets held in a
trading account, may be more vulnerable to security breach, hacking or loss than
assets held in cold storage. Furthermore, assets held in a trading account are
held on an omnibus, rather than segregated basis, which creates greater risk of
loss.
The
security procedures and operational infrastructure may be breached due to the
actions of outside parties, error or malfeasance of an employee of the Sponsor,
the BNB Custodian, the Additional BNB Custodian, the Trust's other service
providers, or otherwise, and, as a result, an unauthorized party may obtain
access to the Trust's account with the BNB Custodian or the Additional BNB
Custodian, the private keys (and therefore BNB) or other data of the Trust.
Additionally, outside parties may attempt to fraudulently induce employees of
the Sponsor, the BNB Custodian, the Additional BNB Custodian or the Trust's
other service providers to disclose sensitive information in order to gain
access to the Trust's infrastructure. As the techniques used to obtain
unauthorized access, disable or degrade service, or sabotage systems change
frequently, or may be designed to remain dormant until a predetermined event and
often are not recognized until launched against a target, the Sponsor, the BNB
Custodian, the Additional BNB Custodian and the Trust's other service providers
may be unable to anticipate these techniques or implement adequate preventative
measures.
An
actual or perceived breach of the Trust's account with the BNB Custodian or the
Additional BNB Custodian could harm the Trust's operations, result in partial or
total loss of the Trust's assets, damage the Trust's reputation and negatively
affect the market perception of the effectiveness of the Trust, all of which
could in turn reduce demand for the Shares, resulting in a reduction in the
price of the Shares. The Trust may also cease operations, the occurrence of
which could similarly result in a reduction in the price of the
Shares.
The
Sponsor Is Leanly Staffed And Relies Heavily On Key Personnel.
The
Sponsor is leanly staffed and relies heavily on key personnel to manage its
activities. These key personnel intend to allocate their time managing the Trust
in a manner that they deem appropriate. 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.
The
Trust Is New, And If It Is Not Profitable, The Trust May Terminate And Liquidate
At A Time That Is Disadvantageous To Shareholders.
The
Trust is new. If the Trust does not attract sufficient assets to remain open,
then the Trust could be terminated and liquidated at the direction of the
Sponsor. Termination and liquidation of the Trust could occur at a time that is
disadvantageous to Shareholders. When the Trust's assets are sold as part of the
Trust's liquidation, the resulting proceeds distributed to Shareholders may be
less than those that may be realized in a sale outside of a liquidation context.
Shareholders may be adversely affected by redemption or creation orders that are
subject to postponement, suspension or rejection under certain
circumstances.
Shareholders
Do Not Have The Rights Enjoyed By Investors In Certain Other Vehicles And May Be
Adversely Affected By A Lack Of Statutory Rights And By Limited Voting And
Distribution Rights.
The
Shares have no voting and limited distribution rights. For example, Shareholders
do not have the right to elect directors, the Trust may enact splits or reverse
splits without Shareholder approval and the Trust is not required to pay regular
distributions, although the Trust may pay distributions at the discretion of the
Sponsor.
The
Sponsor and the Trustee may agree to amend the Trust Agreement, including to
increase the Sponsor Fee, without Shareholder consent. If an amendment imposes
new fees and charges or increases existing fees or charges, including the
Sponsor's Fee (except for taxes and other governmental charges, registration
fees or other such expenses), or prejudices a substantial existing right of
Shareholders, it will become effective for outstanding Shares 30 days after
notice of such amendment is given to registered owners. Notwithstanding the
foregoing, the Sponsor shall have the right to increase or decrease the amount
of the Sponsor Fee (i) upon three (3) business days' prior notice of the
increase or decrease being posted on the website of the Trust and (ii) upon
three (3) business days' prior written notice of the increase or decrease being
given to the Trustee. Shareholders that are not registered owners (which most
shareholders will not be) may not receive specific notice of a fee increase
other than through an amendment to the prospectus. Moreover, at the time an
amendment becomes effective, by continuing to hold Shares, Shareholders are
deemed to agree to the amendment and to be bound by the Trust Agreement as
amended without specific agreement to such increase (other than through the
"negative consent" procedure described above).
The
Trust Agreement Includes Provisions That Limit Shareholders' Voting Rights And
Restrict Shareholders' Right To Bring A Derivative Action.
Under
the Trust Agreement, Shareholders have no voting rights and the Trust will not
have regular Shareholder meetings. Shareholders take no part in the management
or control of the Trust. Accordingly, Shareholders do not have the right to
authorize actions, appoint service providers or take other actions as may be
taken by shareholders of other trusts or companies where shares carry such
rights. The Sponsor may take actions in the operation of the Trust that may be
adverse to the interests of Shareholders and may adversely affect the value of
the Shares.
Moreover,
pursuant to the terms of the Trust Agreement, Shareholders' statutory right
under Delaware law to bring a derivative action (i.e., to initiate a lawsuit in
the name of the Trust in order to assert a claim belonging to the Trust against
a fiduciary of the Trust or against a third-party when the Trust's management
has refused to do so) is restricted. Under Delaware law, a shareholder may bring
a derivative action if the shareholder is a shareholder at the time the action
is brought and either (i) was a shareholder at the time of the transaction at
issue or (ii) acquired the status of shareholder by operation of law or the
Trust's governing instrument from a person who was a shareholder at the time of
the transaction at issue. Additionally, Section 3816(e) of the Delaware
Statutory Trust Act specifically provides that a "beneficial owner's right to
bring a derivative action may be subject to such additional standards and
restrictions, if any, as are set forth in the governing instrument of the
statutory trust, including, without limitation, the requirement that beneficial
owners owning a specified beneficial interest in the statutory trust join in the
bringing of the derivative action." In addition to the requirements of
applicable law and in accordance with Section 3816(e), the Trust Agreement
provides that no Shareholder will have the right, power or authority to bring or
maintain a derivative action, suit or other proceeding on behalf of the Trust
unless two or more Shareholders who (i) are not "Affiliates" (as defined in the
Trust Agreement and below) of one another and (ii) collectively hold at least
10% of the outstanding Shares join in the bringing or maintaining of such
action, suit or other proceeding. This provision applies to any derivative
actions brought in the name of the Trust other than claims under the federal
securities laws and the rules and regulations thereunder.
Due
to this additional requirement, a Shareholder attempting to bring or maintain a
derivative action in the name of the Trust will be required to locate other
Shareholders with which it is not affiliated and that have sufficient Shares to
meet the 10% threshold based on the number of Shares outstanding on the date the
claim is brought and thereafter throughout the duration of the action, suit or
proceeding. This may be difficult and may result in increased costs to a
Shareholder attempting to seek redress in the name of the Trust in court.
Moreover, if Shareholders bringing a derivative action, suit or proceeding
pursuant to this provision of the Trust Agreement do not hold 10% of the
outstanding Shares on the date such an action, suit or proceeding is brought, or
such Shareholders are unable to maintain Share ownership meeting the 10%
threshold throughout the duration of the action, suit or proceeding, such
Shareholders' derivative action may be subject to dismissal. As a result, the
Trust Agreement limits the likelihood that a Shareholder will be able to
successfully assert a derivative action in the name of the Trust, even if such
Shareholder believes that he or she has a valid derivative action, suit or other
proceeding to bring on behalf of the Trust.
The
Non-Exclusive Jurisdiction For Certain Types Of Actions And Proceedings And
Waiver Of Trial By Jury Clauses Set Forth In The Trust Agreement May Have The
Effect Of Limiting A Shareholder's Rights To Bring Legal Action Against The
Trust And Could Limit A Purchaser's Ability To Obtain A Favorable Judicial Forum
For Disputes With The Trust.
The
Trust Agreement provides that the courts of the state of Delaware and any
federal courts located in Wilmington, Delaware will be the non-exclusive
jurisdiction for any claims, suits, actions or proceedings, provided that suits
brought to enforce a duty or liability created by the 1933 Act, the Exchange Act
or any other claim for which the federal courts have exclusive jurisdiction and
the federal district courts of the United States of America shall be the
exclusive forum for the resolution of any complaint asserting a cause of action
arising under the 1933 Act, the Exchange Act, or the rules and regulations
promulgated thereunder. By purchasing Shares in the Trust, Shareholders waive
certain claims that the courts of the state of Delaware and any federal courts
located in Wilmington, Delaware is an inconvenient venue or is otherwise
inappropriate. As such, Shareholder could be required to litigate a matter
relating to the Trust in a Delaware court, even if that court may otherwise be
inconvenient for the Shareholder.
The
Trust Agreement also waives the right to trial by jury in any such claim, suit,
action or proceeding, including any claim under the U.S. federal securities
laws, to the fullest extent permitted by applicable law. If a lawsuit is brought
against the Trust, it may be heard only by a judge or justice of the applicable
trial court, which would be conducted according to different civil procedures
and may result in different outcomes than a trial by jury would have, including
results that could be less favorable to the plaintiffs in any such action. No
Shareholder can waive compliance with respect to the U.S. federal securities
laws and the rules and regulations promulgated thereunder.
If
a Shareholder opposed a jury trial demand based on the waiver, the applicable
court would determine whether the waiver was enforceable based on the facts and
circumstances of that case in accordance with applicable federal laws. To our
knowledge, the enforceability of a contractual pre- dispute jury trial waiver in
connection with claims arising under the U.S. federal securities laws has not
been finally adjudicated by the U.S. Supreme Court. However, we believe that a
contractual pre-dispute jury trial waiver provision is generally enforceable,
including under the laws of the State of Delaware, which govern the Trust
Agreement. By purchasing Shares in the Trust, Shareholders waive a right to a
trial by jury which may limit a Shareholder's ability to bring a claim in a
judicial forum that it finds favorable for disputes with the Trust.
An
Investment In The Trust May Be Adversely Affected By Competition From Other
Investment Vehicles Focused On BNB Or Other Cryptocurrencies.
The
Trust will compete with direct investments in BNB, other cryptocurrencies, and
other potential financial vehicles, possibly including securities backed by or
linked to cryptocurrency and other investment vehicles that focus on other
digital assets. Market and financial conditions, and other conditions beyond the
Trust's control, may make it more attractive to invest in other vehicles, which
could adversely affect the performance of the Trust.
Shareholders
May Be Adversely Affected By Creation Or Redemption Orders That Are Subject To
Postponement, Suspension Or Rejection Under Certain Circumstances.
The
Trust may, in its discretion, suspend the right of creation or redemption or may
postpone the redemption or purchase settlement date, for (1) any period during
which the Exchange is closed other than customary weekend or holiday closings,
or trading on the Exchange is suspended or restricted, (2) any period during
which an emergency exists as a result of which the fulfillment of a purchase
order or the redemption distribution is not reasonably practicable (for example,
as a result of a significant technical failure, power outage, or network error),
or (3) such other period as the Sponsor determines to be necessary for the
protection of the Shareholders of the Trust (for example, where acceptance of
the total deposit required to create each Basket ("Basket Deposit") would have
certain adverse tax consequences to the Trust or its Shareholders). In addition,
the Trust may reject a redemption order if (1) the order is not in proper form
as described in the Authorized Participant Agreement, (2) the fulfillment of the
order counsel advises may be illegal under applicable laws and regulations, or
(3) if circumstances outside the control of the Sponsor, the person authorized
to take redemption orders in the manner provided in the Authorized Participant
Agreement,
Cash Custodian or the BNB Custodian make it for all practical purposes not
feasible for the Shares to be delivered or the redemption distribution to be
made. Any such postponement, suspension or rejection could adversely affect a
redeeming Authorized Participant. Suspension of creation privileges may
adversely impact how the Shares are traded and arbitraged on the secondary
market, which could cause them to trade at levels materially different (premiums
and discounts) from the fair value of their underlying holdings.
If
such a suspension or postponement occurs at a time when an Authorized
Participant intends to redeem Shares, and the price of BNB decreases before such
Authorized Participant is able again to surrender for redemption Baskets, such
Authorized Participant will sustain a loss with respect to the amount that it
would have been able to obtain in exchange for the BNB received from the Trust
upon the redemption of its Shares, had the redemption taken place when such
Authorized Participant originally intended it to occur. As a consequence,
Authorized Participants may reduce their trading in Shares during periods of
suspension, decreasing the number of potential buyers of Shares in the secondary
market and, therefore, decreasing the price a Shareholder may receive upon
sale.
Shareholders
May Be Adversely Affected By An Overstatement Or Understatement Of The NAV
Calculation Of The Trust Due To The Valuation Method Employed On The Date Of The
NAV Calculation.
In
certain circumstances, the Trust's BNB investments may be valued using
techniques other than reliance on the price established by the
MarketVectorTM
[ ]. As described further in "Net Asset Value
Determinations," the Sponsor will monitor for significant events related to
crypto assets that may impact the value of BNB and will determine in good faith,
and in accordance with its valuation policies and procedures, whether to fair
value the Trust's BNB on a given day based on whether certain pre-determined
criteria have been met. For example, if the MarketVectorTM
[ ] deviates by more than a pre-determined amount
from an alternate benchmark available to the Sponsor, then the Sponsor may
determine to utilize the alternate benchmark. The Sponsor evaluates its fair
value criteria and the factors in determining such criteria from time to time
and no less than quarterly. The Sponsor may also fair value the Trust's BNB
using observed market transactions from one or more exchanges. The Sponsor may
also fair value the Trust's BNB using a combination of inputs in certain
situations (e.g., using observed market transactions, OTC quotations from
brokers, etc.). The value of the Shares of the Trust established by using the
MarketVectorTM
[ ] may be different from what would be produced
through the use of another methodology. BNB or other digital asset investments
that are valued using techniques other than those employed by the
MarketVectorTM
[ ], including BNB investments that are "fair
valued," may be subject to greater fluctuation in their value from one day to
the next than would be the case if market-price valuation techniques were
used.
The
Liability Of The Sponsor And The Trustee Is Limited, And The Value Of The Shares
Will Be Adversely Affected If The Trust Is Required To Indemnify The Trustee Or
The Sponsor.
Under
the Trust Agreement, the Trustee and the Sponsor are not liable, and have the
right to be indemnified, for any liability or expense incurred absent gross
negligence or willful misconduct on the part of the Trustee or the Sponsor or
breach by the Sponsor of the Trust Agreement, as the case may be. As a result,
the Sponsor may require the assets of the Trust to be sold in order to cover
losses or liability suffered by it or by the Trustee. Any sale of that kind
would reduce the NAV of the Trust and the value of its Shares.
Due
To The Increased Use Of Technologies, Intentional And Unintentional
Cyber-Attacks Pose Operational And Information Security Risks.
With
the increased use of technologies such as the internet and the dependence on
computer systems to perform necessary business functions, the Trust is
susceptible to operational and information security risks. In general, cyber
incidents can result from deliberate attacks or unintentional events.
Cyber-attacks include, but are not limited to, gaining unauthorized access to
digital systems for the purposes of misappropriating assets or sensitive
information, corrupting data, or causing operational disruption. For instance,
the doxxing of Solana's co-founder on May 27, 2025 via Instagram highlights the
vulnerability of personal information associated with online accounts, even
where digital assets are secure.
Cyber-attacks
may also be carried out in a manner that does not require gaining unauthorized
access, such as causing denial-of-service attacks on websites. Cyber security
failures or breaches of one or more of the Trust's service providers (including,
but not limited to, MarketVector, the administrator, transfer agent, and the BNB
Custodian)
have the ability to cause disruptions and impact business operations,
potentially resulting in financial losses, the inability of the Shareholders to
transact business, violations of applicable privacy and other laws, regulatory
fines, penalties, reputational damage, reimbursement or other compensation
costs, and/or additional compliance costs. For example, in May 2025, Coinbase
experienced a significant breach of sensitive customer data and the
misappropriation of digital assets resulting from the bribery of overseas
insiders. This breach led to substantial financial losses for affected customers
and prompted Coinbase to make certain operational adjustments, including
increasing investment in insider-threat detection and automated response systems
and opening a new support hub in the United States, and adding stronger security
controls and monitoring across all locations.
A
security breach affecting the Trust or its service providers could result in the
unauthorized disclosure of sensitive information, operational disruptions, and
financial losses. Substantial costs may be incurred in order to prevent any
cyber incidents in the future. The Trust and its Shareholders could be
negatively impacted as a result. While the Trust has established business
continuity plans, there are inherent limitations in such plans.
The
Trust And Its Service Providers Are Subject To Certain Operational
Risks.
The
Trust and its service providers, including the Sponsor, Administrator, Transfer
Agent, BNB Custodian and Cash Custodian (as well as Authorized Participants and
market makers) may experience disruptions that arise from human error,
processing and communications errors, counterparty or third-party errors, or
technology or systems failures, any of which may have an adverse impact on the
Trust. Although the Trust and its service providers seek to mitigate these
operational risks through their internal controls and operational risk
management processes, these measures may not identify or may be inadequate to
address all such risks. Additionally, the BNB Custodian, and the Additional BNB
Custodian each have a limited operating company and experience, which could
heighten certain operational risks.
Risk
Factors Related to ERISA
In
General.
Notwithstanding
the commercially reasonable efforts of the Sponsor, it is possible that the
underlying assets of the Trust will be deemed to include "plan assets" for the
purposes of Title I of ERISA or Section 4975 of the Code. If the assets of the
Trust were deemed to be "plan assets," this could result in, among other things,
(i) the application of the prudence and other fiduciary standards of ERISA to
investments made by the Trust and (ii) the possibility that certain transactions
in which the Trust might otherwise seek to engage in the ordinary course of its
business and operation could constitute non-exempt "prohibited transactions"
under Section 406 of ERISA and/or Section 4975 of the Code, which could restrict
the Trust from entering into an otherwise desirable investment or from entering
into an otherwise favorable transaction. In addition, fiduciaries who decide to
invest in the Trust could, under certain circumstances, be liable for
"prohibited transactions" or other violations as a result of their investment in
the Trust or as co-fiduciaries for actions taken by or on behalf of the Trust or
the Sponsor. There may be other federal, state, local, non-U.S. law or
regulation that contains one or more provisions that are similar to the
foregoing provisions of ERISA and the Code that may also apply to an investment
in the Trust.
The
application of ERISA (including the corresponding provisions of the Code and
other relevant laws) may be complex and dependent upon the particular facts and
circumstances of the Trust and of each Plan, and it is the responsibility of the
appropriate fiduciary of each investing Plan to ensure that any investment in
the Trust by such Plan is consistent with all applicable requirements. Each
Shareholder, whether or not subject to Title I of ERISA or Section 4975 of the
Code, should consult its own legal and other advisors regarding the
considerations discussed above and all other relevant ERISA and other
considerations before purchasing the Shares.
BNB,
BNB MARKET, BNB EXCHANGES AND REGULATION OF BNB
This
section of the Prospectus provides a more detailed description of
BNB.
BNB
and the BNB Chain
BNB
is a digital asset that is created and transmitted through the operations of the
peer-to-peer BNB Chain, a network of computers that operates on cryptographic
protocols based on open-source code, the infrastructure of which is collectively
maintained by a global user base. The BNB Chain enables users to exchange tokens
of value, called BNB, which are recorded on a public transaction ledger known as
a blockchain. BNB may be used to pay for goods and services, including
computational power on the BNB Chain, or it may be converted to fiat currencies,
such as the U.S. dollar, at rates determined on digital asset trading platforms
or in individual end-user- to-end-user transactions under a barter system.
The
BNB Chain was designed to allow users to write and implement smart
contracts—that is, general-purpose code that executes on every computer in the
network and can instruct the transmission of information and value based on a
sophisticated set of logical conditions. Using smart contracts, users can create
markets, store registries of debts or promises, represent ownership of property,
move funds in accordance with conditional instructions and create digital assets
other than BNB on the BNB Chain. Smart contract operations are executed on the
BNB Chain in exchange for payment of BNB. Like the Ethereum network, the BNB
Chain is one of a number of projects intended to expand blockchain use beyond
just a peer-to-peer money system.
BNB
Chain
BNB
Chain (formerly referred to as Binance Smart Chain and Binance Chain) is a
blockchain and smart contract network for permissionless applications. The BNB
Chain is an open-source protocol that enables users to deploy smart contracts to
support their blockchain projects. The BNB ecosystem originated in 2017 with the
launch of BNB and later expanded into the current multi-chain “BNB Chain”
architecture. The BNB Chain is comprised of three blockchains, BNB Smart Chain,
opBNB and BNB Greenfield, which allow the network to create and trade assets
such as BNB, coordinate transaction validators and facilitate the creation of
smart contracts. Each chain serves a different purpose: BNB Smart Chain is a
Layer 1 blockchain used to enable the development of user-generated
permissionless applications (“Dapps”), including in the decentralized finance
(“DeFi”) space; opBNB is used as a Layer 2 scaling solution for BNB Smart Chain;
and BNB Greenfield is used as a blockchain storage solution. BNB Chain is
powered by the proof-of-staked-authority consensus protocol (“PoSA”), which
combines elements of delegated proof of stake (“DPoS”) and proof-of-authority
(“PoA”) by requiring validators to stake BNB and be selected based on stake and
reputation. Currently, the number of BNB Chain validator set consists of 45
active validators, comprising 21 “cabinet” (active block-producing) validators,
and 24 “candidate” (standby) validators. This design allows for faster block
times and lower transaction fees than some other blockchain networks however,
this design may result in greater centralization compared to networks with
larger, more distributed validator sets. See [ ]
for additional information.
Although
the technical and strategic development was originally initiated by Binance, the
network is now supported by a large number of participants. There is no central
legal control over BNB Chain, the BNB Chain community coordinates governance
processes through a decentralized governance mechanism (e.g., BEP proposals and
validator consensus). The connection to the broader BNB ecosystem remains
intact.
Governance
on BNB Chain
BNB
Chain incorporates a decentralized governance framework that enables token
holders and validators to influence the network’s evolution. Governance occurs
primarily through BNB Evolution Proposals (BEPs) and validator consensus.
Proposals may address technical upgrades, parameter adjustments (such as gas
limits or slashing thresholds), or changes to the validator set size, which can
be increased through community governance.
Validators
and delegators can vote on proposals using on-chain mechanisms implemented in
BNB Chain governance contracts. Accepted proposals are executed through protocol
updates coordinated by validators and core
developers,
and no single entity can unilaterally amend network rules. This process,
together with open-source development and validator elections, contributes to
the network’s progressive decentralization and transparency.
The
BNB token
BNB
is the native token of the BNB Chain and serves as the base (“gas”) currency for
transactions, smart contract interactions and deployment, as a governance token
on BNB Chain that allows token holders to participate in the governance of the
network, and can currently be used to obtain discounts on trading fees on
Binance. BNB was introduced in 2017 as an ERC-20 token on the Ethereum network
and later migrated to the Binance Chain and BNB Chain. BNB can be staked to help
secure the network and earn staking rewards.
BNB
was initially issued with a maximum supply target of 200 million tokens.
However, the total number of BNB tokens in circulation is variable and subject
to change over time, and the total supply is gradually reduced through a token
burn mechanism, which permanently removes tokens from circulation based on usage
and predefined rules. While this mechanism aims to reduce overall supply and
support long-term scarcity, it does not guarantee a fixed or minimum future
supply, and actual circulating amounts may vary due to market activity and
on-chain dynamics. This mechanism means that risks remain with regard to changes
supply, as this is not guaranteed. As of October 17, 2025, BNB’s market
capitalization is approximately $150 billion, placing it among the top five
cryptocurrencies globally (coinmarketcap.com), with an average daily trading
volume of approximately $6.9 billion (coinmarketcap.com).
Smart
Contracts and Development on the BNB Chain
Smart
contracts are programs that run on a blockchain that can execute automatically
when certain conditions are met. Smart contracts facilitate the exchange of
anything representative of value, such as money, information, property, or
voting rights.
Using
smart contracts, users can send or receive digital assets, create markets, store
registries of debts or promises, represent ownership of property or a company,
move funds in accordance with conditional instructions and create new digital
assets.
Development
on the BNB Chain involves building more complex tools on top of smart contracts,
such as decentralized apps ("DApps") and organizations that are autonomous,
known as decentralized autonomous organizations ("DAOs"). For example, a company
that distributes charitable donations on behalf of users could hold donated
funds in smart contracts that are paid to charities only if the charity
satisfies certain pre-defined conditions.
In
total, as of October [ ], 2025, more than [2,000]
DApps are currently built on the BNB Chain, including DApps in the collectible
non-fungible token, gaming, music streaming, and decentralized finance
categories.
Additionally,
the BNB Chain has been used for decentralized finance ("DeFi"), or open finance
platforms, which seek to democratize access to financial services, such as
borrowing, lending, custody, trading, derivatives and insurance, by removing
third-party intermediaries. DeFi can allow users to lend and earn interest on
their digital assets, exchange one digital asset for another and create
derivative digital assets such as stablecoins, which are digital assets pegged
to a reserve asset such as fiat currency. As of October
[ ], 2025, approximately $[1.42] billion was being
used as collateral on DeFi platforms.
In
addition, the BNB Chain and other smart contract platforms have been used for
creating non-fungible tokens, or NFTs. Unlike digital assets native to smart
contract platforms which are fungible and enable the payment of fees for smart
contract execution. Instead, NFTs allow for digital ownership of assets that
convey certain rights to other digital or real world assets. This new paradigm
allows users to own rights to other assets through NFTs, which enable users to
trade them with others on the BNB Chain. For example, an NFT may convey rights
to a digital asset that exists in an online game or a DApp, and users can trade
their NFT in the DApp or game, and carry them to other digital experiences,
creating an entirely new free-market internet-native economy that can be
monetized in the physical world.
Market
Participants
Validators
Validators
range from BNB Chain enthusiasts to professional operations that design and
build dedicated machines and data centers, including "clusters," which are
groups of validators that act cohesively and combine their processing to confirm
transactions. When a validator confirms a transaction, the validator and any
associated stakers receive a fee. During the course of ordering transactions and
validating blocks, validators may be able to prioritize certain transactions in
return for increased transaction fees, an incentive system known as "Maximal
Extractable Value" or MEV. For example, in blockchain networks that facilitate
DeFi protocols in particular, such as the Ethereum Network, users may attempt to
gain an advantage over other users by offering greater transaction fees.
Validators less commonly capture MEV in the BNB Chain because, unlike the
Ethereum Network, it does not publicly expose transactions before they are
accepted by a validator. However, some efforts are underway to help BNB
Validators consistently capture MEV. See "—Summary of a BNB Transaction"
above.
Investment
and Speculative Sector
This
sector includes the investment and trading activities of both private and
professional investors and speculators. Historically, larger financial services
institutions are publicly reported to have limited involvement in investment and
trading in digital assets, although the participation landscape is beginning to
change. Currently, there is relatively limited use of digital assets in the
retail and commercial marketplace in comparison to relatively extensive use by
speculators, and a significant portion of demand for digital assets is generated
by speculators and investors seeking to profit from the short- or long-term
holding of digital assets.
Retail
Sector
The
retail sector includes users transacting in direct peer-to-peer BNB transactions
through the direct sending of BNB over the BNB Chain. The retail sector also
includes transactions in which consumers purchase goods and services from
commercial or service businesses through direct transactions or third-party
service providers, although the use of BNB as a means of payment is still
developing and has not yet been accepted in the same manner as Bitcoin or
Ethereum due to its infancy and because BNB has a different purpose than Bitcoin
and Ethereum.
Service
Sector
This
sector includes companies that provide a variety of services including the
buying, selling, payment processing and storing of BNB. As BNB continues to grow
in acceptance, it is anticipated that service providers will expand the
currently available range of services and that additional parties will enter the
service sector for BNB.
BNB
Protocol Development and Modifications
Concurrent
with the launch of the Binance’s exchange in July 2017, Binance or its
affiliates minted 200 million BNB tokens on the Ethereum blockchain using
Ethereum’s ERC-20 functionality. These tokens were initially created for the
purposes of allowing the holder of BNB to pay for fees incurred from the use of
the Binance exchange as well as serving as an exchangeable asset for other
digital assets trading on the Binance exchange. After creation, Binance issued
the 200 million BNB as follows: 10% (20 million BNB) to angel investors in
Binance Ltd., 40% (80 million BNB) to the founding employees of Binance Exchange
subject to a 4 year schedule, and 50% (100 million BNB) in what the BNB white
paper termed an “ICO” (an abbreviation of ”Initial Coin Offering) in exchange
for Ethereum (ETH) or the equivalent Ethereum price in Bitcoin in three
consecutive tranches from July 1, 2017 to July 21, 2017.
According
to the terms stated by Binance in their whitepaper and subsequent communications
associated with the creation and issuance of BNB, the 200 million BNB initially
created would be the maximum BNB to exist. In addition, Binance also implemented
a deflationary program whereby Binance, in its discretion and not through an
on-chain mechanism, would purchase BNB tokens in the open market and then
destroy these BNB (known as “burning”) on a quarterly basis. The amount of BNB
burned was set at the US dollar equivalent of 20% of Binance
Exchange
profits in that quarter. The maximum amount of BNB to be burned is capped at 100
million, reducing the maximum BNB in existence to 100 million.
In
March of 2019, this program was revised such that (a) the BNB burned would be
sourced from the Binance treasury and (b) the amount of BNB to be burned would
be determined by an undisclosed percentage of trading volume on the Binance DEX.
In October of 2021, the BNB Chain added an additional BNB burning mechanism (the
“Real-Time” mechanism) that burns BNB tokens at a fixed ratio to the gas fee
collected by validators for each block. In January of 2022, the burning program
was adjusted again such that the amount of BNB to be burned on a quarterly basis
would be determined by an algorithm using the inputs of (a) the total number
blocks produced by the BNB Chain in a quarter, (b) the average price of the BNB
token against the US Dollar and, (c) a constant value as a price anchor (the
“Auto-Burn” mechanism). The Auto-Burn mechanism supplants the previous
methodology for determining the amount of BNB burned on a quarterly basis. The
Real-Time burning methodology remains in place in addition to the quarterly
burns.
Binance’s
overall target burn of 100 million BNB remained unchanged. In addition, to the
Real-Time burning mechanism, Binance has conducted 18 consecutive quarterly BNB
burns since inception, removing, in total, 35,315,591.20 BNB. As of March 14,
2022, the total outstanding BNB is 164,684,408.98
BNB
was originally issued on Ethereum as an ERC-20 token (“ERC-20 BNB”). When the
Binance Chain was developed as a standalone blockchain by Binance (“Beacon
Chain”), ERC-20 BNB was migrated by minting new BNB on the Binance Chain
(“Beacon Chain BNB”) in proportion to the balance of each existing ERC-20 BNB
address on the Ethereum blockchain at a fixed exchange rate, with the Beacon
Chain BNB being the successor asset and ERC-20 BNB being burned. Because the
Beacon Chain was not designed to accommodate smart contracts and user-generated
decentralized applications, a new standalone blockchain, Binance Smart Chain
(“BNB Chain”), was then developed to accommodate smart contract functionality
and Dapps. Eventually, the Beacon Chain was hard forked and merged into BNB
Chain, with BNB Chain as the successor blockchain network and new BNB on the BNB
Chain issued in proportion to the balance of each existing Beacon Chain BNB
wallet on the Beacon Chain at a fixed exchange rate, with BNB being the
successor asset and Beacon Chain BNB no longer functional or operational after
the elapsing of a sunset period.
Historically
the BNB Chain’s development has been overseen by
[ ] and other core developers. The core developers
are able to access and alter the BNB Chain source code and, as a result, they
are responsible for quasi-official releases of updates and other changes to the
BNB Chain’s source code.
The
release of updates to the BNB Chain’s source code does not guarantee that the
updates will be automatically adopted. Users and nodes must accept any changes
made to the BNB source code by downloading the proposed modification of the BNB
Chain’s source code. A modification of the BNB Chain’s source code is only
effective with respect to the BNB users that download it. If a modification is
accepted only by a percentage of users and validators, a division in the BNB
Chain will occur such that one network will run the pre-modification source code
and the other network will run the modified source code. Such a division is
known as a "fork." See "Risk Factors—Risk Factors Related to Digital Assets—A
temporary or permanent fork could adversely affect an investment in the Shares".
Consequently, as a practical matter, a modification to the source code becomes
part of the BNB Chain only if accepted by participants collectively having a
majority of the processing power on the BNB Chain.
Core
development of the BNB source code has increasingly focused on modifications of
the BNB protocol to increase speed and scalability and also allow for financial
and non-financial next generation uses. The Trust's activities will not directly
relate to such projects, though such projects may utilize BNB as tokens for the
facilitation of their non-financial uses, thereby potentially increasing demand
for BNB and the utility of the BNB Chain as a whole. Conversely, projects that
operate and are built within the BNB Chain may increase the data flow on the BNB
Chain and could either "bloat" the size of the BNB Chain or slow confirmation
times.
Forms
of Attack Against the BNB Chain
All
networked systems are vulnerable to various kinds of attacks. As with any
computer network, the BNB Chain contains certain flaws. For example, the BNB
Chain is currently vulnerable to a "51% attack" (though the
numerical
thresholds vary in proof-of-stake) where, if a party or group were to gain
control of more than the relevant threshold of the staked BNB, a malicious actor
would be able to gain full control of the network and the ability to manipulate
the BNB Chain. See "—The BNB Chain Could Be Vulnerable To Attacks on Transaction
Finality and Consensus Processes, Which Could Adversely Affect An Investment In
The Trust Or The Ability Of The Trust To Operate." As of [September 17, 2025],
the top three largest staking pools controlled approximately
[ ]% of the BNB staked on the BNB
Chain.
In
addition, many digital asset networks have been subjected to a number of
denial-of-service attacks, which has led to temporary delays in block creation
and in the transfer of BNB. See "— The BNB Protocol Was Only Conceived In 2017
And The BNB Protocol Or Its Proof-of-History Timestamping Mechanism May Not
Function As Intended, Which Could Have An Adverse Impact On The Value Of BNB And
An Investment In The Shares."
Summary
of a BNB Transaction
Prior
to engaging in BNB transactions directly on the BNB Chain, a user generally must
first install on its computer or mobile device a BNB Chain software program that
will allow the user to generate a private and public key pair associated with a
BNB address. The BNB Chain software program and the BNB address also enable the
user to connect to the BNB Chain and transfer BNB to, and receive BNB from,
other users.
Each
BNB Chain address, or wallet, is associated with a unique "public key" and
"private key" pair. To receive BNB, the BNB 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 BNB. The
recipient, however, does not make public or provide to the sender its related
private key.
Neither
the recipient nor the sender reveals 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 or her private key, the user may
permanently lose access to the BNB contained in the associated address.
Likewise, BNB is irretrievably lost if the private key associated with it is
deleted and no backup has been made. When sending BNB, a user's BNB Chain
software program must validate the transaction with the associated private key.
In addition, since every computation on the BNB Chain requires processing power,
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 BNB Chain
software program to the BNB Chain validators for transaction
confirmation.
BNB
Chain validators record and confirm transactions when they validate and add
blocks of information to the BNB Chain. When a validator is selected to validate
a block, it creates that block, which includes data relating to (i) the
verification of newly submitted and accepted transactions and (ii) a reference
to the prior block in the BNB Chain to which the new block is being added. The
validator becomes aware of outstanding, unrecorded transactions through the data
packet transmission and distribution discussed above.
Upon
the addition of a block of BNB transactions, the BNB Chain software program of
both the spending party and the receiving party will show confirmation of the
transaction on the BNB Chain and reflect an adjustment to the BNB balance in
each party's BNB Chain public key, completing the BNB transaction. Once a
transaction is confirmed on the BNB Chain, it is irreversible.
Some
BNB transactions are conducted "off-blockchain" and are therefore not recorded
in the BNB Chain. These "off-blockchain transactions" involve the transfer of
control over, or ownership of, a specific digital wallet holding BNB or the
reallocation of ownership of certain BNB 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 BNB Chain,
information and data regarding off-blockchain transactions are generally not
publicly available. Therefore, off-blockchain transactions are not truly BNB
transactions in that they do not involve the transfer of transaction data on the
BNB Chain and do not reflect a movement of BNB between addresses recorded in the
BNB Chain. For these reasons, off- blockchain transactions are subject to risks
as any such transfer of BNB ownership is
not
protected by the protocol behind the BNB Chain or recorded in, and validated
through, the blockchain mechanism.
Creation
of New BNB
Initial
Creation of BNB
[ ]
The
Trust’s Staking Program
The
Trust intends to stake a portion of the Trust's BNB through one or more Staking
Services Providers. The Staking Services Providers will utilize the available
BNB for staking by instructing the BNB Custodian to delegate such BNB to a
validator address selected in accordance with the Staking Policy. The validator
node, operated by the Staking Services Provider, receives the delegated BNB, but
control of these assets always remains with the BNB Custodian.The Staking
Services Providers exercise no discretion as to the amount of the Trust's BNB to
be staked or the timing of the staking activities (other than as is incidental
in establishing or deactivating validator nodes). The BNB Custodian will move
the BNB into a staking account, which is a form of warm storage from which
assets cannot be transferred out, ensuring security. Once the delegation process
is complete, the validator node earns inflationary rewards and block rewards on
an epoch-by-epoch basis. In consideration for any staking activity in which the
Trust may engage, the Trust would receive certain staking rewards of BNB, which
may be treated for federal income tax purposes as income to the Trust. The
amount of BNB the Trust may receive as reward for its staking activity can vary
significantly. The staking process is continuously adjusted in scale, in line
with network and market conditions, to ensure the Trust maintains sufficient
liquidity for redemptions on any business day. The Sponsor has adopted a
liquidity risk program (the “Liquidity Program”) that provides a variety of
mechanisms to monitor and manage the liquidity of the Trust’s assets. The
Liquidity Program will be available in full at the Trust’s website at
www.vaneck.com.
Staking
activity comes with a risk of loss of BNB. Staked BNB are not subject to the
protections enjoyed by depositors with FDIC or SIPC member institutions. The
Trust may also be subject to "slashing" penalties. Slashings occur when a
validator attests to two different histories of the chain and penalties occur
when a validator is offline for a prolonged period of time. In combination, they
deter malicious validators from attacking blockchains. The Sponsor believes that
the Staking Services Providers are reputable and will not engage in harmful
behavior that could lead to slashing or penalties.
The
Sponsor has adopted the Staking Policy whereby the Sponsor is responsible for
administering the staking program. The staking program will be overseen by a
designated staking committee. The Sponsor is responsible for evaluating several
factors—such as the underlying BNB, the associated protocol, liquidity (relative
to the circulating market cap), and operational risks such as slashing—when
determining the percentage of the Trust's BNB that will be allocated to staking.
The Sponsor will review historical redemption patterns as a part of its
evaluation to ensure sufficient buffers are in place during extreme market
conditions. Pursuant to the Staking Policy, a base staking percentage is set and
adjusted for unstaking delays, with a 5% buffer in place to prompt rebalancing
if the staked amount deviates significantly. Staking Services Providers will be
chosen based on cost, reputation, financial stability, and operational security,
with a preference for Staking Services Providers with System and Organization
Controls (SOC) reports and/or ISO/IEC certifications. Staking Services Providers
are expected to receive the Staking Services Provider Consideration on an
annualized basis as compensation, paid from the Trust's staking proceeds by the
BNB Custodian or deducted (or “netted”) from the Trust’s staking proceeds before
such amounts are received by the Trust. The Trust may be responsible for fees
charged by the BNB Custodian and/or Additional BNB Custodian for facilitating
staking of the Trust’s assets held with such Custodian (the “Custodian Staking
Facilitation Fee”). To the extent that a Custodian Staking Facilitation Fee is
incurred, such fee shall be paid from the Trust’s staking proceeds by the
applicable custodian, deducted from the Trust’s staking proceeds before such
amounts are received by the Trust or paid by the Sponsor, and the Sponsor shall
be entitled to reimbursement by the Trust of the amount of such Custodian
Staking Facilitation Fee that it has paid on the Trust's behalf. Other than
reimbursement by the Trust of the amount of such Custodian Staking Facilitation
Fee that the Sponsor has paid on the Trust's behalf, which is treated as an
extraordinary expense, the
Sponsor and its affiliates will not receive any
compensation
from the staked assets of the Trust.
Ongoing due diligence will be conducted on validators, including performance
monitoring and benchmarking. Staking rewards received by the Custodian, net of
fees, will be automatically credited to the Trust and reflected in its daily
NAV, with a 4:00 p.m. Eastern time cut-off. The Trust will generally re-stake
the staking rewards it receives, subject to the target staking percentage.
Investors are not required to take any action to receive rewards, and the Trust
does not operate its own validator nodes. Key staking metrics, such as current
percentage of the Trust's BNB being staked and gross staking yields of staked
assets, are published and updated on the Trust's website.
Pursuant
to the Liquidity Program (which is a component of the Staking Policy), the
Sponsor is responsible for assessing, managing and reviewing liquidity risk of
the Trust at least annually based on the following five factors: (i) the Trust's
investment strategy and liquidity of the Trust's assets during normal and
stressed conditions, including use of borrowing for investment purposes and
derivatives and whether the investment strategy is appropriate for effective and
efficient arbitrage, (ii) holdings of cash and cash equivalents, as well as
borrowing arrangements and other funding sources, (iii) percentage and
description of the Trust's assets that are segregated, pledged, hypothecated,
encumbered, or otherwise restricted or prevented from being liquidated, sold,
transferred or assigned, (iv) the lock-up period, including the bonding and
unbonding periods and the entry and exit wait times involved in the staking
process and (v) the historical percentages of cumulative drawdowns in
redemptions for US listed crypto-based ETFs and other similar instruments listed
globally. With respect to factor (i) above, the Staking Policy provides that the
Sponsor has the authority to adjust the size of the Baskets if it determines
that such changes would improve the effectiveness and efficiency of the
arbitrage mechanism.
Following
the liquidity risk assessment, the Sponsor will determine whether changes to the
administration of the Trust's staking program are necessary. Any changes made or
recommended will be evaluated during the next liquidity risk assessment.
The
Liquidity Program is intended to be and is in line with the generic listing
standards of the Exchange.
Credit
Facility
The
Liquidity Program provides that the Trust may enter into a credit facility
(including a credit facility with the Sponsor or its affiliates acting as
lender) that allows the Trust to borrow cash or BNB to meet its current
obligations. If the Trust draws cash or BNB under any such credit facility, the
Trust may incur additional expenses in the form of interest on its indebtedness
or other costs of borrowing. In addition, the lender under any such credit
facility may require the Trust to pledge its assets as collateral for the
amounts borrowed. The Sponsor or its affiliates may also lend cash or BNB to the
Trust, provided that under any such arrangement the Sponsor or its affiliate
will not be permitted to (1) charge interest on the amounts borrowed, (2) demand
or accept any pledge of the Trust’s assets, or (3) impose terms on the Trust
that are more detrimental to the Trust than those that would be available in an
arms-length commercial transaction. As of the date of the Prospectus, the Trust
has not entered into a credit facility. If the Trust’s enters into a credit
facility, the Trust will notify shareholders through the filing of a Form 8-K
and a supplement to this Prospectus describing the material terms of any such
arrangement.
Temporary
Settlement Extension
Under
the Liquidity Program and the applicable agreements with Authorized
Participants, the Sponsor may temporarily extend the settlement timeline in
connection with the fulfillment of the redemption orders received from
Authorized Participants. The Sponsor will exercise this authority if the Trust
does not expect to have enough liquid assets to satisfy redemption orders and
the Trust’s credit facility, if one is in place, has been exhausted. See
“Creation and Redemption of Shares – Delivery of Redemption
Distribution.”
Open-Market
Activities
As
an additional option, the Trust may exchange its staked BNB for an amount of
unstaked BNB or LSTs. If the Sponsor utilizes LSTs in the future, the Trust may
utilize LSTs to convert staked BNB to unstaked BNB to meet redemption requests.
In such transactions, the BNB trading counterparty facilitating such trade will
generally deliver an amount of unstaked BNB that is less than the amount of
staked BNB Trust has delivered in exchange, with such spread representing the
BNB trading counterparty’s compensation. While such spreads are generally
expected to be
de
minimis in relation to the Trust’s overall assets, any such spread charged by a
BNB trading counterparty will reduce the amount of BNB represented by a Share
and the value of Shares. Any use of LSTs is subject to receiving advice from
counsel that doing so should not cause the Trust to fail to qualify as an
investment trust or grantor trust for U.S. federal income tax
purposes.
In
May 2025 the SEC issued a "Statement on Protocol Staking Activities" (the
"Statement"). The Statement gave the SEC staff's view regarding staking on
networks that use a proof-of-stake consensus mechanism. The staff's view is that
some of these activities do not involve the offer and sale of securities within
the meaning of the Securities Act and the Exchange Act. Accordingly, under such
an interpretation, the participants in such staking activities do not need to
register these transactions with the SEC under the Securities Act. The Sponsor
believes that the Trust's staking activities are of the type described in the
Statement and therefore does not involve the purchase and sale of securities.
However, if the staff or the SEC were to disagree with the Sponsor's position,
or if the SEC or the staff were to take a position counter to the position
stated in the Statement, the Trust or its service providers may be deemed to be
in violation of federal securities laws. The treatment of staking in a grantor
trust for U.S. federal income tax purposes is still developing. As a grantor
trust, the Trust can undertake only certain types of activities. Please see
"Taxation of the Trust" below for more details.
Proof-of-Stake
Process
Unlike
proof-of-work, in which validators expend computational resources to compete to
validate transactions and are rewarded coins in proportion to the amount of
computational resources expended, in proof-of-stake, validators risk or "stake"
coins to compete to be randomly selected to validate transactions and are
rewarded coins in proportion to the amount of coins staked. Any malicious
activity, such as validating multiple blocks, disagreeing with the eventual
consensus or otherwise violating protocol rules, results in the forfeiture or
"slashing" of a portion of the staked coins. Proof-of-stake is believed by some
to be more energy efficient and scalable than proof-of-work.
Limits
on BNB Supply
[ ]
BNB
Market and BNB Exchanges
BNB
can be transferred in direct peer-to-peer transactions through the direct
sending of BNB over the BNB Chain from one BNB address to another. Among
end-users, BNB can be used to pay other members of the BNB Chain for goods and
services under what resembles a barter system. Consumers can also pay merchants
and other commercial businesses for goods or services through direct
peer-to-peer transactions on the BNB Chain or through third-party service
providers.
In
addition to using BNB to engage in transactions, investors may purchase and sell
BNB to speculate as to the value of BNB in the BNB market, or as a long-term
investment to diversify their portfolio. The value of BNB within the market is
determined, in part, by the supply of and demand for BNB in the global BNB
market, market expectations for the adoption of BNB as a store of value, the
number of merchants that accept BNB as a form of payment, and the volume of
peer-to-peer transactions, among other factors.
BNB
spot markets provide investors with a website that permits investors to open
accounts with the spot market and then purchase and sell BNB. Prices for trades
on BNB spot markets are typically reported publicly. An investor opening a
trading account must deposit an accepted government-issued currency into their
account with the spot market, or a previously acquired digital asset, before
they can purchase or sell assets on the spot market. The process of establishing
an account with an BNB spot market and trading BNB is different from, and should
not be confused with, the process of users sending BNB from one BNB address to
another BNB address on the BNB Chain. This latter process is an activity that
occurs on the BNB Chain, while the former is an activity that occurs entirely on
the private website operated by the spot market. The spot market typically
records the investor's ownership of BNB in its internal books and records,
rather than on the BNB Chain. The spot market ordinarily does not transfer BNB
to the investor on the BNB Chain unless the investor makes a request to the spot
market to withdraw the BNB in their exchange account to an off-exchange BNB
wallet.
Outside
of spot markets, BNB can be traded OTC in transactions that are not publicly
reported. The OTC market is largely institutional in nature, and OTC market
participants generally consist of institutional entities, such as firms that
offer two-sided liquidity for BNB, investment managers, proprietary trading
firms, high-net-worth individuals that trade BNB on a proprietary basis,
entities with sizeable BNB holdings, and family offices. The OTC market provides
a relatively flexible market in terms of quotes, price, quantity, and other
factors, although it tends to involve large blocks of BNB. The OTC market has no
formal structure and no open-outcry meeting place. Parties engaging in OTC
transactions will agree upon a price—often via phone or email—and then one of
the two parties will then initiate the transaction. For example, a seller of BNB
could initiate the transaction by sending the BNB to the buyer's BNB address.
The buyer would then wire U.S. dollars to the seller's bank account. OTC trades
are sometimes hedged and eventually settled with concomitant trades on BNB spot
markets.
Authorized
Participants will deliver, or facilitate the delivery of, BNB or cash to the
Trust's account with the BNB Custodian in exchange for Shares of the Trust, and
the Trust, through the BNB Custodian, will deliver BNB or cash when such
Authorized Participants redeem Shares of the Trust. Based on the
[ ], MarketVector selects the top five exchanges by
rank for inclusion in the MarketVectorTM
[ ], which the Trust will then use to price its NAV
at the end of every business day. See "The
Trust and BNB Prices— Description of the MarketVectorTM
[ ] Construction and Maintenance"
for more information.
Regulation
of BNB and Government Oversight
As
digital assets have grown in both popularity and market size, the U.S. Congress
and a number of U.S. federal and state agencies (including FinCEN, SEC, CFTC,
FINRA, the Consumer Financial Protection Bureau ("CFPB"), the Department of
Justice, the Department of Homeland Security, the Federal Bureau of
Investigation, the IRS, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the Federal Reserve and state financial
institution and securities regulators) have been examining the operations of
digital asset networks, digital asset users and the digital asset exchange
markets, with particular focus on the extent to which digital assets can be used
to launder the proceeds of illegal activities or fund criminal or terrorist
enterprises and the safety and soundness of exchanges or other service-providers
that hold or custody digital assets for users. Many of these state and federal
agencies have issued consumer advisories regarding the risks posed by digital
assets to investors. In addition, federal and state agencies, and other
countries have issued rules or guidance about the treatment of digital asset
transactions or requirements for businesses engaged in digital asset activity.
President Biden's March 9, 2022 Executive Order, asserting that technological
advances and the rapid growth of the digital asset markets "necessitate an
evaluation and alignment of the United States Government approach to digital
assets," signals an ongoing focus on digital asset policy and regulation in the
United States. A number of reports issued pursuant to the Executive Order have
focused on various risks related to the digital asset ecosystem, and have
recommended additional legislation and regulatory oversight. In addition,
federal and state agencies, and other countries and international bodies have
issued rules or guidance about the treatment of digital asset transactions or
requirements for businesses engaged in digital asset activity. Moreover, the
failure of FTX Trading Ltd. ("FTX") in November 2022 and the resulting market
turmoil substantially increased regulatory scrutiny in the United States and
globally and led to SEC and criminal investigations, enforcement actions and
other regulatory activity across the digital asset ecosystem.
In
addition, the SEC, U.S. state securities regulators and several foreign
governments have issued warnings and instituted legal proceedings in which they
argue that certain digital assets may be classified as securities and that both
those digital assets and any related initial coin offerings or other primary and
secondary market transactions are subject to securities regulations. For
example, in June 2023, the SEC brought charges against Binance and Coinbase, and
in November 2023, the SEC brought charges against Kraken, alleging that they
operated unregistered securities exchanges, brokerages and clearing agencies. In
its complaints, the SEC asserted that several digital assets are securities
under the federal securities laws, including BNB. The outcomes of these
proceedings, as well as ongoing and future regulatory actions, have had a
material adverse effect on the digital asset industry as a whole and on the
price of BNB, and may alter, perhaps to a materially adverse extent, the nature
of an investment in the Shares and/or the ability of the Trust to continue to
operate. Additionally, U.S. state and federal, and foreign regulators and
legislatures have taken action against virtual currency businesses or enacted
restrictive regimes in response to adverse publicity arising from hacks,
consumer harm, or criminal activity stemming from virtual currency
activity.
In
August 2021, the chair of the SEC stated that he believed investors using
digital asset trading platforms are not adequately protected, and that
activities on the platforms can implicate the securities laws, commodities laws
and banking laws, raising a number of issues related to protecting investors and
consumers, guarding against illicit activity, and ensuring financial stability.
The chair expressed a need for the SEC to have additional authorities to prevent
transactions, products, and platforms from "falling between regulatory cracks,"
as well as for more resources to protect investors in "this growing and volatile
sector." The chair called for federal legislation centering on digital asset
trading, lending, and decentralized finance platforms, seeking "additional
plenary authority" to write rules for digital asset trading and lending. At the
same time, the chair has also stated that the SEC has authority under existing
laws to regulate the digital asset sector and several enforcement actions were
filed against digital asset trading platforms during the first half of
2023.
The
SEC has also recently proposed amendments to the custody rules under Rule
406(4)-2 of the Investment Advisers Act. The proposed rule changes would amend
the definition of a "qualified custodian" under Rule 206(4)-2(d)(6) and expand
the current custody rule under Rule 406(4)-2 to cover digital assets and related
advisory activities. If enacted as proposed, these rules would likely impose
additional regulatory requirements with respect to the custody and storage of
digital assets and could lead to additional regulatory oversight of the digital
asset ecosystem more broadly. See "Risk Factors—Risk Factors Related to the
Regulation of Digital Assets, the Trust and the Shares—Regulatory changes or
actions by the U.S. Congress or any U.S. federal or state agencies may affect
the value of the Shares or restrict the use of BNB, validating activity or the
operation of the BNB Chain or the Digital Asset Trading Platform Market in a
manner that adversely affects the value of the Shares," "Risk Factors—Risk
Factors Related to the Regulation of Digital Assets, the Trust and the
Shares—The SEC takes the view that BNB is a "security," and a final
determination that BNB or any other digital asset is a "security" may adversely
affect the value of BNB and the value of the Shares, and result in potentially
extraordinary, nonrecurring expenses to, or termination of, the Trust." and
"Risk Factors—Risk Factors Related to the Regulation of Digital Assets, the
Trust and the Shares—Changes in SEC policy could adversely impact the value of
the Shares."
Various
foreign jurisdictions have, and may continue to, in the near future, adopt laws,
regulations or directives that affect a digital asset network, the Digital Asset
Markets, and their users, particularly Digital Asset Trading Platforms and
service providers that fall within such jurisdictions' regulatory scope. For
example:
•China
has made transacting in cryptocurrencies illegal for Chinese citizens in
mainland China, and additional restrictions may follow. China has banned initial
coin offerings and there have been reports that Chinese regulators have taken
action to shut down a number of China-based Digital Asset Trading
Platforms.
•South
Korea determined to amend its Financial Information Act in March 2020 to require
virtual asset service providers to register and comply with its AML and
counter-terrorism funding framework. These measures also provide the government
with the authority to close Digital Asset Trading Platforms that do not comply
with specified processes. South Korea has also banned initial coin
offerings.
•The
Reserve Bank of India in April 2018 banned the entities it regulates from
providing services to any individuals or business entities dealing with or
settling digital assets. In March 2020, this ban was overturned in the Indian
Supreme Court, although the Reserve Bank of India is currently challenging this
ruling.
•The
United Kingdom's Financial Conduct Authority published final rules in October
2020 banning the sale of derivatives and exchange-traded notes that reference
certain types of digital assets, contending that they are "ill- suited" to
retail investors citing extreme volatility, valuation challenges and association
with financial crime. A new law, the Financial Services and Markets Act 2023
("FSMA"), received royal assent in June 2023. The FSMA brings digital asset
activities within the scope of existing laws governing financial institutions,
markets and assets.
•The
Parliament of the European Union approved the text of the Markets in
Crypto-Assets Regulation ("MiCA") in April 2023, establishing a regulatory
framework for digital asset services across the European Union. MiCA is intended
to serve as a comprehensive regulation of digital asset markets and imposes
various
obligations on digital asset issuers and service providers. The main aims of
MiCA are industry regulation, consumer protection, prevention of market abuse
and upholding the integrity of digital asset markets. MiCA was formally approved
by the European Union's member states in 2023 and is expected to come into
effect in 2024.
There
remains significant uncertainty regarding foreign governments' future actions
with respect to the regulation of digital assets and Digital Asset Trading
Platforms. Such laws, regulations or directives may conflict with those of the
United States and may negatively impact the acceptance of BNB by users,
merchants and service providers outside the United States and may therefore
impede the growth or sustainability of the BNB Chain ecosystem in the United
States and globally, or otherwise negatively affect the value of BNB held by the
Trust. The effect of any future regulatory change on the Trust or the BNB held
by the Trust is impossible to predict, but such change could be substantial and
adverse to the Trust and the value of the Shares.
For
more information, see "Risk
Factors—Digital asset markets in the U.S. exist in a state of regulatory
uncertainty, and adverse legislative or regulatory developments could
significantly harm the value of BNB or the Shares, such as by banning,
restricting or imposing onerous conditions or prohibitions on the use of BNB,
mining activity, digital wallets, the provision of services related to trading
and custodying BNB, the operation of the BNB Chain, or the digital asset markets
generally."
THE
TRUST AND BNB PRICES
Overview
of the Trust
The
Trust is an exchange-traded fund that issues Shares that trade on the Exchange.
The Trust is a passive investment vehicle that does not seek to pursue any
investment strategy beyond reflecting the performance of the price of BNB and
any rewards from staking a portion of the Trust's BNB. As a result, the Trust
will not attempt to avoid losses or hedge exposure arising from the risk of
changes in the price of BNB. The Trust's investment objective is to reflect the
performance of the price of BNB less the expenses of the Trust's operations. In
seeking to achieve its investment objective, the Trust will hold BNB and will
value its Shares daily based on the reported MarketVectorTM
[ ], which is calculated based on prices
contributed by exchanges that MarketVector believes represent the top five BNB
trading platforms, based on the industry leading
[ ] review report. The Trust will not utilize
leverage, derivatives or any similar arrangements in seeking to meet its
investment objective. The Trust is sponsored by VanEck Digital Assets, LLC, a
wholly-owned subsidiary of VanEck. The Trust, the Sponsor and the service
providers will not loan or pledge the Trust's assets, which include staked
assets, nor will the Trust's assets serve as collateral for any loan or similar
arrangement. The Trust is not actively managed. It does not engage in any
activities designed to obtain a profit from, or to ameliorate losses caused by,
changes in the price of BNB.
The
Sponsor believes that the Trust will provide a cost-efficient way for
Shareholders to implement strategic and tactical asset allocation strategies
that use BNB by investing in the Trust's Shares rather than purchasing, holding
and trading BNB directly. The latter alternative would require selecting a BNB
trading platform and opening an account or arranging a private transaction,
establishing a personal computer system capable of transacting directly on the
blockchain, and incurring the risks associated with maintaining and protecting a
private key that is irrecoverable if lost, among other
difficulties.
BNB
Value
The
value of BNB is determined by the value that various market participants place
on BNB through their transactions. The most common means of determining the
value of a BNB is by surveying one or more BNB trading platforms where BNB is
traded publicly and transparently. The price of BNB on the BNB market has
exhibited periods of extreme volatility, which could have a negative impact on
the performance of the Trust.
On
exchanges, BNB 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.
OTC dealers or market makers do not typically disclose their trade
data.
Currently,
there are many exchanges operating worldwide, representing a substantial
percentage of BNB buying and selling activity, and providing the most data with
respect to prevailing valuations of BNB. The below table reflects the average
daily trading volume (in thousands of USD) of each of the BNB trading platforms
included in the MarketVectorTM
[ ] as of [ ], 2025
using data reported by MarketVector from [ ], 2024
to [ ], 2025:
|
|
|
|
|
|
|
|
|
|
BNB
Exchanges included in the MarketVectorTM
[ ] as of [ ],
2025 |
|
Average
Daily Volume |
|
|
|
The
market share for BNB/USD trading of the five constituent platforms over the past
four calendar quarters is shown in the table below:
__________________
*Source:
MarketVector
Trust
Structure
The
Sponsor designed the Trust in what it believes is a straight-forward structure
to provide exposure to BNB. By utilizing the MarketVectorTM
[ ], the Trust draws prices for its Shares off of
what is in effect a "consolidated tape" for BNB, similar to the consolidated
tapes or "ticker tapes" used by major stock exchanges to report trades and
quotes. The term "consolidated" refers to the fact that securities, just like
BNB, often trade on more than one exchange, and a consolidated tape reports not
only a security's trading activity on its primary listing exchange but the
trading activity on all or substantially all exchanges on which it is traded.
However, the global BNB market is not subject to comparable regulatory
guardrails as regulated securities markets. See "Risk Factors—Due to the
unregulated nature and lack of transparency surrounding the operations of BNB
trading platforms, which may be subject to regulation in relevant jurisdiction,
but may not be complying, they may experience fraud, manipulation, security
failures or operational problems, which may adversely affect the value of BNB
and, consequently, the value of the Shares."
The
use of the MarketVectorTM
[ ] is designed to eliminate from the NAV
calculation pursuant to which the Trust prices its Shares those BNB trading
platforms with indicia of suspicious, fake, or non-economic volume. However,
there is no guarantee that such measures will be effective. See "Risk Factors—
The MarketVectorTM
[ ] may be affected by manipulative or fraudulent
practices in the global BNB market or at constituent trading platforms." In
addition, the use of five BNB trading platforms is designed to mitigate the
potential for idiosyncratic exchange risk, as the failure of any individual BNB
trading platform should not materially impact pricing for the Trust. Moreover,
any attempt to manipulate the NAV would require a substantial amount of capital
distributed across a majority of the five exchanges, and potentially coordinated
activity across those exchanges, making it more difficult to conduct, profit
from, or avoid the detection of market manipulation. The Sponsor believes that
this is especially true in a well-arbitraged and distributed market, as
MarketVector believes the real BNB market to be.
In
addition to the above safeguards, the MarketVectorTM
[ ] is calculated over twenty three-minute
intervals pursuant to a methodology referred to as an equal-weighted average of
the volume-weighted median price. The use of twenty consecutive three-minute
segments over a sixty-minute period means a malicious actor would need to
sustain efforts to manipulate the market over an extended period of time, or
would need to replicate efforts multiple times, potentially triggering review
from the exchange or regulators, or both. The use of a "median" price by its
nature limits the ability of outlier prices that may have been caused by
attempts to manipulate the price on a particular exchange, to impact the NAV, as
it systematically excludes those prices from the NAV calculation.
Description
of the MarketVectorTM
[ ] Construction and Maintenance
The
Sponsor has entered into a licensing agreement with MarketVector to use the
MarketVectorTM
[ ]. The Trust is entitled to use the
MarketVectorTM
[ ] pursuant to a sub-licensing arrangement with
the Sponsor. The MarketVectorTM
[ ] is a U.S. dollar-denominated composite
reference rate for the price of BNB. The index administrator is Market Vector, a
wholly-owned subsidiary of VanEck. On each day that the Exchange is open for
regular trading, as promptly as practical after 4:00 p.m. Eastern time, the
Administrator determines the NAV of the Trust, based on the
MarketVectorTM
[ ]. In determining the Trust's NAV, the
Administrator values the BNB held by the Trust based on the price set by the
MarketVectorTM
[ ] as of 4:00 p.m. Eastern time.
The
Index is calculated daily between 00:00 and 24:00 (CET) and the Index values are
disseminated every 15 seconds to data vendors. The Index is disseminated in USD
and the closing and intraday value is calculated over twenty three-minute
intervals pursuant to a methodology referred to as an equal-weighted average of
the volume-weighted median price. The intra-day data available in the
MarketVectorTM
[ ] is published once every 15 seconds throughout
each trading day. The intra-day levels and closing levels of the
MarketVectorTM
[ ] are published by MarketVector. The current
exchange composition of the MarketVectorTM
[ ] is Bitstamp, Bullish,
[ ], [ ] and Kraken.
The MarketVectorTM
[ ] index was launched on February 16,
2024.
The
underlying exchanges are sourced from the industry leading
[ ] review report. [ ]
was established in 2019 as a tool designed to bring clarity to the digital asset
exchange sector by providing a framework for assessing risk and in turn bringing
transparency and accountability to a complex and rapidly evolving market. The
[ ] methodology utilizes a combination of
qualitative and quantitative metrics to analyze a comprehensive data set,
covering
eight categories of evaluation. The categories of evaluation include
legal/regulation, KYC/transaction risk, data provision, security, team/exchange,
asset quality/diversity, market quality and negative events.
The
legal/regulation category considers, among other inputs, an exchange's offering
of some form of cryptocurrency insurance and whether the exchange is registered
as a money services business. The KYC/transaction risk category assesses an
exchange's market surveillance system, transaction protocols and KYC/AML
procedures. Data provisions measure an exchange's quality of connectivity and
data processing, including its API average response time and order book
availability, among others. The security category takes into account, among
others, an exchange's use of cold wallets, two-factor authentication policy, and
encryption quality. The team/exchange category gauges the experience of an
exchange's senior leadership and funding sources, among others. Asset
quality/diversity considerations include the fundamental health and mix of
digital assets available on each exchange. The market quality category includes,
but is not limited to, average spreads on exchange, volatility and volume
correlation, and depth of market. Negative events impose a 5% penalty factor in
determining the overall ranking of an exchange and captures negative events such
as a flash crash, legal matters, or a large breach in data privacy.
The
[ ] review report provides a framework for
assessing risk of each exchange and brings transparency and accountability to a
rapidly evolving market and industry. Based on the
[ ], MarketVector initially selects the top five
exchanges by rank for inclusion in the MarketVectorTM
[ ]. If an eligible non-component exchange is in
the top five by rank for two consecutive semi-annual reviews, it replaces the
lowest ranked component exchange. If an eligible exchange is downgraded by two
or more notches in a semi-annual review and is no longer in the top five by
rank, it is replaced by the highest ranked non-component exchange. Adjustments
to exchange coverage are announced four business days prior to the first
business day of each of March and September at 23:00 CET. Once it has actual
knowledge of material changes to the component exchanges used to calculate the
Index, the Trust will notify Shareholders in a prospectus supplement and a
current report on Form 8-K or in its annual or quarterly reports. The
MarketVectorTM
[ ] is rebalanced at 16:00:00 GMT/BST on the last
business day of each of February and August.
As
noted above, the MarketVectorTM
[ ] is disseminated in USD and the closing and
intraday value is calculated over twenty three-minute intervals pursuant to a
methodology referred to as an equal-weighted average of the volume-weighted
median price. In other words, MarketVectorTM
[ ] seeks to provide the average price that BNB has
traded at during the past hour. This is calculated as the average of the
volume-weighted median price on the constituent platforms of each of the twenty
three-minute intervals, as displayed below:
Volume-weighted
median price of BNB for each three minute period (20 total) / 20 = MarketVector
[ ] price.
When
determining the volume-weighted median price during a three minute period, the
highest and lowest contributed prices from the five constituent trading
platforms are removed and the volume-weight median is derived from the
contributed prices of the other three exchanges. Using twenty consecutive
three-minute segments over a sixty-minute period means malicious actors would
need to sustain efforts to manipulate the market over an extended period of
time, or would need to replicate efforts multiple times across exchanges,
potentially triggering review. This extended period also supports Authorized
Participant activity by capturing volume over a longer time period, rather than
forcing Authorized Participants to mark an individual close or auction. The use
of a median price reduces the ability of outlier prices to impact the NAV, as it
systematically excludes those prices from the NAV calculation. The use of a
volume-weighted median (as opposed to a traditional median) serves as an
additional protection against attempts to manipulate the NAV by executing a
large number of low-dollar trades, because, any manipulation attempt would have
to involve a majority of global spot BNB volume in a three-minute window to have
any influence on the NAV. As discussed herein, removing the highest and lowest
prices further protects against attempts to manipulate the NAV, requiring bad
actors to act on multiple exchanges at once to have any ability to influence the
price.
Disclaimers
VanEck
BNB ETF (the "Product") is not sponsored, endorsed, sold or promoted by
MarketVector Indexes GmbH ("Licensor") and any of its affiliates. Licensor and
any of its affiliates make no representation or warranty,
express
or implied, to the owners of the Product or any member of the public regarding
the advisability of investing in tokens generally or in the Product particularly
or the ability of the MarketVectorTM
[ ] to track the performance of the digital assets
market. Licensor's only relationship to the Licensee is the licensing of certain
service marks and trade names of Licensor and of the Index that is determined,
composed and calculated by Licensor without regard to the Licensee or the
Product. Licensor has no obligation to take the needs of the Licensee or the
owners of the Product into consideration in determining, composing or
calculating the Index. Licensor is not responsible for and has not participated
in the determination of the timing of, prices at, or quantities of the Product
to be issued or in the determination or calculation of the equation by which the
Product is to be converted into cash. Licensor has no obligation or liability in
connection with the administration, marketing or trading of the
Product.
LICENSOR
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE MARKETVECTOR
[ ] OR ANY DATA INCLUDED THEREIN AND LICENSOR AND
ANY OF ITS AFFILIATES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. LICENSOR AND ANY OF ITS AFFILIATES MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE
VANECK BNB ETF, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE MARKETVECTOR
[ ] OR ANY DATA INCLUDED THEREIN. LICENSOR MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
MARKETVECTOR [ ] OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR AND ANY OF ITS
AFFILIATES HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
The
Product is not sponsored, promoted, sold or supported in any other manner by CC
Data Limited nor does CC Data Limited offer any express or implicit guarantee or
assurance either with regard to the results of using the Index and/or Index
trade mark or the Index price at any time or in any other respect. The Index is
calculated and published by CC Data Limited. CC Data Limited uses its best
efforts to ensure that the Index is calculated correctly. Irrespective of its
obligations towards the Issuer, CC Data Limited has no obligation to point out
errors in the Index to third parties including but not limited to investors
and/or financial intermediaries of the financial instrument. Neither publication
of the Index by CC Data Limited nor the licensing of the Index or Index trade
mark for the purpose of use in connection with the financial instrument
constitutes a recommendation by CC Data Limited to invest capital in said
financial instrument nor does it in any way represent an assurance or opinion of
CC Data Limited with regard to any investment in this financial instrument. CC
Data Limited is not responsible for fulfilling the legal requirements concerning
the accuracy and completeness of the financial instrument's
prospectus.
NET
ASSET VALUE DETERMINATIONS
Calculation
of NAV and NAV per Share
The
Trust's NAV will be calculated based on the Trust's net asset holdings as
reconciled to the BNB Custodian's accounts on a market approach, determined on a
daily basis in accordance with the MarketVectorTM
[ ] price at 4:00 p.m. Eastern time. The Sponsor
believes that use of the MarketVectorTM
[ ] mitigates against idiosyncratic exchange risk,
as the failure of any individual exchange will not materially impact pricing for
the Trust. It also allows the Administrator to calculate the NAV in a manner
that significantly deters manipulation.
The
Sponsor holds full discretion to change either the index used for calculating
NAV or the index provider subject to proper notification to shareholders (such
notification will be made via a prospectus supplement and/or a current report
filed with the SEC and will occur in advance of any such change). Shareholder
approval is not required.
As
discussed, the fact that there are multiple exchanges contributing prices to the
MarketVectorTM
[ ] used to calculate NAV makes manipulation more
difficult in a well-arbitraged and fractured market, as a malicious actor would
need to manipulate multiple exchanges simultaneously to impact the NAV, or
dramatically skew the historical distribution of volume between the various
exchanges.
In
calculating the MarketVectorTM
[ ], the methodology captures trade prices and
sizes from exchanges and examines twenty three-minute periods leading up to 4:00
p.m. Eastern time to produce the closing value. It then calculates an
equal-weighted average of the volume-weighted median price of these twenty
three-minute periods, removing the highest and lowest contributed prices. Using
twenty consecutive three-minute segments over a sixty-minute period means
malicious actors would need to sustain efforts to manipulate the market over an
extended period of time, or would need to replicate efforts multiple times
across exchanges, potentially triggering review. This extended period also
supports Authorized Participant activity by capturing volume over a longer time
period, rather than forcing Authorized Participants to mark an individual close
or auction. The use of a median price eliminates the ability of outlier prices
to impact the NAV, as it systematically excludes those prices from the NAV
calculation. The use of a volume-weighted median (as opposed to a traditional
median) protects against attempts to manipulate the NAV by executing a large
number of low-dollar trades, because, any manipulation attempt would have to
involve a majority of global spot BNB volume in a three-minute window to have
any influence on the NAV. As discussed, trimming the highest and lowest prices
further protects against attempts to manipulate the NAV, requiring bad actors to
act on multiple exchanges at once to have any ability to influence the price.
Additional information about the MarketVectorTM
[ ], including its methodology and calculation
formula, are available the MarketVector website, which is accessible at
www.marketvector.com.
The
MarketVector™ [ ] is designed to be a robust price
for BNB in USD. There is no component other than BNB in the index.
Review
procedure (for eligible exchanges with USD pair/agreement):
•If
an eligible exchange is in the top 5 by rank based on the
[ ]'s [ ] table for
two consecutive semiannual reviews, it replaces the lowest ranked
exchange.
•If
an eligible exchange is downgraded by two or more notches in a semiannual review
and is not in the top 5 by rank anymore, it is replaced by the highest ranked
non-component exchange.
Adjustments
to exchange coverage will be announced four business days prior to the first
business day of June/December at 23:00 CET/CEST; the indexes are rebalanced at
16:00:00 ET on the last business day of May/November.
In
case of a hard fork, the forked coin is not added to the
MarketVectorTM
[ ]. Notwithstanding the foregoing, if MarketVector
determines that a forked asset is significant enough to replace the old line in
terms of market capitalization and acceptance, MarketVector may decide for a
different treatment.
In
the unlikely event a spun-off coin is larger than BNB (by market capitalization)
and is in general accepted as the successor of the original chain, the index
owner might decide to keep it as the only index component.
The
index is calculated daily between 00:00 and 24:00 (ET) and the index values are
disseminated to data vendors every 15 seconds. The index is disseminated in USD
and the closing value is calculated at 16:00:00 ET with fixed 16:00 ET exchange
rates.
The
following provides a hypothetical example of the MarketVector™
[ ] calculation*:
1.On
a given calculation day, the below relevant transactions are observed at 9:02
p.m. Eastern time:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Bucket |
|
Time
(NY) |
|
Price
(USD) |
|
Size
(BNB) |
|
Exchange |
|
|
|
|
|
|
|
|
|
|
|
2.These
transactions are segmented by their timestamp into 20 buckets of equal 3-minute
length as shown in the first column in the above table.
3.The
volume weighted median price for each bucket is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Bucket |
|
Volume
(BNB) |
|
Volume
Weighted Median Price ($) |
|
|
|
|
|
4.The
average of the 20 volume weighted medians is calculated to be
$[ ].
The
Trust's NAV per Share is calculated by:
•taking
the current market value of its total assets;
•subtracting
any liabilities; and
•dividing
that total by the total number of outstanding Shares.
The
Administrator calculates the NAV of the Trust once each Exchange trading day.
The NAV for a normal trading day will be released after 4:00 p.m. Eastern time.
Trading during the core trading session on the Exchange typically closes at 4:00
p.m. Eastern time. However, NAVs are not officially struck until later in the
day (often by 5:30 p.m. Eastern time and generally no later than 8:00 p.m.
Eastern time). The pause between 4:00 p.m. Eastern time and 5:30 p.m. Eastern
time (or later) provides an opportunity to detect, flag, investigate, and
correct unusual pricing should it occur. The Sponsor will monitor for
significant events related to crypto assets that may impact the value of BNB and
will determine in good faith, and in accordance with its valuation policies and
procedures, whether to fair value the Trust's BNB on a given day based
(e.g.,
if the MarketVectorTM
[ ] is not available the Sponsor). In certain
circumstances, the Sponsor will determine whether to fair value the Trust's BNB
on a given day on whether certain pre-determined criteria have been met. For
example, if the MarketVectorTM
[ ] deviates by more than a pre-determined amount
from an alternate benchmark available to the Sponsor, then the Sponsor may
determine to utilize the alternate benchmark. The Sponsor may also fair value
the Trust's BNB using observed market transactions from one or more exchanges.
The Sponsor may also fair value the Trust's BNB using a combination of inputs in
certain situations (e.g., using observed market transactions, OTC quotations
from brokers, etc.).
Accordingly,
the NAV of the Trust may reflect the fair value of BNB rather than the BNB
market prices on certain exchanges at 4:00 p.m. Eastern time. Fair value pricing
involves subjective judgments and it is possible that a fair value determination
for BNB or other assets is materially different than the value that could be
realized upon the sale of such BNB or asset. In addition, fair value pricing
could result in a difference between the prices used to calculate the Trust's
NAV and the prices used by the MarketVectorTM
[ ]. The Sponsor, in conjunction with the
Administrator, will work in good faith to determine the fair value and implement
the correct of the Trust's NAV. The NAV for the Trust will be calculated by the
Administrator once a day and will be disseminated daily to all market
participants at the same time. Quotation and last-sale information regarding the
Shares will be disseminated through
the
facilities of the Consolidated Tape Association ("CTA"). In addition, in order
to provide updated information relating to the Trust for use by Shareholders and
market professionals, ICE Data Indices, LLC will calculate and disseminate
throughout the core trading session on each trading day an updated intraday
indicative value ("IIV"). The IIV will be calculated by taking creation unit
holdings and updating that value throughout the trading day to reflect changes
in the price of BNB; this value is then divided by the numbers of shares per
creation unit in order to calculate an IIV on a "per share" basis.
The
IIV disseminated during the Exchange core trading session hours should not be
viewed as an actual real time update of the NAV, because NAV per Share is
calculated only once at the end of each trading day based upon the relevant end
of day values of the Trust's investments. The Trust will provide the IIV per
Share updated every 15 seconds, as calculated by the Exchange or a third-party
financial data provider during the Exchange's regular trading hours (9:30 a.m.
to 4:00 p.m. E.T.). The IIV will be disseminated on a per Share basis every 15
seconds during regular Exchange core trading session hours of 9:30 a.m. Eastern
time to 4:00 p.m. Eastern time. ICE Data Indices, LLC will disseminate the IIV
value through the facilities of CTA/CQ High Speed Lines. In addition, the
indicative fund value will be published on the Exchange's website and will be
available through on-line information services such as Bloomberg and Reuters.
The IIV may differ from the NAV due to the differences in the time window of
trades used to calculate each price (the NAV uses a sixty-minute window, whereas
the IIV draws prices from the last trade on each exchange in an effort to
produce a relevant, real-time price). The Sponsor does not believe this will
cause confusion in the marketplace, as Authorized Participants are the only
Shareholders who interact with the NAV and the Sponsor will communicate its NAV
calculation methodology clearly.
There
are many instances in the market today where the IIV and the NAV of an ETF are
subtly different, whether due to the calculation methodology, market hours
overlap or other factors. The Sponsor has seen limited or no negative impact on
trading, liquidity or other factors for exchange-traded funds in this situation.
The Sponsor believes that the IIV will closely track the globally integrated BNB
price as reflected on the contributing real BNB trading platforms.
Dissemination
of the IIV provides additional information that is not otherwise available to
the public and is useful to Shareholders and market professionals in connection
with the trading of the Trust's Shares on the Exchange. Shareholders and market
professionals will be able throughout the trading day to compare the market
price of the Trust and the IIV. If the market price of the Trust's Shares
diverges significantly from the IIV, market professionals will have an incentive
to execute arbitrage trades. For example, if the Trust appears to be trading at
a discount compared to the IIV, a market professional could buy the Trust's
Shares on the Exchange and sell short futures contracts. Such arbitrage trades
can tighten the tracking between the market price of the Trust and the IIV and
thus can be beneficial to all market participants.
The
Trust does not expect that price differentials for BNB across exchanges would
have a meaningful impact on this arbitrage mechanism. Furthermore, the Trust
does not expect that the closure of any single one exchange would meaningfully
impact the arbitrage mechanism because Liquidity Providers typically source
underlying spot BNB liquidity from multiple exchanges. The Trust acknowledges,
however, that this arbitrage mechanism could potentially be adversely impacted
if halts in the trading of spot BNB were to occur across multiple exchanges,
whether due to breaches or otherwise. See "Risk Factors-- BNB spot exchanges are
not subject to same regulatory oversight as traditional equity exchanges, which
could negatively impact the ability of Authorized Participants and Liquidity
Providers to implement arbitrage mechanism" for additional information on these
risks.
The
Sponsor reserves the right to adjust the Share price of the Trust in the future
to maintain convenient trading ranges for Shareholders. Any adjustments would be
accomplished through stock splits or reverse stock splits. Such splits would
decrease (in the case of a split) or increase (in the case of a reverse split)
the proportionate NAV per Share, but would have no effect on the net assets of
the Trust or the proportionate voting rights of Shareholders or the value of any
Shareholder's investment.
Calculation
of Principal Market NAV and Principal Market NAV per Share
In
addition to calculating NAV and NAV per Share, for purposes of the Trust's
financial statements, the Trust determines the Principal Market NAV and
Principal Market NAV per Share on each valuation date for such
financial
statements. The determination of the Principal Market NAV and Principal Market
NAV per Share is identical to the calculation of NAV and NAV per Share,
respectively, except that the value of BNB is determined using the fair value of
BNB based on the price in the BNB market that the Trust considers its "principal
market" as of 11:59 p.m., Eastern time, on the valuation date, rather than using
the Index. A disparity between the fair value of the Trust's BNB determined
using "principal market" and the fair value of the Trust's BNB using the
MarketVectorTM
[ ] could be material. In the case of such a
material disparity that is ongoing, the Trust will notify Shareholders in a
prospectus supplement and a current report on Form 8-K or in its annual or
quarterly reports.
The
Trust has adopted a valuation policy, which provides for the procedure for
valuing the Trust's assets. The policy also sets forth the procedures to
determine the principal market (or in the absence of a principal market, the
most advantageous market) for purposes of determining the Principal Market NAV
and Principal Market NAV per Share in accordance with Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") 820-10, which
outlines the application of fair value accounting. Under ASC 820-10, fair value
for BNB is determined to be the price that would be received in a current sale,
assuming an orderly transaction between market participants on the valuation
date in the principal market to market participants or, in the absence of a
principal market, the most advantageous market. Market participants are defined
as buyers and sellers in the principal or most advantageous market that are
independent, knowledgeable, and willing and able to transact. Under its
valuation policy, the Trust determines its principal market (or in the absence
of a principal market the most advantageous market) annually and conducts an
analysis at least on a quarterly basis to determine whether there have occurred
any changes in BNB markets and its operations that would require a change in the
Trust's determination of its principal market.
The
Trust identifies and determines the BNB principal market (or in the absence of a
principal market, the most advantageous market) for GAAP purposes consistent
with the application of fair value measurement framework in FASB ASC
820-10.
ASC
820-10 determines fair value to be the price that would be received for BNB in a
current sale, which assumes an orderly transaction between market participants
on the measurement date. ASC 820-10 requires the Trust to assume that BNB is
sold in its principal market to market participants or, in the absence of a
principal market, the most advantageous market. Market participants are defined
as buyers and sellers in the principal or most advantageous market that are
independent, knowledgeable, and willing and able to transact.
Under
ASC 820-10, a principal market is the market with the greatest volume and
activity level for the asset or liability. The determination of the principal
market will be based on the market with the greatest volume and level of
activity that can be accessed.
The
Trust does not itself transact on any Digital Asset Markets (as defined below).
The Authorized Participants or Liquidity Providers transact in an Exchange
Market, Brokered Market, a Dealer Market, and Principal-to-Principal Markets,
each as defined in ASC 820-10-35-36A (collectively, "Digital Asset
Markets").
In
determining which of the eligible Digital Asset Markets is the Trust's principal
market, the Trust obtains reliable volume and level of activity information and
reviews these criteria in the following order:
First,
the Trust reviews a list of Digital Asset Markets and scopes in the markets that
the Trust reasonably believes are operating in compliance with applicable laws
and regulations and those that are accessible to the Trust and the Authorized
Participant.
Second,
the Trust sorts the remaining Digital Asset Markets from high to low based on
volume and level of activity of BNB traded on each Digital Asset
Market.
Third,
the Trust then reviews intra-day pricing fluctuations and the degree of
variances in price on Digital Asset Markets to identify any material notable
variances that may impact the volume or price information of a particular
Digital Asset Market.
Fourth,
the Trust then selects a Digital Asset Market as its principal market based on
the highest market-based volume, level of activity, and price stability in
comparison to the other Digital Asset Markets on the list. Based on
information
reasonably available to the Trust, Exchange Markets have the greatest volume and
level of activity for the asset. The Trust therefore looks to accessible
Exchange Markets as opposed to the Brokered Market, Dealer Market and
Principal-to-Principal Markets to determine its principal market.
As
a result of the analysis, the Trust will select an Exchange Market as the
Trust's principal market. Based on the Trust's initial assessment, the NAV and
NAV per Share will be calculated using the fair value of BNB based on the price
provided by this Exchange, as of 4:00 p.m., Eastern time on the measurement date
for GAAP purposes.
The
Trust will update its principal market analysis periodically and as needed to
the extent that events have occurred, or activities have changed in a manner
that could change the Trust's determination of the principal
market.
The
Sponsor on behalf of the Trust will determine in its sole discretion the
valuation sources and policies used to prepare the Trust's financial statements
in accordance with GAAP.
The
cost basis of the investment in BNB recorded by the Trust for financial
reporting purposes is the fair value of BNB at the time of transfer. The cost
basis recorded by the Trust may differ from proceeds collected by the Authorized
Participant from the sale of the corresponding Shares to investors.
ADDITIONAL
INFORMATION ABOUT THE TRUST
The
Trust
The
Trust is a Delaware statutory trust, formed on March 31, 2025 pursuant to the
DSTA. The Trust continuously issues common shares representing fractional
undivided beneficial interest in and ownership of the Trust that may be
purchased and sold on the Exchange. The Trust operates pursuant to the Trust
Agreement dated as of March 31, 2025. CSC Delaware Trust Company, a Delaware
trust company, is the Delaware trustee of the Trust. The Trust is managed and
controlled by the Sponsor. The Sponsor is a limited liability company formed in
the state of Delaware on December 8, 2020.
The
Trust is not registered as an investment company under the 1940 Act and
currently is not required to register under the 1940 Act, and the Sponsor is not
registered as an investment adviser and currently is not required to register
under the Advisers Act in connection with its activities on behalf of the Trust.
The Trust will not hold or trade in commodity futures contracts regulated by the
Commodity Exchange Act ("CEA"), as administered by the CFTC. The Trust is not a
commodity pool for purposes of the CEA and neither the Sponsor, nor the Trustee
is subject to regulation as a commodity pool operator or a commodity trading
adviser in connection with their activity on behalf of the Trust.
The
Trust has no operating history. The Trust and the Sponsor face competition with
respect to the creation of competing products, such as exchange-traded products
offering exposure to the spot BNB market or other digital assets. There can be
no assurance that the Trust will grow to or maintain an economically viable
size. While there are no predetermined criteria for determining whether the
Trust has reached an economically viable size, the Sponsor will monitor the
Trust's assets and liabilities, average daily trading volume of the Shares and
other factors on an ongoing basis. If the Trust is unable to reach or maintain
an economically viable size, trading in Shares may occur at wider spreads than
other competitor products, which could adversely affect the Shareholders.
Additionally, Shareholders may be subject to a higher expense ratio than
expected if the Trust incurred any operating expenses that are not borne by the
Sponsor. There is no guarantee that the Sponsor will obtain or maintain a
commercial advantage relative to competitors offering similar products. Whether
or not the Trust is successful in achieving its intended scale may be impacted
by a range of factors, such as the Trust's timing in entering the market and its
fee structure relative to those of competitive products.
The
number of outstanding Shares is expected to increase and decrease from time to
time as a result of the creation and redemption of Baskets. The creation and
redemption of Baskets requires the delivery to the Trust or the distribution by
the Trust of the amount of BNB represented by the NAV of the Baskets being
created or redeemed. The total amount of BNB required for the creation of
Baskets will be based on the combined net assets represented by the number of
Baskets being created or redeemed.
The
Trust has no fixed termination date.
The
Trust's Fees and Expenses
The
Trust will pay the Sponsor the Sponsor Fee, which is a unified fee of
[ ]%. The Sponsor Fee is paid by the Trust to the
Sponsor as compensation for services performed under the Trust Agreement. The
Administrator will make its determination regarding the Sponsor Fee in respect
of each day by reference to the Trust's NAV as of that day. The Sponsor Fee will
be accrue in U.S. dollars daily and be payable monthly in arrears in BNB on, or
by, the tenth business day of the next month in respect of the prior month. Each
month, the Administrator will calculate the Sponsor Fee for each day of the
month, resulting in a cumulative total in U.S. dollars, which the Administrator
will then calculate the BNB equivalent of by reference to the Index as of the
date of calculation, and the Sponsor shall then withdraw the corresponding
amount of BNB from the Trust's BNB Account in payment of the Sponsor Fee. The
Sponsor has agreed to pay all operating expenses (except for extraordinary
expenses, including but not limited to, non-recurring expenses and costs of
services performed by the Sponsor or a service provider on behalf of the Trust
to protect the Trust or the interests of Shareholders, such as the Custodian
Staking Facilitation Fee, and in connection with any indemnification of agents,
service providers or counterparties of the Trust and extraordinary legal fees
and expenses, including any legal fees and expenses incurred in connection with
litigation, regulatory enforcement or investigation matters) out of the Sponsor
Fee. For extraordinary expenses not covered in the
previous
sentence, the Sponsor shall pay these expenses as they become due and seek
contemporaneous reimbursement from the Trust in the form of BNB at the time of
payment. For extraordinary expenses denominated in dollars, the Sponsor shall
convert the expense amounts into BNB at the Index price on the date the Sponsor
seeks such reimbursement from the Trust, and shall withdraw the corresponding
amounts of BNB from the Trust as reimbursement for paying such extraordinary
expenses of the Trust. For extraordinary expenses denominated in BNB, if any,
the Sponsor shall withdraw the corresponding amounts of BNB from the Trust as
reimbursement for paying such extraordinary expenses. Neither the Trust nor the
Shareholders shall be responsible for any fees and expenses, including any BNB
Chain fees, incurred by the Sponsor to withdraw BNB from the Trust's BNB Account
in connection with payment of the Sponsor Fee or Trust expenses not assumed by
the Sponsor, or to convert such BNB, once withdrawn, into cash (if applicable).
The Sponsor will sell BNB which may be facilitated by one or more Liquidity
Providers and/or the BNB Custodian or an affiliate thereof, in connection with
the termination of the Trust and the liquidation of the Trust's BNB holdings,
which the Sponsor shall do at a price which it is able to obtain through
commercially reasonable efforts, and arrange for the distribution of the cash
proceeds to the Trust's Shareholders and creditors (if any). Accordingly, the
amount of BNB held by the Trust may vary from time to time depending on the
level of the Trust's expenses and liabilities and the market price of BNB. In
addition, the Sponsor may, at its sole discretion and from time to time, waive
all or a portion of the Sponsor Fee for stated periods of time. The Sponsor is
under no obligation to waive any portion of its fees and any such waiver shall
create no obligation to waive any such fees during any period not covered by the
waiver.
As
partial consideration for receipt of the Sponsor Fee, the Sponsor shall assume
and pay all fees and other expenses incurred by the Trust in the ordinary course
of its affairs, excluding taxes, but including (i) marketing-related expenses,
(ii) fees to the Administrator, if any, (iii) fees to the BNB Custodian, (iv)
fees to the Transfer Agent, (v) fees to the Trustee, (vi) the fees and expenses
related to any future listing, trading or quotation of the Shares on any listing
exchange or quotation system (including legal, marketing and audit fees and
expenses), (vii) ordinary course legal fees and expenses but not
litigation-related expenses, (viii) audit fees, (ix) regulatory fees, including
if applicable any fees relating to the registration of the Shares under the 1933
Act or Exchange Act, (x) printing and mailing costs; (xi) costs of maintaining
the Trust's website and (xii) applicable license fees (each, a "Sponsor-paid
Expense" and together, the "Sponsor-paid Expenses"), provided that any expense
that qualifies as an Additional Trust Expense will be deemed to be an Additional
Trust Expense and not a Sponsor-paid Expense.
The
Sponsor will not, however, assume certain extraordinary, non-recurring expenses
that are not Sponsor-paid Expenses (each, "Additional Trust Expenses"),
including, but not limited to, taxes and governmental charges, 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, any indemnification of the BNB Custodian, Administrator or
other agents, service providers or counterparties of the Trust, the fees and
expenses related to the listing, and extraordinary legal fees and expenses,
including any legal fees and expenses incurred in connection with litigation,
regulatory enforcement or investigation matters. Certain of the Sponsor-paid
Expenses, such as ordinary course legal fees and expenses, are capped. In the
Sponsor's sole discretion, all or any portion of a Sponsor-paid Expense may be
redesignated as an Additional Trust Expense.
After
the payment of the Sponsor Fee to the Sponsor, or reimbursement of Additional
Trust Expenses the Sponsor may elect to convert some or all of the Sponsor Fee
or reimbursement of Additional Trust Expenses into cash by selling this BNB at
market prices, in the Sponsor's sole discretion. Due to the variance in market
prices for BNB, the rate at which the Sponsor converts BNB to cash may differ
from the rate at which the Sponsor Fee or reimbursement of Additional Trust
Expenses was initially paid in BNB.
The
BNB Custodian will assume the transfer fees associated with the transfer of BNB
to the Sponsor with respect to the Sponsor Fee or Additional Trust Expenses, and
any further expenses associated with such transfer will be assumed by the
Sponsor. The Trust shall not be responsible for any fees and expenses incurred
by the Sponsor to convert BNB received in payment of the Sponsor Fee or as
reimbursement of Additional Trust Expenses into cash.
The
Sponsor from time to time will sell BNB, which may be facilitated by one or more
Liquidity Providers and/or the BNB Custodian or an affiliate thereof, in
connection with the termination of the Trust and the liquidation of its BNB
holdings. The Sponsor is authorized to sell BNB, which may be facilitated by the
BNB Custodian, at such times and in the smallest amounts required to permit such
payments. Assuming that the Trust is properly treated as a
grantor
trust for U.S. federal income tax purposes, each beneficial owner of Shares will
be treated for U.S. federal income tax purposes as the owner of an undivided
interest in the BNB held in the Trust.
Termination
of the Trust
The
Trust shall be dissolved at any time upon the happening of any of the following
events:
•a
U.S. federal or state regulator requires the Trust to shut down or forces the
Trust to liquidate its BNB or seizes, impounds or otherwise restricts access to
the property of the Trust;
•any
ongoing event exists that either prevents the Trust from making or makes
impractical the Trust's reasonable efforts to make a fair determination of the
price of BNB for purposes of determining the net asset value of the
Trust;
•any
ongoing event exists that either prevents the Trust from converting or makes
impractical the Trust's reasonable efforts to convert BNB to U.S. Dollars;
or
•a
certificate of dissolution or revocation of the Sponsor's charter is filed (and
ninety (90) days have passed after the date of notice to the Sponsor of
revocation without a reinstatement of the Sponsor's charter) or the withdrawal,
removal, adjudication or admission of bankruptcy or insolvency of the Sponsor
(each of the foregoing events an "Event of Withdrawal") has occurred unless (i)
at the time there is at least one remaining Sponsor or (ii) within ninety (90)
days of such Event of Withdrawal, the Trustee agrees in writing to continue the
affairs of the Trust and to select, effective as of the date of such event, one
or more successor Sponsors.
The
Sponsor may, in its sole discretion, dissolve the Trust if any of the following
events occur:
•Shares
are delisted from the Exchange and are not approved for listing on another
national securities exchange within five business days of their
delisting;
•the
SEC determines that BNB is a security or the Trust is an investment company
under the 1940 Act;
•the
CFTC determines that the Trust is a commodity pool under the Commodity Exchange
Act;
•the
Trust is determined to be a "money service business" under the regulations
promulgated by FinCEN under the authority of the US Bank Secrecy Act and is
required to comply with certain FinCEN regulations thereunder;
•the
Trust is required to obtain a license or make a registration under any state law
regulating money transmitters, money services businesses, providers of prepaid
or stored value or similar entities, or virtual currency
businesses;
•the
Trust becomes insolvent or bankrupt;
•the
BNB Custodian resigns or is removed without replacement;
•all
of the Trust's BNB are sold;
•the
Sponsor determines that the property of the Trust in relation to the expenses of
the Trust makes it unreasonable or imprudent to continue the affairs of the
Trust;
•the
Sponsor receives notice from the IRS or from counsel for the Trust or the
Sponsor that the Trust fails to qualify for treatment, or will not be treated,
as a grantor trust under the Internal Revenue Code of 1986, as amended (the
"Code");
•60
days have elapsed since DTC or another depository has ceased to act as
depository with respect to the Shares and the Sponsor has not identified another
depository that is willing to act in such capacity; or
•the
Trustee notifies the Sponsor of the Trustee's election to resign and the Sponsor
does not appoint a successor trustee within one hundred and eighty (180)
days.
In
addition, the Trust may be dissolved if the Sponsor determines, in its sole
discretion, that it is desirable or advisable for any reason to discontinue the
affairs of the Trust. In respect of termination events that rely on Sponsor
determinations to terminate the Trust (e.g., if the SEC determines that the
Trust is an investment company under the 1940 Act; the CFTC determines that the
Trust is a commodity pool under the CEA; the Trust is determined to be a money
transmitter under the regulations promulgated by FinCEN; the Trust fails to
qualify for treatment, or ceases to be treated, as a grantor trust for U.S.
federal income tax purposes; or, following a resignation by a trustee or
custodian, the Sponsor determines that no replacement is acceptable to it), the
Sponsor may consider, without limitation, the profitability to the Sponsor and
other service providers of the operation of the Trust, any obstacles or costs
relating to the operation or regulatory compliance of the Trust relating to the
determination's triggering event, and the ability to market the Trust to
investors. To the extent that the Sponsor determines to continue operation of
the Trust following a determination's triggering event, the Trust will be
required to alter its operations to comply with the triggering event. In the
instance of a determination that the Trust is an investment company, the Trust
and Sponsor would have to comply with the regulations and disclosure and
reporting requirements applicable to investment companies and investment
advisers. In the instance of a determination that the Trust is a commodity pool,
the Trust and the Sponsor would have to comply with regulations and disclosure
and reporting requirements applicable to commodity pools and commodity pool
operators or commodity trading advisers. In the event that the Trust is
determined to be a money transmitter, the Trust and the Sponsor will have to
comply with applicable federal and state registration and regulatory
requirements for money transmitters and/or money service businesses. In the
event that the Trust ceases to qualify for treatment as a grantor trust for U.S.
federal income tax purposes, the Trust will be required to alter its disclosure
and tax reporting procedures and may no longer be able to operate or to rely on
pass-through tax treatment. In each such case and in the case of the Sponsor's
determination as to whether a potential successor trustee or custodian is
acceptable to it, the Sponsor will not be liable to anyone for its determination
of whether to continue or to terminate the Trust.
Upon
the dissolution of the Trust, the Sponsor (or in the event there is no Sponsor,
such person (the "Liquidating Trustee") as the majority in interest of the
beneficial owners of the Trust may propose and approve) shall take full charge
of the property of the Trust. Any Liquidating Trustee so appointed shall have
and may exercise, without further authorization or approval of any of the
parties hereto, all of the powers conferred upon the Sponsor under the terms of
the Trust Agreement, subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers, and provided that the
Liquidating Trustee shall not have general liability for the acts, omissions,
obligations and expenses of the Trust. Thereafter, in accordance with Section
3808(e) of the Delaware Statutory Trust Act ("DSTA"), the affairs of the Trust
shall be wound up and all assets owned by the Trust shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom shall be applied and distributed in the following order of
priority: (a) to the expenses of liquidation and termination and to creditors,
including registered owners and beneficial owners of the Trust who are
creditors, to the extent otherwise permitted by law, in satisfaction of
liabilities of the Trust (whether by payment or the making of reasonable
provision for payment thereof) other than liabilities for distributions to
registered owners of the Trust, and (b) to the beneficial owners of the Trust
pro rata in accordance with their respective percentage interests of the
property of the Trust. The proceeds of the liquidation of the Trust's assets are
expected to be distributed in cash. Shareholders are not entitled to any of the
Trust's underlying BNB holdings upon the dissolution of the Trust. The Sponsor
(or in the event there is no Sponsor, the Liquidating Trustee), on behalf of the
Trust, would expect to sell the Trust's BNB through the same processes and
procedures as creation and redemption transactions or through the BNB Custodian
or its affiliate. See "Creation and Redemption of Shares" for more
information.
Following
the dissolution and distribution of the assets of the Trust, the Trust shall
terminate and the Sponsor or the Liquidating Trustee, as the case may be, shall
instruct the Trustee in writing to execute and cause such certificate of
cancellation of the Certificate of Trust to be filed in accordance with the
Delaware Statutory Trust Act at the expense of the Sponsor or the Liquidating
Trustee, as the case may be. Notwithstanding anything to the contrary contained
in this Trust Agreement, the existence of the Trust as a separate legal entity
shall continue until the filing of such certificate of
cancellation.
Amendments
The
Trustee and the Sponsor may amend any provision of the Trust Agreement without
the consent of any other person, including any registered owner or beneficial
owner of the Trust, provided that any amendment that imposes or increases any
fees or charges (other than taxes and other governmental charges, registration
fees or other such expenses), or that otherwise prejudices any substantial
existing right of the registered owners or the beneficial owners of the Trust,
will not become effective as to outstanding Shares until 30 days after notice of
such amendment is given to the registered owners of the Trust. Notwithstanding
the foregoing, the Sponsor shall have the right to increase or decrease the
amount of the Sponsor Fee (i) upon three (3) business days' prior notice of the
increase or decrease being posted on the website of the Trust and (ii) upon
three (3) business days' prior written notice of the increase or decrease being
given to the Trustee. Every registered owner or beneficial owner of the Trust,
at the time any amendment so becomes effective, shall be deemed, by continuing
to hold any Shares or an interest therein, to consent and agree to such
amendment and to be bound by the Trust Agreement as amended
thereby.
THE
TRUST'S SERVICE PROVIDERS
The
Sponsor
The
Sponsor arranged for the creation of the Trust and is responsible for the
ongoing registration of the Shares for their public offering in the United
States and the listing of Shares on the Exchange. The Sponsor has developed a
marketing plan for the Trust, will prepare marketing materials regarding the
Shares of the Trust, and will exercise the marketing plan of the Trust on an
ongoing basis. The Sponsor has agreed to pay all operating expenses (except for
litigation expenses and other extraordinary expenses) out of the Sponsor's
unified fee.
The
Sponsor is a wholly-owned subsidiary of VanEck. VanEck acts as adviser or
sub-adviser to exchange-traded funds, mutual funds, other pooled investment
vehicles and separate accounts. VanEck has been wholly owned by members of the
van Eck family since its founding in 1955 and its shares are held by its Chief
Executive Officer, Jan van Eck, and his family. See "Management; Voting by
Shareholders" for a discussion of Mr. van Eck's biography and positions with the
Sponsor.
VanEck
and its subsidiaries have considerable experience issuing and operating
exchange-traded products, including three investment companies registered under
the 1940 Act, that provide exposure to digital assets and digital asset
companies (i.e., the equity securities of companies primarily engaged in the
digital asset industry). As of August 29, 2025, VanEck and its affiliates
oversee approximately $5.1 billion in assets under management across over 20
digital asset-related products across various jurisdiction. Although the Sponsor
is a relatively new entity within the broader structure of VanEck, the Sponsor
utilizes a similar management team that VanEck has used in issuing and operating
these exchange-traded products.
The
principal office of the Sponsor is:
VanEck
Digital Assets, LLC
666
Third Avenue, 9th Floor
New
York, NY 10017
The
Trustee
CSC
Delaware Trust Company, a Delaware trust company, acts as the trustee of the
Trust for the purpose of creating a Delaware statutory trust in accordance with
the DSTA. The Trustee is appointed to serve as the trustee of the Trust in the
State of Delaware for the sole purpose of satisfying the requirement of Section
3807(a) of the DSTA that the Trust have at least one trustee with a principal
place of business in the State of Delaware.
General
Duty of Care of Trustee
The
Trustee is a fiduciary under the Trust Agreement; provided, however, that the
fiduciary duties and responsibilities and liabilities of the Trustee are limited
by, and are only those specifically set forth in, the Trust
Agreement.
Resignation,
Discharge or Removal of Trustee; Successor Trustees
The
Trustee may resign upon at least 60 days' prior written notice to the Sponsor;
provided, however, that such resignation shall not be effective until such time
as a successor Trustee has accepted such appointment. The Sponsor may remove the
Trustee at any time upon 60 days' prior written notice to the Trustee; provided,
however, that such removal shall not be effective until such time as a successor
Trustee has accepted such appointment.
Upon
the resignation or removal of the Trustee, the Sponsor shall appoint a successor
Trustee. If no successor Trustee shall have been appointed and shall have
accepted such appointment within 60 days after the giving of such notice of
resignation or removal, the Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee. Any successor Trustee
appointed pursuant to the Trust Agreement shall be eligible to act in such
capacity in accordance with this Trust Agreement and, following compliance with
the Trust Agreement, shall become fully vested with the rights, powers, duties
and obligations of its predecessor under the Trust Agreement, with like effect
as if originally named as Trustee. Any such successor Trustee shall notify the
Trustee of its
appointment
by providing a written instrument to the Trustee. At such time the Trustee shall
be discharged of its duties herein. Any corporation into which the Trustee may
be merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such Trustee
shall be a party, or any corporation to which substantially all the corporate
trust business of the Trustee may be transferred, shall, subject to the
preceding sentence, be the Trustee under the Trust Agreement without further
act.
The
Administrator
[ ]
("[ ]") serves as the Trust's administrator (the
"Administrator"). [ ]'s principal address is
[ ]. Under the Trust Administration and Accounting
Agreement, the Administrator provides necessary administrative, tax and
accounting services and financial reporting for the maintenance and operations
of the Trust, including valuing the Trust's BNB and calculating the net asset
value per Share of the Trust and the net asset value of the Trust and supplying
pricing information to the Sponsor for the Trust's website. In addition, the
Administrator makes available the office space, equipment, personnel and
facilities required to provide such services.
The
Staking Services Provider
[ ]
(“[ ]”) is expected to serve as the Staking
Services Provider for the Trust from the date the Shares are initially listed on
the Exchange. Pursuant to the Staking Services Agreement, the Staking Services
Provider will transfer the Trust's BNB held in its BNB Account to a public
blockchain address for the purpose of staking such BNB (the "Staking Services").
The Staking Services Provider will regularly credit staking rewards on a
recurring basis established by Staking Services Provider, after deducting any
(i) applicable payments to the Staking Services Provider as compensation for its
services under the Staking Services Agreement (the "Staking Provider
Consideration"); (ii) withholding required by applicable law or regulation; and
(iii) transaction fees or commissions imposed by the Staking Services Provider
or other third parties. Staking rewards will be recorded at the end of each
epoch and distributed shortly thereafter. Initially, block rewards will also be
recorded at the end of each epoch and distributed shortly thereafter. However
the Trust may elect to adopt a daily rewards system in the future for block
rewards, though no such determination has been made as of the date of this
registration statement.
Either
party may terminate the Staking Services Agreement upon 60 days’ advance written
notice to the other party. Either Party may also terminate the Staking Services
Agreement immediately upon written notice to the other party if, in such party’s
reasonable discretion, the provision of the Staking Services may violate any
applicable law or regulation.
Once
the Trust's BNB is staked and completes its "activation" period, any staking
rewards will be posted to the staking ledger at the BNB Custodian. The date that
such rewards are deposited to the BNB Custodian account will be considered the
trade date for the recognition of the staking rewards. The received rewards are
retained by the Trust and may be delegated for staking. The staking rewards will
be recognized as income to the Trust's daily records on a T+1 basis. In
accordance with GAAP, the Trust will report such income in the financial
statements based upon trade date in the quarterly and annual
reports.
The
Cash Custodian
Under
the Cash Custody Agreement between [ ] and the
Trust, [ ] may act as custodian for the Trust's
non-BNB assets, if any, and as custodian for the Trust's cash (in such capacity,
the "Cash Custodian"). The Cash Custodian has agreed to, among other things,
open and maintain a separate deposit account or accounts of the Trust, to
determine the amount of BNB and/or cash required for an issuance or redemption
of shares in a Basket and to release and deliver non-BNB assets and pay out
cash.
The
Cash Custodian shall credit to the deposit account(s) all cash received by the
Cash Custodian from or for the account of the Trust. Upon an instruction to
purchase Shares for the account of the Trust, the Cash Custodian shall pay out
cash of the Trust to purchase Shares. Upon an instruction to redeem Shares for
the account of the Trust, the Cash Custodian shall transfer the Shares so as to
sell or redeem the Shares and receive proceeds of such sale or
redemption.
The
BNB Custodian
[ ]
serves as the Trust's BNB Custodian and is a fiduciary under § 100 of the New
York Banking Law. The BNB Custodian is authorized to serve as the Trust's
custodian under the Trust Agreement and pursuant to the terms and provisions of
the Custody Agreement. The BNB Custodian has its principal office at
[ ].
The
BNB Custodian makes available to the Trust the BNB Account and access to an
omnibus custodial account held at depository institutions or money market funds
in the BNB Custodian's name for the benefit of its customers at which a cash
balance may be maintained. The BNB Custodian's services in respect of the BNB
Account (i) allow BNB to be deposited from a public blockchain address to the
Trust's BNB Account and (ii) allow BNB to be withdrawn from the BNB Account to a
public blockchain address as instructed by the Trust. The Custody Agreement
requires the BNB Custodian to hold the Trust's BNB in cold storage, unless
required to facilitate withdrawals as a temporary measure. Other than in
connection with creations and redemptions and withdrawals of BNB to pay the
Sponsor Fee and Additional Trust Expenses, where the associated BNB may
temporarily be held in omnibus hot storage in the Clearing Account, the BNB
Custodian will use segregated cold storage BNB addresses for the Trust. The
addresses on the BNB Chain at which the Trust's BNB in the BNB Account are held
by the BNB Custodian are separate from the BNB addresses that the BNB Custodian
uses for its other customers and are directly verifiable via the BNB Chain. The
BNB Custodian will safeguard the private keys to the BNB associated with the
Trust's BNB Account. The BNB Custodian will at all times record and identify in
its books and records that such BNBs constitute the property of the Trust. The
BNB Custodian will not withdraw the Trust's BNB from the Trust's BNB Account
with the BNB Custodian, or loan, hypothecate, pledge or otherwise encumber the
Trust's BNB, without the Trust's instruction, nor will the Sponsor or any other
entity or service provider. The Trust will not lease or loan BNB held in the
Trust's BNB Account with the BNB Custodian and will not give instructions to
that effect.
The
Custody Agreement provides that BNB is deemed delivered to the address
associated with the Trust's BNB Account only after the required number of
confirmations of the transaction on the BNB Chain, and that
[ ] has no obligations for BNB that is not
delivered in that manner. The Custody Agreement provides that once the Trust
submits a request for a withdrawal transaction, the BNB subject to the
withdrawal request shall be delivered by the BNB Custodian to the designated
address on the BNB Chain specified in the Trust's withdrawal transaction within
one business day of 4:00 p.m. Eastern time of the business day on which the
Trust submits the withdrawal request. If a withdrawal request is made by the
Trust (i) by 4:00 p.m. Eastern time of the business day on which the Trust
submits the withdrawal request, (ii) in connection with a redemption of Shares
of the Trust by an Authorized Participant, and (iii) the delivery of BNB for
such withdrawal request is to the account at the BNB Custodian of an Authorized
Participant, then the BNB subject to such withdrawal request shall be delivered
to the destination blockchain address specified therein, by the next business
day from the business day when such withdrawal request was submitted. The
Custody Agreement provides that withdrawals may be delayed in connection with
scheduled maintenance ("Downtime") or the congestion or disruption of a digital
asset network, including the BNB Chain.
In
respect of the Fiat Account, the BNB Custodian holds the Trust's cash held in
its account at the BNB Custodian in one or more Customer Omnibus Accounts."
Customer Omnibus Account" means, with respect to fiat currency held for
customers of the BNB Custodian in fiat accounts (including the Trust's cash
balance in its Fiat Account), omnibus bank accounts (each an "Omnibus Account")
at depository institutions (each, a "Bank"); money market accounts (each, a
"Money Market Account") at a Bank or financial institution; and/or payment
accounts (each, a "Payment Account") at a financial institution. Each Omnibus
Account is: (i) in the BNB Custodian's name, and under its control; (ii)
separate from the BNB Custodian's business, operating, and reserve bank
accounts; (iii) established specifically for the benefit of the BNB Custodian's
customers; and (iv) represents a banking relationship, not a custodial
relationship, with each Bank. Omnibus Accounts do not create or represent any
relationship between the Trust and any of the BNB Custodian's Banks. Each Money
Market Account is held at a Bank or financial institution: (i) in the BNB
Custodian's name, and under its control; (ii) separate from the BNB Custodian's
business, operating, and reserve money market accounts; (iii) established
specifically for the benefit of the BNB Custodian's customers; (iv) managed by a
registered financial advisor, (v) custodied by a qualified custodian; and (vi)
the monies within which are used to purchase money market funds invested in
securities issued or guaranteed by the United States or certain U.S. government
agencies or instrumentalities. Money Market Accounts do not create or represent
any relationship between the Trust and any of the related registered financial
advisors and/or qualified custodians. Each Payment Account is held at a
financial institution: (i) in the BNB Custodian's name, and under its control;
(ii)
separate
from the BNB Custodian's business, operating, and reserve bank accounts; and
(iii) established specifically for processing the fiat funds transfers of the
BNB Custodian's customers. Payment Accounts do not create or represent any
relationship between the Trust and any of the related financial institutions.
The Trust's fiat currency deposits are: (i) held across the BNB Custodian's
Customer Omnibus Accounts in the exact proportion that all BNB Custodian
customer fiat currency deposits are held across its Customer Omnibus Accounts;
(ii) not treated as the BNB Custodian's general assets; (iii) fully owned by the
Trust; and (iv) recorded and maintained in good faith on the BNB Custodian's
books and records and reflected in a sub-account (i.e., the Fiat Account of the
Trust's [ ] Account) so that the Trust's interests
in the BNB Custodian's Customer Omnibus Accounts are readily ascertainable. The
BNB Custodian's records permit the determination of the balance of U.S. dollars
for a particular customer as a percentage of total commingled U.S. dollars held
for the benefit of all of the BNB Custodian's customers in all Customer Omnibus
Accounts in a manner consistent with 12 C.F.R. § 330.5(a)(2). The Trust is not
entitled to receive any interest that may be generated with respect to the cash
held in its Fiat Account. U.S. dollar deposits in the Trust's Fiat Account held
in one or more Omnibus Accounts at one or more Banks located in the United
States are held with the intention that they be eligible for Federal Deposit
Insurance Corporation ("FDIC") "pass-through" deposit insurance, subject to the
Standard Maximum Deposit Insurance Amount per FDIC regulations (currently
$250,000 per eligible customer of the BNB Custodian) and other applicable
limitations. U.S dollar deposits held at banks or financial institutions located
outside of the United States, may not be subject to or eligible for FDIC deposit
insurance. The portion of the Trust's cash holdings attributable to the Trust's
Fiat Account which is held at a Money Market Fund is not eligible for deposit
insurance whether on a pass-through or any other basis. The Custody Agreement
provides that wire deposit and withdrawal transfer times in respect of the Fiat
Account are subject to bank holidays, the internal processes and jurisdiction of
the Trust's bank, and the internal processes of the BNB Custodian's banks and
financial institutions. In certain situations, wire deposit or withdrawal
transfer times may be delayed in connection with Downtime or disruptions to the
BNB Custodian's banks and/or affiliates or service providers. ACH deposit and
withdrawal transfer times are subject to bank holidays, the internal processes
and jurisdiction of the Trust's bank, and the internal processes of the Trust's
banks. The Custody Agreement provides that in certain situations, ACH withdrawal
transfer times may be delayed in connection with Downtime or disruptions to the
BNB Custodian's banks and/or affiliates or service providers.
The
Custody Agreement provides that no more than once per calendar year, the Trust
shall be entitled to request that the BNB Custodian produce its Services
Organization Controls 2 Type I report (a "SOC 2-I Report") and a new Services
Organization Controls 2 Type II report (a "SOC 2-II Report" and, together with a
SOC 2-I Report, "SOC Reports"), or certify that there have been no material
changes which would impact the previous SOC Reports provided to the Trust, and
promptly deliver to the Trust a copy of each SOC Report within 45 days of the
Trust's request. No more than once per calendar year, the Trust shall be
entitled to request that the BNB Custodian produce a copy of the BNB Custodian's
audited annual financial statements for each financial year ending on or after
December 31, 2021, and the BNB Custodian shall promptly deliver such financial
statements to the Trust.
The
BNB Custodian agrees to take reasonable care and use commercially reasonable
efforts in executing its responsibilities to the Trust pursuant to the Custody
Agreement, which includes exercising the degree of care, diligence and skill
that a prudent and competent professional provider of services similar to the
services contemplated by the Custody Agreement would exercise in the
circumstances, or such higher care where required by law or the Custody
Agreement (collectively, the "Standard of Care"). The BNB Custodian cannot be
held responsible for any failure or delay to act by the BNB Custodian, its
affiliates or service providers, or its banks that is within the time limits
permitted by the Custody Agreement, or that is caused by the Trust's negligence
or is required to comply with applicable laws and regulations. The BNB Custodian
cannot be held responsible for any Downtime or System Failure (defined below),
which prevents the BNB Custodian from fulfilling its obligations under the
Custody Agreement, provided that BNB Custodian took reasonable care and used
commercially reasonable efforts to prevent or limit such System Failures or
Downtime and otherwise complied with this Agreement. The Custody Agreement
provides that a "System Failure" shall mean a failure of any computer hardware,
software, computer systems, or telecommunications lines or devices used by BNB
Custodian, or interruption, loss, or malfunction of utility, data center,
Internet or network provider services used by BNB Custodian; provided, however,
that a cybersecurity attack, data breach, hack, or other intrusion, or
unauthorized disclosure by a third party, BNB Custodian, a BNB Custodian
affiliate or service provider, or an agent or subcontractor of BNB Custodian,
shall not be deemed a System Failure, to the extent such events or any losses
arising
therefrom are due to BNB Custodian's failure to comply with its obligations
under the Custody Agreement. The BNB Custodian cannot be held responsible for
any circumstances beyond the BNB Custodian's reasonable control, provided BNB
Custodian acted in accordance with the Standard of Care. Notwithstanding any
other provision in the Custody Agreement, for the Trust's BNB held in the BNB
Account, the BNB Custodian represents, warrants, and covenants that it will
maintain the private key or keys in a form accessible to the BNB Custodian and
will take reasonable care and use commercially reasonable efforts to (i) protect
and keep the private key or keys secure and (ii) not disclose them or allow
access to them by any other person. The BNB Custodian shall take reasonable care
and use commercially reasonable efforts to ensure that the Trust shall be able
to access the BNB Account via the BNB Custodian's online interface 97% of the
time excluding Downtime and System Failures. The BNB Custodian shall not,
without the prior written consent of the Trust, deposit or hold the Trust's BNB
with any third-party depositary, custodian, clearance system, wallet, or
sub-custodian. Subject to the foregoing, the BNB Custodian is permitted to
perform its obligations under the Custody Agreement using subcontractors or
agents, provided that, in relation to each such subcontractor or agent used by
the BNB Custodian, the BNB Custodian shall: (i) comply with the Standard of Care
in the selection, appointment and use of each such subcontractor or agent; (ii)
monitor such subcontractor's or agent's performance; and (iii) remain solely
liable to Trust for the performance of the BNB Custodian's obligations under the
Custody Agreement, notwithstanding any use of subcontractors or
agents.
Subject
to the "Force Majeure" provision (defined below) and as limited by the
limitations of liability in the Custody Agreement, the BNB Custodian shall be
liable to the Trust for the Loss (defined below) of any of the Trust's BNB or
fiat currency to the extent that such Loss was caused by the negligence, fraud,
willful or reckless misconduct of the BNB Custodian or breach by the BNB
Custodian of its Standard of Care. The Custody Agreement provides that "Loss"
means if, at any time the Trust's BNB Account or Fiat Account, as applicable,
does not hold the BNB or fiat currency that had been (1) received by BNB
Custodian in connection with the Trust's BNB Account or Fiat Account pursuant to
the Custody Agreement, or (2) duly sent to the BNB Custodian by the Trust or
Authorized Participants in connection with the Trust's BNB Account pursuant to
the Custody Agreement but not received because of a failure caused by the BNB
Custodian. The Custody Agreement provides that "Loss" shall include situations
where the BNB Custodian fails to execute a valid withdrawal request, BNB are
withdrawn from the Trust's BNB Account other than pursuant to a withdrawal
request, or the Trust is not able to timely withdraw BNB from the BNB Account
pursuant to a withdrawal request, in each case due to a failure caused by the
BNB Custodian; provided, however, that the BNB Custodian's failure to permit
timely withdrawals because it has determined that it cannot do so due to the
requirements of applicable laws and regulations or because of the operation of
its fraud detection controls shall not be considered a Loss, provided the BNB
Custodian is acting reasonably and in good faith. The Custody Agreement provides
that should a Loss of the Trust's BNB or fiat currency due to the negligence,
fraud, willful or reckless misconduct of the BNB Custodian or a breach by the
BNB Custodian of its Standard of Care occur, the BNB Custodian will, as soon as
practicable, return to the Trust a quantity of the same digital asset that is
equal to the quantity of digital assets involved in the Loss, or return to the
Trust a quantity of the same fiat currency that is equal to the quantity of fiat
currency involved in the Loss (if the Loss involved the Fiat Account). The
Custody Agreement provides that (i) the BNB Custodian does not own or control
the underlying software protocols of networks which govern the operation of
digital assets (including the BNB Chain), (ii) the BNB Custodian makes no
guarantees regarding their security, functionality, or availability, and (iii)
in no event shall the BNB Custodian be liable for or in connection with any
acts, decisions, or omissions made by developers or promoters of digital assets,
including BNB.
The
Custody Agreement's "Force Majeure" provision provides that in no event shall
the BNB Custodian be liable for any delays, failure in performance or
interruption of service which result directly or indirectly from any cause or
condition, whether or not foreseeable, beyond the BNB Custodian's reasonable
control, including, but not limited to, any act of God, nuclear or natural
disaster, epidemic, action or inaction of civil or military authorities, act of
war, terrorism, sabotage, civil disturbance, strike or other labor dispute,
accident, or state of emergency; provided, however, that for the avoidance of
doubt, the Custody Agreement's Force Majeure provision shall not apply in
respect of System Failures or Downtime, which are subject to other respective
provisions of the Custody Agreement. The occurrence of an event described in the
Force Majeure provision shall not affect the validity and enforceability of any
remaining provisions of the Custody Agreement.
Under
the Custody Agreement, each of the BNB Custodian and the Trust has agreed to
indemnify and hold harmless the other party from any third-party claim or
third-party demand (including reasonable attorneys' fees and expenses)
(collectively, "Damages") arising out of or related to the BNB Custodian's or
the Trust's, as the case may be, non-performance of its obligations under or
material breach of the Custody Agreement and inaccuracy in any of the BNB
Custodian's or the Trust's, as the case may be, representations or warranties in
the Custody Agreement. In addition, the BNB Custodian agrees to indemnify the
Trust in the event of Damages relating to the holding of the Trust's BNB and
fiat currency by the BNB Custodian as contemplated by the Custody Agreement,
including any loss or damage caused by any act or omission of any employee of
the BNB Custodian or any agent, representative or independent contractor engaged
by the BNB Custodian, whether or not such act or omission occurred within the
scope of his employment or engagement. The Custody Agreement provides that
"Damages" shall not include any losses, claims, damages, liabilities or expenses
arising from any fluctuation in market price, forks, governance changes,
airdrops or other events which impact all holders of a digital asset such as BNB
globally as a class.
The
Custody Agreement provides the BNB Custodian, its affiliates, service providers,
or any of their respective officers, directors, agents, joint venturers,
employees or representatives, shall not be liable for (i) any losses or claims
arising out of actions that are in the Trust's control and related to its use of
the BNB Custodian's online platform, including but not limited to, the Trust's
failure to follow security protocols, the BNB Custodian's controls, improper
instructions, failure to secure the Trust's credentials from third parties, or
anything else in the Trust's control and (ii) any amount greater than the value
of the BNB on deposit in the Trust's BNB Account at the time of, and directly
relating to, the events giving rise to the liability occurred, the value of
which shall be determined in accordance with the Chicago Mercantile Exchange
[ ] or any successor thereto. No party shall be
liable to the other parties (whether under contract, tort (including negligence)
or otherwise) for any indirect, incidental, special, punitive or consequential
losses suffered or incurred by the other parties (whether or not any such losses
were foreseeable or within the contemplation of the parties). This means, by way
of example only (and without limiting the scope of the above), that if the Trust
claims that the BNB Custodian failed to process a withdrawal request properly,
the Trust's damages are limited to no more than the value of the BNB at issue in
the withdrawal request, and that the Trust may not recover for lost profits,
lost business opportunities, or other types of special, incidental, indirect,
intangible, or consequential damages in excess of the value of the BNB at issue
in the withdrawal. The BNB Custodian shall not be liable to the Trust or anyone
else for any loss or injury resulting directly or indirectly from any damage or
interruptions caused by any computer viruses, spyware, scamware, trojan horses,
worms, or other malware that may affect the Trust's computer or other equipment,
provided such malware did not originate from the BNB Custodian or its
agents.
The
Custody Agreement provides that the BNB Custodian has obtained insurance
coverage by a reputable insurance company with respect to digital assets
custodied with the BNB Custodian, in accordance with its internal standards for
maintaining such insurance and subject to change at the BNB Custodian's
discretion. The Custody Agreement provides that the BNB Custodian shall provide
the Trust with notice of material changes in its insurance coverage. For more
information, see "CUSTODY OF THE TRUST'S ASSETS—Insurance" and "RISK FACTORS—The
Lack Of Full Insurance And Shareholders' Limited Rights Of Legal Recourse
Against The Trust, Trustee, Sponsor, Administrator, Cash Custodian, BNB
Custodian And Additional BNB Custodian Expose The Trust And Its Shareholders To
The Risk Of Loss Of The Trust's BNB For Which No Person Or Entity Is
Liable."
The
Custody Agreement will commence on the date of execution and continue until
terminated in accordance with its provisions. The Custody Agreement may be
terminated by either party upon 90 days written notice to the other party;
provided, however, that if the Custody Agreement is terminated, the BNB
Custodian shall use commercially reasonable efforts to cooperate with the
Trust's transition to a replacement custodian and if the Trust is unable to
engage a replacement custodian using commercially reasonable efforts within such
90 day period, the BNB Custodian terminates the Custody Agreement, then the BNB
Custodian shall continue to act as BNB Custodian pursuant to the terms of the
Custody Agreement until such time as the Trust engages a replacement custodian,
provided that the Trust uses reasonable commercial efforts to promptly engage a
replacement custodian. Either party (the "Terminating Party") may terminate the
Custody Agreement at any time on written notice to the other party (the
"Defaulting Party"), such termination to take effect (i) on the tenth business
day after the delivery of written notice of termination by the Terminating Party
to the Defaulting Party, unless the Defaulting Party has cured the event
triggering a termination right to the satisfaction of the Terminating Party,
acting reasonably, or (ii) immediately after
delivery
of written notice of termination by the Terminating Party to the Defaulting
Party if the event triggering a termination right is incapable of being cured
within ten business days, in the following circumstances. First, any
representation, warranty, certification or statement made by the Defaulting
Party under the Custody Agreement was or becomes incorrect in any material
respect when made; second, the Defaulting Party materially breaches, or fails in
any material respect to perform any of its obligations under, the Custody
Agreement; third, the Defaulting Party requests a postponement of maturity or a
moratorium with respect to any indebtedness or is adjudged bankrupt or
insolvent, or there is commenced against the Defaulting Party a case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or the Defaulting Party files a petition for bankruptcy or an
application for an arrangement with its creditors, seeks or consents to the
appointment of a receiver, administrator or other similar official for all or
any substantial part of its property, admits in writing its inability to pay its
debts as they mature, or takes any corporate action in furtherance of any of the
foregoing, or fails to meet applicable legal minimum capital requirements;
fourth, a Change of Control (as defined in the Custody Agreement) of the
Defaulting Party, or an event, change or development that causes or is likely to
cause a Material Adverse Effect (as defined in the Custody Agreement) on the
Defaulting Party, or in the ability of the Defaulting Party to fulfill its
responsibilities under the Custody Agreement, occurs; fifth, with respect to the
Trust's right to terminate, the BNB Chain undergoes a fork and becomes a forked
network, and the Trust disagrees with the BNB Custodian's choice of which forked
network to support; or with respect to the Trust's right to terminate,
applicable laws and regulations or any change therein or in the interpretation
or administration thereof that may have a Material Adverse Effect (as defined in
the Custody Agreement) on the Trust or the rights of the Trust with respect to
any services covered by the Custody Agreement.
The
BNB Custodian has the right to immediately (i) take actions the BNB Custodian
determines appropriate to comply with applicable law and regulations and in
accordance with its Bank Secrecy Act and Anti-Money Laundering compliance
program ("BSA/AML Program"), (ii) suspend the Trust's BNB Account or Fiat
Account, (iii) freeze/lock the funds and assets in all such accounts, and (iv)
suspend the Trust's access to the BNB Custodian's platform or its account there
(collectively, an "account suspension"), if: (A) the BNB Custodian is required
to do so by a regulatory authority, court order, facially valid subpoena, or
binding order of a governmental authority, (B) the BNB Custodian reasonably and
in good faith believes the Trust has violated applicable laws and regulations in
connection with the Trust's BNB Account or Fiat Account, or the BNB Custodian is
required to do so under the BNB Custodian's BSA/AML Program, (C) the BNB
Custodian believes someone is attempting to gain unauthorized access to the
account, or (D) the BNB Custodian believes there is unusual activity in the
account. Except as set forth above, the BNB Custodian shall not suspend the
Trust's access to the BNB Account or the Fiat Account, and any suspension of the
Trust's access to such accounts shall constitute a breach of the Custody
Agreement. In the case of an account suspension due to (C) or (D) of this
paragraph, the BNB Custodian shall restore the Trust's normal access to the BNB
Account or Fiat Account as promptly as reasonably possible without putting the
BNB and fiat currency in such accounts at risk. In the case of an account
suspension due to (A) or (B) of this paragraph, the BNB Custodian shall permit
the Trust to withdraw the Trust's BNB and fiat currencies from BNB Account or
Fiat Account as soon as permitted by applicable laws and regulations or the
applicable court order, subpoena, or regulatory or governmental authority, and
for ninety (90) days thereafter.
The
Sponsor may, in its sole discretion, add or terminate other BNB Custodians. The
Sponsor may, in its sole discretion, change the custodian for the Trust's BNB
holdings, but it will have no obligation to do so or to seek any particular
terms for the Trust from other such custodians. To the extent that the Sponsor
adds or terminates other BNB Custodians, or changes the custodian for the
Trust's BNB holdings, notification will be made to Shareholders via a prospectus
supplement and/or a current report filed with the SEC.
In
addition to the BNB custodial services described herein, the BNB Custodian will
also provide the Trust with clearing and settlement services for BNB purchase
and sale transactions between the Trust and its trading partners. These services
are detailed within the clearing agreement between the Trust and the BNB
Custodian (the "Clearing Agreement").
The
BNB Custodian's
Role in the Clearing Agreement
The
BNB Custodian's clearing services ("[ ]") has been
in operation as a settlement platform to clear off-exchange trades, allowing the
submission, acceptance, funding, and settlement of purchase and sale
transactions
with
respect to BNB that the Trust arranges and negotiates with another party that is
also a customer of the BNB Custodian ("Counterparty") without the involvement of
the BNB Custodian (such transactions, "Clearing Transactions"). The Trust
engages in Clearing Transactions with Liquidity Providers (as defined in
"CREATION AND REDEMPTION OF SHARES—Creation Procedures") to source BNB in
connection with purchase orders made in cash by Authorized Participants, or to
sell BNB for cash to fill redemption orders in cash made by Authorized
Participants. The Trust engages in Clearing Transactions with Authorized
Participants or their designees in connection with in-kind transfers of BNB in
connection with in-kind subscription and redemption processes.
[ ] does not charge additional fees as the cost of
Clearing Transactions is included in the BNB Custodian's custody fees. As
further described below under "CREATION AND REDEMPTION OF SHARES", the Trust's
Authorized Participant Agreement provides that transaction costs and slippage
related to Basket creation and redemption are the responsibility of the
Authorized Participant.
[ ]
has adopted the [ ] BSA/AML Program for its digital
asset trading platform and custody service in an effort to maintain the highest
possible compliance with applicable laws and regulations relating to anti-money
laundering in the U.S. and other countries where it conducts business. This
program includes robust internal policies, procedures and controls that combat
any attempted use of [ ] for illegal or illicit
purposes, including, among others, a customer identification program, annual
training of all employees and officers in anti-money laundering regulation,
filing of Suspicious Activity Reports and Currency Transaction Reports with the
U.S. Financial Crimes Enforcement Network and annual internal and independent
audits of the [ ] BSA/AML Program.
[ ]
has represented to the Sponsor that it has policies in place to mitigate
conflicts of interest in connection with the Clearing Services, including a
conflicts of interest policy and a trading policy for employees. The Trust's
Clearing Account is subject to [ ]'s User
Agreement, which provides that BNB custodied in the Trust's Clearing Account are
not treated as general assets of [ ].
[ ] has represented to the Sponsor that
[ ] treats the BNB credited to the Trust's Clearing
Account as belonging to the Trust and does not pledge, hypothecate, or otherwise
encumber the Trust's BNB in its Clearing Account except pursuant to instructions
from the Trust, which the Trust has not granted and will not grant.
Each
Clearing Transaction has one party that will act as buyer owing an amount of
fiat currency (such party, the "Buyer" and such amount, the "Fiat Currency
Amount") and a party that will act as a seller owing an amount of BNB (such
party, the "Seller" and such amount, the "Digital Asset Amount"). The Trust will
act as Buyer in connection with a purchase order or Seller in connection with a
redemption order, while the Liquidity Provider (or Authorized Participant or
their designee) – which must be a customer and have established accounts at the
BNB Custodian – will be the Seller in connection with a purchase order or the
Buyer in connection with a redemption order.
For
each Clearing Transaction, the Trust or the Counterparty is responsible for
submitting a request (such party, the "Submitting Party" and such request a
"Clearing Request") to settle a transaction through
[ ] in the form and manner, and otherwise in
accordance with the instructions, technical specifications and other
information, that the BNB Custodian may require. For each Clearing Transaction
and Clearing Request, the Submitting Party must, at a minimum, (i) identify the
account at the BNB Custodian ("[ ]") of the other
party to the Clearing Transaction (such party, the "Confirming Party"), (ii) the
Buyer and the applicable Fiat Currency Amount for the Clearing Transaction,
(iii) the Seller and the applicable Digital Asset Amount for the Clearing
Transaction, and (iv) the time period by when the Clearing Request will expire
if not completed ("Expiration Time").
Once
the Submitting Party successfully submits a Clearing Request, the BNB Custodian
shall notify the Confirming Party of the Clearing Request and the relevant
information in such Clearing Request. The Trust is responsible for funding its
Fiat Account or BNB Account, as applicable, with the Fiat Currency Amount and
the Digital Asset Amount, as applicable based on the Clearing Request, in each
case prior to the Expiration Time. The Counterparty must fund its applicable
account at the BNB Custodian as well.
If,
prior to the Expiration Time, both the Trust and the Counterparty have funded
their applicable account at the BNB Custodian with their respective obligation
of the Fiat Currency Amount and the Digital Asset Amount, the BNB Custodian
shall (i) transfer the Fiat Currency Amount from the Buyer's
[ ] Account to the Seller's
[ ] Account and (ii) transfer the Digital Asset
Amount from the Seller's [ ] Account to the Buyer's
[ ] Account. If
the
parties do not fund their respective accounts with the amounts specified in the
Clearing Request by the Expiration Time, the Clearing Request will expire and
[ ] have no obligations with respect to such
Clearing Request.
The
Trust acknowledges and agrees that the BNB Custodian is not involved in and does
not have any responsibility for any Clearing Transaction, other than as
specifically identified in the Clearing Agreement. The BNB Custodian has
represented to the Sponsor that it has policies and procedures in place for
mitigating conflicts of interest when executing the Trust's orders pursuant to
the Clearing Services. Absent gross negligence, willful misconduct or fraud, the
BNB Custodian shall not be liable for any loss resulting from a Clearing Request
or the use of Clearing Services. Validation and confirmation procedures used by
[ ] are designed only to verify the source of
Clearing Requests and that each party has met its respective obligations in
respect of a Clearing Request and not to detect errors in the content of that
Clearing Request or to prevent duplicate Clearing Requests. The Trust is
responsible for losses resulting from Clearing Requests provided by it and for
any errors made by or on behalf of the Trust, any errors resulting, directly or
indirectly, from fraud or the duplication of any Clearing Request by or on
behalf of the Trust, or any losses resulting from the malfunctioning of any
devices used by the Trust or loss or compromise of credentials used by the Trust
to deliver Clearing Requests.
The
Trust also agrees and understands that the BNB Custodian may reject, refuse to
settle or otherwise not complete any request to settle a Clearing Request
through [ ] for any reason necessary to comply with
applicable laws and regulations or in connection with its fraud or other
compliance controls and systems, and the Trust agrees that the BNB Custodian
shall have no liability whatsoever to the Trust, any transaction counterparty or
any other party in connection with or arising out of the BNB Custodian
rejecting, refusing or otherwise not completing the settlement of a transaction
through [ ].
The
BNB Custodian will not settle transactions through
[ ]: (i) if either party to a Clearing Transaction
has not fully funded its applicable account at the BNB Custodian, with the
required Fiat Currency Amount or Digital Asset Amount, as applicable, prior to
the Expiration Time; (ii) if either party to a Clearing Transaction has not
confirmed its acceptance of the Clearing Request to the BNB Custodian prior to
the Expiration Time; (iii) if either party to a transaction is not a customer of
the BNB Custodian; or (iv) for any other reason as determined by the BNB
Custodian in its sole discretion to comply with applicable laws and regulation
or in connection with the BNB Custodian's fraud or other compliance controls and
systems.
The
Additional BNB Custodian
The
Additional BNB Custodian for the Trust's BNB holdings is
[ ], and the Trust has entered into the Additional
BNB Custody Agreement with the Additional BNB Custodian. The Sponsor may, in its
sole discretion, add or terminate BNB Custodians. The Sponsor may, in its sole
discretion, change the custodian for the Trust's BNB holdings, but it will have
no obligation whatsoever to do so or to seek any particular terms for the Trust
from other such custodians.
The
Additional BNB Custodian will keep custody of all of the Trust's BNB in
segregated accounts in the Additional BNB Vault Balance. Trust assets held in
the Additional BNB Vault Balance are held in segregated wallets and are not
commingled with the assets of the Additional BNB Custodian's other
customers.
The
Additional BNB Custodian will keep all of the private keys associated with the
Trust's BNB held at the Additional BNB Custodian in the Additional BNB Vault
Balance in cold storage. Cold storage is a safeguarding method by which the
private key(s) corresponding to BNB is (are) generated and stored in an offline
manner. Private keys are generated in offline computers or devices that are not
connected to the internet so that they are more resistant to being hacked. By
contrast, in hot storage, the private keys are held online, where they are more
accessible, leading to more efficient transfers, though they are potentially
more vulnerable to being hacked.
Cold
storage of private keys may involve keeping such keys on a non-networked
computer or electronic device or storing the public key and private keys on a
storage device or printed medium and deleting the keys from all computers. The
Additional BNB Custodian may receive deposits of BNB but may not send BNB
without use of the corresponding private keys. Such private keys are stored in
cold storage facilities within the United States and Europe, exact locations of
which are not disclosed for security reasons. A limited number of employees at
the
Additional
BNB Custodian are involved in private key management operations, and the
Additional BNB Custodian has represented that no single individual has access to
full private keys. The Additional BNB Custodian's internal audit team performs
periodic internal audits over custody operations, and the Additional BNB
Custodian has represented that Systems and Organizational Control ("SOC")
attestations covering private key management controls are also performed on the
Additional BNB Custodian by an external provider.
The
Additional BNB Custodian has adopted the following security policies and
practices with respect to BNB held in its hot wallet: hot wallet private keys
are managed online within high security environments; the high security
environments can only be accessed via limited programmatic access from
pre-defined environments; all human access to the environment is exceptional and
requires going through additional authentication mechanisms; private keys are
stored in an encrypted, non-exportable format in dedicated resources.
Operational redundancy is achieved through services being run in a redundant,
high availability mode across geographically redundant facilities, accompanied
by regular system backups, thus protecting against service disruptions and
single points of failure.
[ ]
maintains a commercial crime insurance policy of up to $320 million, which is
intended to cover the loss of client assets held by
[ ], including from employee collusion or fraud,
physical loss including theft, damage of key material, security breach or hack,
and fraudulent transfer. The insurance maintained by
[ ] is shared among all of
[ ]'s customers, is not specific to the Trust or to
customers holding BNB with the Additional BNB Custodian and may not be available
or sufficient to protect the Trust from all possible losses or sources of
losses.
In
the event of a fork, the Additional BNB Custody Agreement provides that the
Additional BNB Custodian may temporarily suspend services, and may, in their
sole discretion, determine whether or not to support (or cease supporting)
either branch of the forked protocol entirely, provided that the Additional BNB
Custodian shall use commercially reasonable efforts to avoid ceasing to support
both branches of such forked protocol and will support, at a minimum, the
original digital asset. The Additional BNB Custody Agreement provides that,
other than as set forth therein, and provided that the Additional BNB Custodian
shall make commercially reasonable efforts to assist the Trust to retrieve
and/or obtain any assets related to a fork, airdrop or similar event the
Additional BNB Custodian shall have no liability, obligation or responsibility
whatsoever arising out of or relating to the operation of the underlying
software protocols relating to the BNB Chain or an unsupported branch of a
forked protocol and, accordingly, The Trust acknowledges and assumes the risk of
the same. The Additional BNB Custody Agreement further provides that, unless
specifically communicated by the Additional BNB Custodian and its affiliates
through a written public statement on the [ ]
website, the Additional BNB Custodian does not support airdrops, metacoins,
colored coins, side chains, or other derivative, enhanced or forked protocols,
tokens or coins, which supplement or interact with BNB. The Sponsor has
committed to cause the Trust to permanently and irrevocably abandon any
Incidental Rights and IR Virtual Currency to which the Trust may become entitled
in the future. The Trust has no right to receive any Incidental Right or IR
Virtual Currency. Furthermore, the Additional BNB Custodian has no authority,
pursuant to the Additional BNB Custody Agreement or otherwise, to exercise,
obtain or hold, as the case may be, any such abandoned Incidental Right or IR
Virtual Currency on behalf of the Trust or to transfer any such abandoned
Incidental Right or IR Virtual Currency to the Trust if the Trust terminates its
custodial arrangement with the Additional BNB Custodian. For more information on
the Trust's and Sponsor's policies on forked or airdropped assets, see "Risk
Factors— a temporary or permanent "fork" of the BNB Chain could adversely affect
an investment in the trust." Neither the Additional BNB Custodian nor any other
[ ] entity is permitted to withdraw the Trust's BNB
from the Trust's Additional BNB Vault Balance, or loan, hypothecate, pledge or
otherwise encumber the Trust's BNB, without the consent of the
Trust.
The
Additional BNB Custodian's "Force Majeure Provision" provides that: Neither the
Additional BNB Custodian nor the Client shall be liable to the other for delays,
suspension of operations, whether temporary or permanent, failure in performance
of the Additional BNB Custody Agreement, or interruption of service in each case
to the extent it is directly due to a cause or condition beyond the reasonable
control of the party whose performance is affected by it, including, to the
extent beyond its reasonable control, any act of God; embargo; natural disaster;
act of civil or military authorities; act of terrorists; hacking (provided that
the Additional BNB Custodian has taken reasonable precautions and acts in a
manner consistent with its applicable policies and procedures with respect to
hacking risks and in doing so is not negligent); government prohibitions; civil
disturbance; war; strike or other labor dispute; fire; severe weather;
interruption in telecommunications, Internet
services,
or network provider services; unavailability of Fedwire, SWIFT or banks' payment
processes; outbreaks of infectious disease or any other public health crises,
including quarantine or other required employee restrictions; or any other
catastrophe or material event which is beyond the reasonable control of the
party affected by it.
Under
the Additional BNB Custody Agreement, the Additional BNB Custodian's liability
is limited as follows, among others: (i) in respect of any incidental, indirect,
special, punitive, consequential or similar losses, the Additional BNB Custodian
is not liable, even if the Additional BNB Custodian has been advised of or knew
or should have known of the possibility thereof; (ii) the Additional BNB
Custodian, its affiliates or its respective officers, directors, agents,
employees and representatives shall in no event have any liability with respect
to any breach of its obligations under the Additional BNB Custody Agreement
which does not result from its negligence, fault, fraud or willful misconduct;
and (iii) except for the: (i) Excluded Liabilities; (ii) fraud; or (iii) willful
misconduct, in no event shall any [ ] entity's
aggregate liability with respect to any breach of its obligations under the
Additional BNB Custody Agreement exceed the greater of (a) the value of the BNB
involved in the transaction giving rise to such liability and (b) the aggregate
amount of fees paid by the Trust to such [ ] entity
in respect of services relating to custody, trade execution, lending or
post-trade credit (if applicable) and other services in the 12-month period
prior to the event giving rise to such liability, and solely in respect of
custodial services provided pursuant to the Additional BNB Custody Agreement,
the liability of the Additional BNB Custodian shall not exceed the greater of
(i) the aggregate amount of fees paid by the Trust to the Additional BNB
Custodian in respect of the custodial services in the 12-month period prior to
the event giving rise to such liability; or (ii) the value of the BNB on deposit
in Trust's Additional BNB Account(s) involved in the event giving rise to such
liability; provided, that in no event shall the Additional BNB Custodian's
aggregate liability in respect of each cold storage address exceed one hundred
million US dollars ($100,000,000.00 USD).
"Excluded
Liabilities" means (x) with respect to the Trust, (1) the Trust's defense and
indemnity obligations under the Additional BNB Custody Agreement; (2) any
outstanding commissions or fees owed by the Trust under the Additional BNB
Custody Agreement and (3) the Trust's breach of representations and warranties
under the Additional BNB Custody Agreement; and (y) with respect to the
Additional BNB Custodian, its defense and indemnity obligations under the
Additional BNB Custody Agreement.
With
respect to the Excluded Liabilities, the Additional BNB Custodian's liability to
the Trust for any losses arising out of or in connection with the Additional BNB
Custodian's defense and indemnity obligations under the Additional BNB Custody
Agreement will be limited, in the aggregate, to an amount equal to five million
U.S. dollars ($5,000,000.00 USD).
The
Additional BNB Custodian requires up to twenty-four (24) hours between any
request to withdraw BNB from the Trust's Additional BNB Account and submission
of the Trust's withdrawal to the BNB Chain. It may be necessary to retrieve
certain information from offline storage in order to facilitate a withdrawal in
accordance with the Trust's instructions, which may delay the initiation or
crediting of such withdrawal from the Trust's Additional BNB Account. BNB shall
not be deposited or withdrawn upon less than twenty-four (24) hours' notice
initiated from the Trust's Additional BNB Account. The time of such request
shall be the time such notice is transmitted from the Trust's Additional BNB
Account. In the context of the foregoing and during such twenty-four (24) hours'
notice period, the Additional BNB Custodian makes no representations or
warranties with respect to the availability and/or accessibility of (1) the BNB,
(2) a Custody Transaction (as defined in the Additional BNB Custody Agreement,
which includes a deposit or withdrawal), (3) the Additional BNB Account, or (4)
the Custodial Services (as defined in the Additional BNB Custody Agreement).
While the Additional BNB Custodian will make reasonable efforts to process
client initiated deposits in a timely manner, the Additional BNB Custodian makes
no representations or warranties regarding the amount of time needed to complete
processing of deposits as such processing is dependent upon many factors outside
of the Additional BNB Custodian's control.
Under
the Additional BNB Custody Agreement, except in the case of its negligence,
fraud, material violation of applicable law or willful misconduct, the
Additional BNB Custodian shall not have any liability, obligation, or
responsibility for any damage or interruptions caused by any computer viruses,
spyware, scareware, Trojan horses, worms or other malware that may affect the
Trust's computer or other equipment, or any phishing, spoofing or other
attack.
The
Additional BNB Custodian could terminate services under the Additional BNB
Custody Agreement for any reason and without Cause upon providing the applicable
notice to the Trust for any reason, or immediately for Cause ("Cause" is defined
in the Additional BNB Custody Agreement as (i) the Trust breaches any provision
of the Additional BNB Custody Agreement and such breach is not cured within
three (3) business days after notice of such breach is given to the Trust in the
case of a payment-related breach or is not cured within ten (10) business days
after notice of such breach is given to the Trust; (ii) the Trust takes any
action to dissolve or liquidate (iii) the Trust becomes insolvent, makes an
assignment for the benefit of creditors, becomes subject to direct control of a
trustee, receiver or similar authority; (iv) the Trust becomes subject to any
bankruptcy or insolvency proceeding; (v) the Additional BNB Custodian becomes
aware of any facts or circumstances with respect to the Trust's financial,
legal, regulatory or reputational position which reasonably would materially
adversely affect The Trust's ability to comply with its obligations under the
Additional BNB Custody Agreement, and such facts and circumstances cannot be
cured within five (5) business days; (vi) termination is required pursuant to a
facially valid subpoena, court order or binding order of a government authority;
(vii) the Trust's Additional BNB Account is subject to any pending litigation,
investigation or government proceeding; or (viii) the Additional BNB Custodian
reasonably suspects the Trust of attempting to circumvent the Additional BNB
Custodian's controls in a manner the Additional BNB Custodian otherwise deems
inappropriate or potentially harmful to itself or third parties).
The
Transfer Agent
The
Transfer Agent: (1) issues and redeems Shares of the Trust; (2) responds to
correspondence by Trust Shareholders and others relating to its duties; (3)
maintains Shareholder accounts; and (4) makes periodic reports to the
Trust.
The
Marketing Agent
The
Marketing Agent is responsible for: (1) working with the Administrator to review
and approve, or reject, purchase and redemption orders of Baskets placed by
Authorized Participants with the Administrator; (2) providing assistance in the
marketing of the Shares; (3) reviewing and approving the marketing materials
prepared by the Sponsor for compliance with applicable SEC and FIRA advertising
laws, rules and regulations; and (4) maintaining a public website on behalf of
the Trust, containing information about the Trust and the Shares. The internet
address of the Trust's website is accessible at www.vaneck.com. This internet
address is only provided here as a convenience, and the information contained on
or connected to the Trust's website is not considered part of this
Prospectus.
MarketVector
Indexes GmbH is an indirectly wholly owned-subsidiary of Van Eck Associates
Corporation.
CUSTODY
OF THE TRUST'S ASSETS
The
Trust's BNB Custodian will keep custody of all of the Trust's BNB relating to
its BNB Account and Clearing Account. BNB private keys are stored in two
different forms: "hot wallet" storage, whereby the private keys are stored on
secure, internet-connected devices, and "cold" storage, where digital currency
private keys are stored completely offline.
The
Trust's Transfer Agent will facilitate the settlement of Shares in response to
the placement of creation orders and redemption orders from Authorized
Participants. The Trust generally does not intend to hold cash or cash
equivalents except in connection with cash creation and redemption orders.
However, there may be situations where the Trust will unexpectedly hold cash on
a temporary basis. The Custody Agreement requires the BNB Custodian to hold the
Trust's BNB in its BNB Account in cold storage, unless required to facilitate
withdrawals as a temporary measure. BNB temporarily held in the Clearing Account
in connection with creations and redemptions or withdrawals of BNB to pay the
Sponsor Fee or extraordinary expenses may be held in omnibus hot storage
wallets.
As
a fiduciary under Section 100 of the New York Banking Law, the BNB Custodian is
held to specific capital reserve requirements and banking compliance standards.
The BNB Custodian is also subject to the laws, regulations and rules of
applicable governmental or regulatory authorities, including: money service
business regulations under FinCEN; U.S. state money transmission laws; laws,
regulations, and rules of relevant tax authorities; applicable regulations and
guidance set forth by FinCEN; the Bank Secrecy Act of 1970; the USA PATRIOT Act
of 2001; other anti-money laundering regulations as mandated by U.S. federal law
and any other rules and regulations regarding anti-money
laundering/counter-terrorist financing; issuances from the Office of Foreign
Assets Control; the New York Banking Law; regulations promulgated by the NYDFS
from time to time; the National Futures Association; the Financial Industry
Regulatory Authority; and the Commodity Exchange Act.
The
BNB Custodian provides custody, clearing/settlement, and other capital markets
services specifically designed for digital asset exchange-traded funds and other
fund vehicles. The BNB Custodian currently custodies and supports other exchange
traded products.
The
BNB Custodian has been providing services as a limited purpose trust company
licensed by the NYSDFS since 2015. The BNB Custodian is a fiduciary under
Section 100 of the New York Banking Law and a qualified custodian for purposes
of Rule 206(4)-2(d)(6) under the Advisers Act, and it was the world's first
digital asset platform to achieve a SOC 1 Type II and SOC 2 Type II
certification for custody. [ ]® is also regularly
audited and subject to stringent capital reserve requirements. The BNB Custodian
has represented to the Sponsor that it also maintains digital asset insurance
consisting of a $100 million specie policy which provides certain coverage for
digital assets held in its cold storage system as well as a $25 million crime
policy which provides certain coverage for assets and funds including those
digital assets held in its hot wallets. This insurance coverage applies to all
digital assets held by the BNB Custodian. The Trust is not a named insured on
such insurance policies and such insurance is not specific to the Trust, but the
BNB Custodian has represented to the Sponsor that such insurance covers customer
losses, including losses suffered by the Trust, arising from specified events,
including fraud, theft, and cybersecurity breaches.
The
BNB Custodian will use segregated cold storage BNB addresses for the Trust's BNB
Account, which is separate from the BNB addresses that the BNB Custodian uses
for its other customers and which are directly verifiable via the BNB Chain. The
BNB Custodian will at all times record and identify in its books and records
that such BNB constitute the property of the Trust. The BNB Custodian will not
loan, hypothecate, pledge or otherwise encumber the Trust's BNB, as applicable,
without the Trust's instruction, nor will the Sponsor or any other entity or
service provider. The Trust will not lease or loan BNB held in the Trust's
account with the BNB Custodian and will not give instructions to that
effect.
BNB
Storage Structure
BNB
private keys are stored in two different forms: "hot wallet" storage, whereby
the private keys are connected to the internet, and "cold" storage, where
digital currency private keys are stored completely offline. The Trust's BNB
will be stored by the BNB Custodian offline in cold storage. When under the
purview of the BNB Custodian, BNB will only enter "hot" storage in the case of
creations and redemptions or withdrawals to pay the
Sponsor
Fee or extraordinary expenses, meaning that the BNB will only be in "hot"
storage for a temporary period. The BNB Custodian will store private keys in
geographically diverse regions across the continental United
States.
The
BNB Custodian has adopted the following security policies and practices with
respect to digital assets held in cold storage: HSMs are used to generate, store
and manage cold storage private keys; multi-signature technology is used to
provide both security against attacks and tolerance for losing access to a key
or facility, eliminating single points of failure; all HSMs are stored offline
in air-gapped environments within a diverse network of guarded, monitored and
access-controlled facilities that are geographically distributed; multiple
levels of physical security and monitoring controls are implemented to safeguard
HSMs within storage facilities; and all fund transfers require the coordinated
actions of multiple employees.
The
BNB Custodian has adopted the following security policies and practices with
respect to digital assets held in its hot wallet: HSMs are used to store and
manage hot wallet private keys; operational redundancy is achieved through
geographic disbursement of failover storage facilities and hardware, thus
protecting against service disruptions and single points of failure; all hot
wallet HSMs are stored within secured facilities that are access-controlled,
guarded, and monitored; tiered access-controls are applied to the BNB
Custodian's production environment to restrict access to employees based on
role, following the principle of least-privilege; administrative access to its
production environment requires multi-factor authentication; and it offers
additional account level protections such as crypto address whitelisting, which
allows customers to restrict withdrawals to addresses only included in the
customer's whitelist.
The
Trust will use the Clearing Account in connection with the Clearing Services.
While the BNB Custodian maintains records of the Trust's BNB balance in its
Clearing Account, the actual BNB relating to the Trust's Clearing Account is
held in omnibus wallets by the BNB Custodian, meaning that BNB owned by multiple
customers is held in the same wallet and at the same address on the BNB Chain.
The Trust's Clearing Account balance therefore represents an omnibus claim on
the BNB Custodian's BNB held in such wallets, and the Trust does not have an
identifiable claim to specific BNB. The BNB Custodian holds the BNB across a
combination of omnibus hot wallets and cold wallets. The Sponsor has no control
over, and the BNB Custodian does not disclose to the Sponsor, the amount of BNB
that the BNB Custodian holds in connection with the Trust's Clearing Account in
omnibus hot wallets, as compared to omnibus cold wallets. The BNB Custodian
could hold substantially all BNB connected to the Trust's Clearing Account in
omnibus hot wallets.
[ ]
BSA/AML Program
The
BNB Custodian has adopted the [ ] BSA/AML Program
for its digital asset trading platform and custody service in an effort to
maintain the highest possible compliance with applicable laws and regulations
relating to anti-money laundering in the U.S. and other countries where it
conducts business. This program includes robust internal policies, procedures
and controls that combat any attempted use of [ ]
for illegal or illicit purposes, including a customer identification program,
annual training of all employees and officers in anti-money laundering
regulation, filing of Suspicious Activity Reports and Currency Transaction
Reports with the U.S. Financial Crimes Enforcement Network and annual internal
and independent audits of the [ ] BSA/AML
Program.
Website
Security
The
BNB Custodian has implemented certain security policies and practices to enhance
security on its website, including through the use of two-factor authentication
for certain user actions, such as withdrawals; a requirement for strong
passwords from its users, which are cryptographically hashed using modern
standards; encryption of sensitive user information, both in transit and at
rest; the application of rate-limiting procedures to certain account operations
such as login attempts to thwart brute force attacks; the transmission of
website data over encrypted transport layer security connections; the leveraging
of content-security policy and HTTP strict transport security features in modern
browsers; partnerships with enterprise vendors to mitigate-potential distributed
denial-of-service attacks; and the use of separate access controls on
internal-only sections of the BNB Custodian's website.
Internal
Control
In
addition to the security policies and procedures discussed above, the BNB
Custodian has also instituted the following internal controls: multiple
signatories are required to transfer funds out of cold storage; the BNB
Custodian's Chief Executive Officer and President are unable to individually or
jointly transfer funds out of cold storage; all private keys are stored offsite
in secure facilities; all employees undergo criminal and credit background
checks, and are subject to ongoing background checks throughout their
employment; and all remote-access by employees uses public-key authentication
(e.g. no passwords, one-time passwords or other phishable credentials are
used).
Insurance
The
BNB Custodian, as custodian of the Trust's BNB, is responsible for securing the
Trust's BNB. The BNB Custodian currently maintains digital asset insurance
consisting of a $100 million specie policy which provides certain coverage for
digital assets held in its cold storage system, as well as a $25 million crime
policy which provides certain coverage for assets and funds including those
digital assets held in its hot wallets. This insurance coverage applies to all
digital assets held by the BNB Custodian. Such insurance is shared with other
customers and is not specific to the Trust. The Trust is not a named beneficiary
under the BNB Custodian's insurance policies, though the BNB Custodian has
represented to the Sponsor that the insurance covers customer losses, including
losses suffered by the Trust, arising from specified events, including fraud,
theft, and cybersecurity breaches. For more information, see "RISK FACTORS—The
Lack Of Full Insurance And Shareholders' Limited Rights Of Legal Recourse
Against The Trust, Trustee, Sponsor, Administrator, Cash Custodian, BNB
Custodian And Additional BNB Custodian Expose The Trust And Its Shareholders To
The Risk Of Loss Of The Trust's BNB For Which No Person Or Entity Is Liable."
The amounts and continuing availability of this coverage are subject to change
at the BNB Custodian's sole discretion. The BNB Custodian also maintains
separate commercial crime insurance coverage for digital assets custodied in its
"hot wallet". To date, the BNB Custodian has never experienced a loss due to
unauthorized access from its hot wallet or the cold storage vaults.
Each
Liquidity Provider is required to maintain a Liquidity Provider BNB account at
the Trust's BNB Custodian.
The
Trust's Transfer Agent will facilitate the settlement of Shares in response to
the placement of creation orders and redemption orders from Authorized
Participants. The Trust generally does not intend to hold cash or cash
equivalents except in connection with cash creation and redemption orders.
However, there may be situations where the Trust will unexpectedly hold cash on
a temporary basis.
FORM
OF SHARES
Registered
Form
Shares
are issued in registered form in accordance with the Trust Agreement. The
Transfer Agent has been appointed registrar and transfer agent for the purpose
of transferring Shares in certificated form. The Transfer Agent keeps a record
of all Shareholders and holders of the Shares in certified form in the registry
("Register"). The Sponsor recognizes transfers of Shares in certificated form
only if done in accordance with the Trust Agreement. The beneficial interests in
such Shares are held in book-entry form through participants and/or
accountholders in DTC.
Book
Entry
Individual
certificates are not issued for the Shares. Instead, Shares are represented by
one or more global certificates, which are deposited by the Administrator with
DTC and registered in the name of Cede & Co., as nominee for DTC. The global
certificates evidence all of the Shares outstanding at any time. Shareholders
are limited to (1) participants in DTC such as banks, brokers, dealers and trust
companies ("DTC Participants"), (2) those who maintain, either directly or
indirectly, a custodial relationship with a DTC Participant ("Indirect
Participants"), and (3) those who hold interests in the Shares through DTC
Participants or Indirect Participants, in each case who satisfy the requirements
for transfers of Shares. DTC Participants acting on behalf of Shareholders
holding Shares through such participants' accounts in DTC will follow the
delivery practice applicable to securities eligible for DTC's Same-Day Funds
Settlement System. Shares are credited to DTC Participants' securities accounts
following confirmation of receipt of payment.
DTC
DTC
has advised us as follows: It is a limited purpose trust company organized under
the laws of the State of New York and is a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities for DTC Participants and
facilitates the clearance and settlement of transactions between DTC
Participants through electronic book-entry changes in accounts of DTC
Participants.
TRANSFER
OF SHARES
The
Shares are only transferable through the book-entry system of DTC. Shareholders
who are not DTC Participants may transfer their Shares through DTC by
instructing the DTC Participant holding their Shares (or by instructing the
Indirect Participant or other entity through which their Shares are held) to
transfer the Shares. Transfers are made in accordance with standard securities
industry practice.
Transfers
of interests in Shares with DTC are made in accordance with the usual rules and
operating procedures of DTC and the nature of the transfer. DTC has established
procedures to facilitate transfers among the participants and/or accountholders
of DTC. Because DTC can only act on behalf of DTC Participants, who in turn act
on behalf of Indirect Participants, the ability of a person or entity having an
interest in a global certificate to pledge such interest to persons or entities
that do not participate in DTC, or otherwise take actions in respect of such
interest, may be affected by the lack of a certificate or other definitive
document representing such interest.
DTC
has advised us that it will take any action permitted to be taken by a
Shareholder (including, without limitation, the presentation of a global
certificate for exchange) only at the direction of one or more DTC Participants
in whose account with DTC interests in global certificates are credited and only
in respect of such portion of the aggregate principal amount of the global
certificate as to which such DTC Participant or Participants has or have given
such direction.
PLAN
OF DISTRIBUTION
Buying
and Selling Shares
Most
investors buy and sell Shares of the Trust in secondary market transactions
through brokers. Shares are expected to be approved for listing, subject to
notice of issuance, on the Exchange under the ticker symbol
[ ]. Shares are bought and sold throughout the
trading day like other publicly traded securities. When buying or selling Shares
through a broker, most investors incur customary brokerage commissions and
charges. Shareholders are encouraged to review the terms of their brokerage
account for details on applicable charges.
Authorized
Participants
The
offering of the Trust's Shares is a best efforts offering. The Trust
continuously offers Baskets consisting of [ ]
Shares to Authorized Participants. Authorized Participants pay a transaction fee
for each order they place to create or redeem one or more Baskets.
The
offering of Baskets is being made in compliance with Rule 2310 of the FINRA
Rules. Accordingly, Authorized Participants will not make any sales to any
account over which they have discretionary authority without the prior written
approval of a purchaser of Shares.
The
per Share price of Shares offered in Baskets on any day will be the total NAV of
the Trust calculated shortly after the close of the Exchange on that day divided
by the number of issued and outstanding Shares of the Trust. An Authorized
Participant is not required to sell any specific number or dollar amount of
Shares.
By
executing an Authorized Participant Agreement, an Authorized Participant becomes
part of the group of parties eligible to purchase Baskets from, and put Baskets
for redemption to, the Trust. An Authorized Participant is under no obligation
to create or redeem Baskets or to offer to the public Shares of any Basket it
does create. Authorized Participants as of the date of this Prospectus are:
[ ]. Additional Authorized Participants may be
added at any time, subject to the Sponsor's discretion.
Current
or future Liquidity Providers may be affiliates of, or have material
relationships with, the Trust's current or future Authorized
Participants.
Because
new Shares can be created and issued on an ongoing basis, at any point during
the life of the Trust, a "distribution," as such term is used in the 1933 Act,
will be occurring. Authorized Participants, other broker-dealers and other
persons are cautioned that some of their activities may result in their being
deemed participants in a distribution in a manner that would render them
statutory underwriters and subject them to the prospectus-delivery and liability
provisions of the 1933 Act. Any purchaser who purchases Shares with a view
towards distribution of such Shares may be deemed to be a statutory underwriter.
In addition, an Authorized Participant, other broker-dealer firm or its client
will be deemed a statutory underwriter if it purchases a Basket from the Trust,
breaks the Basket down into the constituent Shares and sells the Shares to its
customers; or if it chooses to couple the creation of a supply of new Shares
with an active selling effort involving solicitation of secondary market demand
for the Shares. In contrast, Authorized Participants may engage in secondary
market or other transactions in Shares that would not be deemed "underwriting."
For example, an Authorized Participant may act in the capacity of a broker or
dealer with respect to Shares that were previously distributed by other
Authorized Participants. A determination of whether a particular market
participant is an underwriter must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that would lead to designation as an
underwriter and subject them to the prospectus-delivery and liability provisions
of the 1933 Act.
Dealers
who are neither Authorized Participants nor "underwriters" but are nonetheless
participating in a distribution (as contrasted to ordinary secondary trading
transactions), and thus dealing with Shares that are part of an "unsold
allotment" within the meaning of Section 4(a)(3)(C) of the 1933 Act, would be
unable to take advantage of the prospectus-delivery exemption provided by
Section 4(a)(3) of the 1933 Act.
The
Authorized Participants may be indemnified by the Sponsor for (i) any material
breach by the Sponsor of any provision of the Authorized Participant Agreement
that relates to the Sponsor; (ii) any representations provided by the Sponsor
relating to the Authorized Participant Agreement, the Registration Statement,
the Prospectus or the issuance or distribution of Shares that is false or
misleading in any material respect or omits material information necessary to
make the statement contained therein complete; (iii) any failure on the part of
the Sponsor to perform any obligation of the Sponsor set forth in the Authorized
Participant Agreement; (iv) any failure by the Sponsor to comply with applicable
laws in connection with the Authorized Participant Agreement and the offer,
sale, creation, redemption and marketing of the Shares; (v) actions of the
Authorized Participant taken in reasonable reliance upon any instructions issued
or representations reasonably believed by it to be genuine and to have been
given by or on behalf of the Sponsor; (vi) any (1) representation by the Sponsor
that is not consistent with the Trust's then-current Registration Statement made
in connection with the offer or the solicitation of an offer to buy or sell
Shares or applicable prospectus, and (2) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement as
originally declared effective by the SEC or in any amendment thereof or
applicable prospectus, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or (vii) any untrue
statement or alleged untrue statement of a material fact, or omission or alleged
omission of a material fact, made in any marketing materials prepared by or for
the Sponsor or Trust and/or furnished to the Authorized Participant by the
Sponsor or the Trust, or any disclosure provided by the Sponsor to the
Authorized Participant for inclusion in marketing materials prepared by the
Authorized Participant. Notwithstanding the foregoing, the Authorized
Participants will not be entitled to receive a discount or commission from the
Trust or the Sponsor for their purchases of Baskets.
Seed
Capital Investor
On
[ ], Van Eck Associates Corporation (the "Seed
Capital Investor"), the parent of the Sponsor, subject to certain conditions,
purchased the "Seed Shares," comprising [ ] Shares
at a per-Share price of [ ]. Delivery of the Seed
Shares was made on [ ]. Total proceeds to the Trust
from the sale of the Seed Shares were [ ]. On
[ ], 2025, the Seed Shares were redeemed for cash
and the Seed Capital Investor purchased the "Seed Creation Baskets," comprising
of [ ] Shares at a per-Share price equal to
[ ] BNB. The price of BNB was determined using the
Index on [ ], 2025. The Index price on
[ ], 2025 was $[ ].
Total proceeds to the Trust from the sale of the Seed Creation Baskets were
[ ] BNB. Delivery of the Seed Creation Baskets was
made on [ ], 2025. The Seed Capital Investor has
acted as a statutory underwriter in connection with this purchase.
The
price of the Seed Creation Baskets was determined as described above and such
Shares could be sold at different prices if sold by the Seed Capital Investor at
different times.
CREATION
AND REDEMPTION OF SHARES
The
Trust creates and redeems Shares from time to time, but only in one or more
Baskets. Baskets are only made in exchange for delivery to the Trust of the
amount of BNB represented by the Baskets being created or an amount of cash
sufficient purchase such amount of BNB, the amount of which is equal to the
combined NAV of the number of Shares included in the Baskets being created
determined as of 4:00 p.m. Eastern time on the day the order to create Baskets
is properly received. Baskets are only redeemed in exchange for delivery to the
Trust of the amount of Shares represented by the Basket. The Authorized
Participants will deliver cash or BNB to create Shares and will receive cash or
BNB when redeeming Shares. For a redemption in cash, the Sponsor shall arrange
for the BNB represented by the Basket to be sold to a Liquidity Provider
selected by the Sponsor and the cash proceeds distributed from the Trust's
account at the Cash Custodian to the Authorized Participant. The Liquidity
Providers as of the date of this Prospectus, that have agreed to serve as a
Liquidity Provider and have consented to be named in this Prospectus are
[ ]. Additional Liquidity Providers may be added at
any time, subject to the Sponsor's sole discretion. For an "in-kind"
subscription, Authorized Participants will deliver, or arrange for the delivery
by the Authorized Participant's designee of, BNB to the Trust's account with the
BNB Custodian in exchange for Shares when they purchase Shares. For an "in-kind"
redemption transaction with the Trust, when Authorized Participants redeem
Shares, the Trust, through the BNB Custodian, will deliver BNB to such
Authorized Participants, or a designee thereof, in exchange for their Shares.
Authorized
Participants are the only persons that may place orders to create and redeem
Baskets. Authorized Participants must be (1) registered broker-dealers or other
securities market participants, such as banks and other financial institutions,
that are not required to register as broker-dealers to engage in securities
transactions described below, and (2) DTC Participants. Registered
broker-dealers are subject to various requirements of the federal securities
laws and rules, including financial responsibility rules such as the customer
protection rule, the net capital rule and recordkeeping requirements. On May 15,
2025, the SEC’s Division of Trading and Markets and FINRA’s Office of General
Counsel withdrew their 2019 joint statement regarding broker-dealer custody of
crypto asset securities, which was widely perceived as prohibiting
broker-dealers from offering custodial services for crypto assets that are not
securities. Additionally, on the same day, the SEC released a set of Frequently
Asked Questions (FAQs) clarifying its views on broker-dealers' crypto asset
activities. The FAQs stated that (i) SEC Rule 15c3-3 applies only to crypto
asset securities, and (ii) broker-dealers are permitted to facilitate in-kind
creations and redemptions in connection with spot crypto exchange-traded
products.
To
become an Authorized Participant, a person must enter into an Authorized
Participant Agreement with the Sponsor. The Authorized Participant Agreement
provides the procedures for the creation and redemption of Baskets and for the
delivery, or facilitation of the delivery, of the BNB required for such creation
and redemptions. The Authorized Participant Agreement and the related procedures
attached thereto may be amended by the Trust or the Sponsor (as the case may
be), without the consent of any Shareholder or Authorized Participant.
Authorized Participants pay the Transfer Agent a fee for each order they place
to create or redeem one or more Baskets. The transaction fee may be reduced,
increased or otherwise changed by the Sponsor. Authorized Participants who make
deposits (directly in the case of cash creations and, indirectly in the case of
BNB deposits) with the Trust in exchange for Baskets receive no fees,
commissions or other form of compensation or inducement of any kind from either
the Trust or the Sponsor, and no such person will have any obligation or
responsibility to the Sponsor or the Trust to effect any sale or resale of
Shares.
Each
Authorized Participant will be required to be registered as a broker-dealer
under the Exchange Act and a member in good standing with FINRA, or exempt from
being or otherwise not required to be licensed as a broker-dealer or a member of
FINRA, and will be qualified to act as a broker or dealer in the states or other
jurisdictions where the nature of its business so requires. Certain Authorized
Participants may also be regulated under federal and state banking laws and
regulations. Each Authorized Participant has its own set of rules and
procedures, internal controls and information barriers as it determines is
appropriate in light of its own regulatory regime.
The
Trust will engage in BNB transactions for converting cash into BNB (in
association with purchase orders) and BNB into cash (in association with
redemption orders). The Trust will conduct its BNB purchase and sale
transactions by trading directly with third parties selected by the Sponsor
(each, a "Liquidity Provider"), who are not registered broker-dealers, pursuant
to written agreements between such Liquidity Providers and the Trust. Liquidity
Providers
may be added at any time, subject to the discretion of the Sponsor.
Alternatively, Liquidity Providers may choose to terminate their participation
as Liquidity Providers to the Trust at any time. The Trust is not aware of any
other affiliation or material relationship between Liquidity Provider and the
Authorized Participants or other service providers of the Trust in executing a
transaction in BNB with the Trust. Each Liquidity Provider represents to the
Trust that it is acting for itself and not for another person, and is not acting
as agent or at the direction of any Authorized Participant. Upon receipt of an
order from an Authorized Participant to create or redeem Baskets, the Trust may
obtain quotes for a price to purchase or sell BNB from one or more Liquidity
Providers. A Liquidity Provider may respond to the Trust's request with an offer
of a quote at which it is willing to sell the specified quantity of BNB, or a
portion thereof, in the case of a creation, or a quote at which it is willing to
buy the specified quantity of BNB, or a portion thereof, in the case of a
redemption, as indicated in such offer. The Trust then determines, in its sole
discretion, which Liquidity Provider that provided a quote to use. Once an offer
is accepted it becomes a trade that is binding on both the Trust and the
Liquidity Provider. Each Liquidity Provider is required to comply with U.S.
federal and/or state laws including licensing and registration requirements or
similar laws in non-U.S. jurisdictions and maintain practices and policies
designed to comply with AML and KYC regulations. The Liquidity Providers as of
the date of this Prospectus, that have agreed to serve as a Liquidity Provider
and have consented to be named in this Prospectus
are[ ]. Current or future Liquidity Providers may
be affiliates of, or have material relationships with, the Trust's current or
future Authorized Participants.
The
following description of the procedures for the creation and redemption of
Baskets is only a summary and a Shareholder should refer to the relevant
provisions of the Trust Agreement and the form of Authorized Participant
Agreement for more detail. The Trust Agreement and form of Authorized
Participant Agreement are filed as exhibits to the registration statement of
which this Prospectus is a part.
Authorized
Participants will place orders through the Transfer Agent. The Transfer Agent
will coordinate with the Sponsor, who will in turn coordinate with the Trust's
BNB Custodian in order to facilitate settlement of the Shares and BNB as
described in more detail in the Creation Procedures and Redemption Procedures
sections below.
The
trading prices of many digital assets, including BNB, have experienced extreme
volatility in recent periods and may continue to do so. Extreme volatility may
persist and the value of the Shares may significantly decline in the future
without recovery. The digital asset markets may still be experiencing a bubble
or may experience a bubble again in the future. Extreme volatility in the
future, including further declines in the trading prices of BNB, could have a
material adverse effect on the value of the Shares and the Shares could lose all
or substantially all of their value. The Trust is not actively managed and will
not take any actions to take advantage, or mitigate the impacts, of volatility
in the price of BNB.
In
addition, the use of cash creations and redemptions has transaction costs of
buying and selling BNB. These costs include the bid-ask spread along with the
operational costs from the labor and overhead involved in calculating,
executing, monitoring, and accounting for transactions in the BNB markets and
related cash movements. The Trust's Authorized Participant Agreement provides
that transaction costs and slippage related to Basket creation and redemption
are the responsibility of the Authorized Participant. Under ordinary
circumstances, the Trust does not anticipate that there would be fees or costs
related to purchases and sales of BNB because Clearing Services are provided to
the Trust without additional charges by the BNB Custodian. To the extent there
are unusual or unanticipated fees or costs associated with BNB purchases and
sales in connection with creation and redemption activity, the Sponsor would
seek to pass these costs to the Liquidity Providers or the Authorized
Participants. If unable to do so, the Sponsor would treat these as extraordinary
expenses and could decide to seek reimbursement from the Trust to the extent the
fees or expenses were paid by the Sponsor on the Trust's behalf.
Creation
Procedures
On
any business day, an Authorized Participant may place an order with the Transfer
Agent to create one or more Baskets. Currently, creation orders are only
accepted in cash or in-kind. For purposes of processing creation and redemption
orders, a "business day" means any day other than a day when the Exchange is
closed for regular trading ("Business Day"). Purchase orders must be placed by
the order cut-off time for a purchase order on a Business Day (the "Creation
Order Cut-Off Time"). The Creation Order Cut-Off Time is 3:59:59 p.m. Eastern
time
on
a trade date or as otherwise communicated by the Sponsor. The day on which an
order is received by the Transfer Agent is considered the purchase order
date.
Prior
to the delivery of Baskets for a purchase order, the Authorized Participant must
also have wired to the Transfer Agent the nonrefundable transaction fee due for
the creation order to offset the transfer and other transaction costs associated
with the issuance of the Basket. Authorized Participants may not withdraw a
creation request. The manner by which creations are made is dictated by the
terms of the Authorized Participant Agreement. By placing a creation order, an
Authorized Participant agrees to facilitate the deposit of cash with the Cash
Custodian or BNB, with the BNB Custodian. If an Authorized Participant fails to
consummate the foregoing, the order will be cancelled.
For
a cash creation, the total deposit of cash required to create each Basket is an
amount of cash that is in the same proportion to the total assets of the Trust,
net of accrued expenses and other liabilities, on the date the order to purchase
is properly received, as the number of Shares to be created under the purchase
order is in proportion to the total number of Shares outstanding on the date the
order is received. On the trade date for a purchase order (the "Creation Trade
Date"), following receipt of the purchase order from the Authorized Participant,
the Trust shall, in its sole discretion, select a Liquidity Provider and execute
a trade to purchase BNB from that Liquidity Provider in the amount of the Basket
Deposit (the calculation of which is explained below), with the purchased BNB to
be delivered by the Liquidity Provider on the Creation Settlement Date in
exchange for a cash price to be delivered by the Trust on Creation Settlement
Date. The Liquidity Provider, not the Authorized Participant, shall be
responsible for delivering BNB to the Trust. The Authorized Participant shall be
responsible for delivering cash to the Trust.
For
an in-kind creation, following an Authorized Participant's placement of a
purchase order, the Trust's BNB Custodian account must be credited with the
required BNB by the end of the business day following the purchase order date,
or in the case of cash deposits, the Trust's Cash Custodian account must be
credited with the required cash by the end of the business day following the
purchase order date, as applicable. If the Authorized Participant or its
designee fails to consummate the foregoing, the order shall be cancelled. Upon
receipt of the BNB deposit amount in the Trust's BNB Custodian account, in the
case of in-kind creations, or the cash deposit amount in the Trust's Cash
Custodian account, in the case of cash creations, the Trust will notify the
Transfer Agent to release the shares to the Authorized Participant, by directing
DTC to credit the number of Shares created to the applicable DTC
account.
No
Shares will be issued unless and until the BNB Custodian (in the case of in-kind
deposits) or Cash Custodian (in the case of cash deposits) has informed the
Transfer Agent that the BNB or cash (as applicable) has been received.
Disruption of services at the BNB Custodian would have the potential to delay
settlement of the BNB related to Share creations. To the extent a Liquidity
Provider, is not able to deliver BNB associated with a cash purchase order as of
a specified time on the settlement date, the Authorized Participant will have
the option to cancel the order, or the Sponsor may select an alternative
execution method for the BNB purchase. To the extent that BNB transfers in
connection with a creation order are delayed due to congestion or other issues
with the BNB Chain, such BNB will not be held in cold storage in until such
transfers can occur.
BNB
held in the Trust's BNB Custodian account is the property of the Trust and is
not leased, or loaned under any circumstances.
Determination
of Required Deposits
The
Basket Cash Component changes from day to day. To determine the Basket Cash
Component, the Administrator starts by determining the number of BNB held by the
Trust as of the opening of business on that trade date, and subtracts the amount
of BNB constituting estimated accrued but unpaid fees and expenses of the Trust
as of the opening of business on that trade date. For the purposes of the
computation of the Basket Deposit, the BNB quantity is displayed to the hundred
millionth. Second, this figure, in BNB, is divided by the quotient of the number
of Shares outstanding at the opening of business on the trade date divided by
[ ]. This produces the Basket Deposit, which is the
number of BNB attributable to each Basket as of the opening of business on the
trade date. Third, the resulting BNB amount is then valued, in cash, at the
Index calculated on the trade date, or in accordance with the other valuation
policies described in the Registration Statement if the Index is not available.
This produces
the
Basket Cash Component. The Basket Deposit, and the Basket Cash Component, so
determined is communicated via electronic mail message to all Authorized
Participants, and made available on the Sponsor's website for the Shares. The
Exchange also publishes the Basket Deposit determined by the Administrator as
indicated above.
In
the case of a cash creation only, by the end of day Eastern time (or such other
time as the parties may agree) on the trade date for a purchase order, the
Administrator will calculate and transmit the Required Cash Creation Total,
consisting of (1) the Basket Cash Component, (2) Cash Amount, and (3) any
Purchase Slippage, to the Authorized Participant, which the Authorized
Participant shall be responsible for delivering in cash on the settlement date
for a purchase order (which shall be the Business Day immediately following the
trade date unless the Trust, Sponsor, Authorized Participant agree to a
different date) (the "Creation Settlement Date") to the Trust's account at the
Cash Custodian is cleared, immediately available funds by 1:00 p.m. Eastern
time. The Trust acknowledges that, if the actual cash purchase price of BNB from
the Liquidity Provider is below the Basket Cash Component, the Authorized
Participant shall be entitled to retain the difference and the Required Cash
Creation Total shall be reduced accordingly.
In
the case of an in-kind creation only, by the end of day Eastern Standard Time
(or such other time as the parties may agree) on Creation Trade Date, the
Administrator will calculate and transmit the Creation Basket Deposit, to the
Authorized Participant, which the Authorized Participant shall be responsible
for delivering in BNB on Creation Settlement Date to the Trust's Custodian
Account.
Delivery
of Required Deposits
For
a cash creation, on the Creation Settlement Date, the Authorized Participant who
places a purchase order must follow the procedures outlined in the "Creation
Procedures" section of this Prospectus. In the case of a cash creation only, the
Trust shall instruct the Cash Custodian to transfer the cash proceeds to the
Trust's Fiat Account. The Liquidity Provider delivers BNB to the Trust's
Clearing Account in exchange for the cash purchase price, a delivery facilitated
by the BNB Custodian under the Clearing Agreement. Upon settlement by the BNB
Custodian, in its capacity as the provider of Clearing Services pursuant to the
Clearing Agreement, of the BNB purchase from the Liquidity Provider and the
deposit of BNB in the Trust's Clearing Account, the Trust shall instruct the
Transfer Agent to release the Shares to the Authorized Participant, and the
Transfer Agent shall direct DTC to credit the number of Shares ordered to the
applicable DTC account, by 1:00 p.m. Eastern time on the Creation Settlement
Date and the Creation Order shall be settled. If the BNB purchase transaction
between the Trust and the Liquidity Provider fails to settle, the Authorized
Participant shall have the option to cancel the Creation Order, in which case
the Trust will return the Required Cash Creation Total less the Cash Amount to
the Authorized Participant and the Shares will not be issued, or the Sponsor may
use an alternative execution method for the Trust to purchase BNB, in which case
the Authorized Participant agrees and acknowledges it is responsible for any
Purchase Slippage and Cash Amount relating to such alternative execution method.
The expense and risk of delivery and ownership of cash until such cash has been
received in immediately available, cleared federal funds by the Cash Custodian
on behalf of the Trust will be borne solely by the Authorized
Participant.
For
an in-kind creation, on the Creation Settlement Date, the Authorized Participant
or its designee shall deposit the amount of BNB specified in the Creation Basket
Deposit in the Trust's account at the BNB Custodian by 1:00 p.m. Eastern time.
Upon settlement by the BNB Custodian, the Trust shall instruct the Transfer
Agent to release the Shares to the Authorized Participant, and the Transfer
Agent shall direct DTC to credit the number of Shares ordered to the applicable
DTC account, by close of business on the Creation Settlement Date and the
Creation Order shall be settled. If the BNB deposit transaction between the
Trust and the Authorized Participant or its designee fails to settle, the
Authorized Participant shall have the option to cancel the Creation Order, in
which case the Trust will return the Creation Basket Deposit to the Authorized
Participant and the Shares will not be issued, or the Sponsor may use an
alternative execution method for the Trust to purchase BNB, in which case the
Authorized Participant agrees and acknowledges it is responsible for providing
any Basket Cash Component, plus any Purchase Slippage and Cash Amount, relating
to such alternative execution method. The expense and risk of delivery and
ownership of BNB until such BNB has been credited to the Trust's Custody Account
by the BNB Custodian on behalf of the Trust will be borne solely by the
Authorized Participant.
Rejection
of Purchase Orders
The
Sponsor or its designee has the absolute right, but does not have any
obligation, to reject any purchase order or Basket Deposit if the Sponsor
determines that:
•the
purchase order or Basket Deposit is not in proper form;
•it
would not be in the best interest of the Shareholders of the Trust;
•the
acceptance of the purchase order or the Basket Deposit would have adverse tax
consequences to the Trust or its Shareholders;
•the
acceptance or receipt of the purchase order or the Basket Deposit would, in the
opinion of counsel to the Sponsor, be unlawful; or
•circumstances
outside the control of the Trust, the Sponsor, the Marketing Agent or the BNB
Custodian or Cash Custodian make it, for all practical purposes impracticable or
not feasible to process Baskets (including if the Sponsor determines that the
investments available to the Trust at that time will not enable it to meet its
investment objective).
None
of the Sponsor, the Transfer Agent, the BNB Custodian or the Cash Custodian will
be liable for the rejection of any purchase order or Basket
Deposit.
Redemption
Procedures
The
procedures by which an Authorized Participant can redeem one or more Baskets
mirror the procedures for the creation of Baskets with an additional safeguard
on BNB or cash being removed from the Trust's BNB Custodian or Cash Custodian
account. Currently, redemption orders are processed in cash or BNB. On any
business day, an Authorized Participant may place an order with the Transfer
Agent to redeem one or more Baskets. Redemption orders must be placed by the
order cut-off time for an order on a Business Day (the "Redemption Order Cut-Off
Time"). The Redemption Order Cut-Off Time is 3:59:59 p.m. Eastern time on a
trade date or as otherwise communicated by the Sponsor. A redemption order will
be effective on the date it is received by the Transfer Agent ("Redemption Order
Date").
For
a cash redemption, on the trade date for a Redemption Order (the "Redemption
Trade Date"), following receipt of the Redemption Order from the Authorized
Participant, the Trust shall instruct the BNB Custodian to move the BNB in the
amount of the Basket Deposit out of the Trust's account at the BNB Custodian
into the Trust's Clearing Account. On the Redemption Trade Date, the Trust in
its sole discretion, shall select a Liquidity Provider and execute a trade to
sell the BNB in exchange for cash to be delivered on the settlement date for a
Redemption Order (which shall be the Business Day immediately following the
Redemption Trade Date unless the Trust, Sponsor, and Authorized Participant
agree to a different date) (the "Redemption Settlement Date"). The Liquidity
Providers as of the date of this Prospectus, that have agreed to serve as a
Liquidity Provider and have consented to be named in this Prospectus are
[ ]. Additional Liquidity Providers may be added at
any time, subject to the Sponsor's sole discretion. The Redemption Settlement
Date shall be the immediately following Business Day after the Redemption Trade
Date, unless the parties otherwise agree in writing. The Liquidity Provider, not
the Authorized Participant, shall be responsible for purchasing BNB from the
Trust. By placing a Redemption Order, an Authorized Participant agrees to
facilitate the delivery of the Basket of Shares.
For
an in-kind redemption, on the Redemption Trade Date, the Trust shall instruct
the BNB Custodian to deliver BNB to the Authorized Participant or its designee
on the Redemption Settlement Date. The Redemption Settlement Date, in the case
of an in-kind redemption order, shall be the immediately following Business Day
after the Redemption Trade Date, unless the parties otherwise agree in writing.
The Authorized Participant, or its designee, shall be responsible for receiving
BNB from the Trust in the case of an in-kind redemption order.
Once
the Transfer Agent notifies the BNB Custodian or Cash Custodian (as applicable),
the Sponsor and the Administrator that the Shares have been received in the
Trust's DTC account, the Administrator shall instruct the
BNB
Custodian or Cash Custodian (as applicable) to transfer the redemption BNB or
cash amount from the Trust's BNB Custodian or Cash Custodian account to the
Authorized Participant.
BNB
held in the Trust's BNB Custodian account is the property of the Trust and is
not leased, or loaned under any circumstances.
Determination
of Redemption Distribution
By
8:00 p.m. Eastern time (or such other time as the parties may agree) on the
Redemption Trade Date, in the case of a cash Redemption Order, the Administrator
will calculate the Required Cash Redemption Total that the Trust is responsible
for delivering in cash on Redemption Settlement Date to the Authorized
Participant's designated bank account. The Required Cash Redemption Total
consists of (1) Basket Cash Component, minus (2) the Cash Amount, and minus (3)
any Redemption Slippage. The Trust acknowledges that, if the actual cash sale
price realized from selling BNB to the Liquidity Provider is above the Basket
Cash Component, the Authorized Participant shall be entitled to retain the
difference and the Required Cash Redemption Total shall be increased
accordingly.
By
8:00 p.m. Eastern Standard Time (or such other time as the parties may agree) on
Redemption Trade Date, in the case of an in-kind Redemption Order, the
Administrator will calculate the Creation Basket Deposit that the Trust is
responsible for delivering in BNB on Redemption Settlement Date to the
Authorized Participant's or its designee's account at the BNB
Custodian.
Delivery
of Redemption Distribution
On
the Redemption Settlement Date, in the case of a cash Redemption Order, the
Liquidity Provider delivers cash to the Trust's Fiat Account in exchange for
BNB, as facilitated by the BNB Custodian under the Clearing Agreement. Upon
settlement of the BNB sale by the Trust to the Liquidity Provider and the
receipt of the Liquidity Provider's cash in the Trust's Fiat Account, the Trust
shall instruct the BNB Custodian to transfer the cash to the Trust's Cash
Custodian account. The Trust shall then instruct the Transfer Agent to deliver
the Authorized Participant's Shares in the Basket Deposit back to the Trust, in
exchange for which the Trust shall instruct the Cash Custodian to transfer the
Required Cash Redemption Total to the Authorized Participant's designated bank
account and the Redemption Order shall be settled. If the BNB sale transaction
between the Trust and the Liquidity Provider fails to settle, the Authorized
Participant shall have the option to cancel the Redemption Order, in which case
the Trust will retain its BNB and the Authorized Participant will retain the
associated Shares and will not receive any cash, or the Sponsor may use an
alternative execution method for the Trust to sell BNB, in which case the
Authorized Participant agrees and acknowledges it is responsible for any
Redemption Slippage and Cash Amount relating to such alternative execution
method. If the Trust's DTC account has not been credited with all of the Baskets
to be redeemed by such time, the redemption distribution will also be
delayed.
On
the Redemption Settlement Date, in the case of an in-kind Redemption Order, the
Trust shall instruct the Transfer Agent to deliver the Authorized Participant's
Shares in the Creation Basket Deposit back to the Trust, in exchange for which
the Trust shall instruct the BNB Custodian to transfer the BNB in the Creation
Basket Deposit to the Authorized Participant's or its designee's account at the
BNB Custodian and the Redemption Order shall be settled. The Trust shall have no
obligation to instruct the BNB Custodian to transfer BNB to the Authorized
Participant or its designee unless and until the Trust's DTC account has been
credited with all of the Shares relating to the Creation Baskets to be redeemed.
If the BNB transfer between the Trust's BNB Custodian Account and the Authorized
Participant's or its designee's BNB Custodian account fails to settle, the
Authorized Participant shall have the option to cancel the Redemption Order, in
which case the Trust will retain its BNB and the Authorized Participant will
retain the associated Shares and will not receive any BNB, or the Sponsor may
use an alternative execution method for the Trust to sell BNB, in which case the
Authorized Participant will receive cash, and the Authorized Participant agrees
and acknowledges it is responsible for any Redemption Slippage and Cash Amount
relating to such alternative execution method. Notwithstanding the forgoing, the
Sponsor may extend the period for delivery of redemption proceeds in connection
with stressed liquidity conditions resulting from the Trust’s staking
program.
Suspension
or Rejection of Redemption Orders
The
Sponsor may, in its discretion, suspend the right of redemption, or postpone the
redemption settlement date, (1) for any period during which the Exchange is
closed other than customary weekend or holiday closings, or trading on the
Exchange is suspended or restricted, (2) for any period during which an
emergency exists as a result of which delivery, disposal or evaluation of BNB is
not reasonably practicable, or (3) for such other period as the Sponsor
determines to be necessary for the protection of the Shareholders. For example,
the Sponsor may determine that it is necessary to suspend redemptions to allow
for the orderly liquidation of the Trust's assets. If the Sponsor has difficulty
liquidating the Trust's positions, e.g., because of a market disruption event,
it may be appropriate to suspend redemptions until such time as such
circumstances are rectified. If any of these events occurs at a time when an
Authorized Participant intends to redeem Shares, and the price of BNB decreases
before such Authorized Participant is able to complete such redemption order,
such Authorized Participant may sustain a loss with respect to the amount that
it would have been able to obtain in exchange for the BNB received from the
Trust upon the redemption of its Shares, had the redemption taken place when
such Authorized Participant originally intended it to occur. As a consequence,
Authorized Participants may reduce their trading in Shares during periods of
suspension, decreasing the number of potential buyers of Shares in the secondary
market and, therefore, decreasing the price a Shareholder may receive upon sale.
None of the Sponsor, the person authorized to take redemption orders in the
manner provided in the Authorized Participant Agreement, the provider of
Clearing Services, the Cash Custodian or the BNB Custodian will be liable to any
person or in any way for any loss or damages that may result from any such
suspension or postponement. To the extent that the Sponsor suspends the right of
redemption, the Trust will notify Shareholders in a prospectus supplement and a
current report on Form 8-K or in its annual or quarterly reports.
Redemption
orders must be made in whole Baskets. The Sponsor acting by itself or through
the person authorized to take redemption orders in the manner provided in the
Authorized Participant Agreement may, in its sole discretion, reject any
redemption order (1) the Sponsor determines not to be in proper form, (2) the
fulfillment of which its counsel advises may be illegal under applicable laws
and regulations, or (3) if circumstances outside the control of the Sponsor, the
person authorized to take redemption orders in the manner provided in the
Authorized Participant Agreement or the BNB Custodian make it for all practical
purposes not feasible for the Shares to be delivered under the redemption order.
The Sponsor may also reject a redemption order if the number of Shares being
redeemed would reduce the remaining outstanding Shares to
[ ] Shares (i.e., 1 Basket) or less.
The
Marketing Agent shall notify the Authorized Participant of a rejection or
suspension of any redemption order. The Marketing Agent is under no duty,
however, to give notification of any specific defects or irregularities nor
shall the Marketing Agent or the Trust incur any liability for the failure to
give any such notification. The Trust and the Marketing Agent may not revoke a
previously accepted redemption order.
Creation
and Redemption Transaction Fee
To
compensate the Transfer Agent for expenses incurred in connection with the
creation and redemption of Baskets, an Authorized Participant is required to pay
a transaction fee to the Transfer Agent to create or redeem Baskets, which does
not vary in accordance with number of Baskets in such order. The transaction fee
may be reduced, increased or otherwise changed by the Sponsor. The Sponsor will
notify DTC of any change in the transaction fee and will not implement any
increase in the fee for the redemption of baskets until thirty (30) days after
the date of notice.
Tax
Responsibility
Authorized
Participants are responsible for any transfer tax, sales or use tax, stamp tax,
recording tax, value added tax or similar tax or governmental charge applicable
to the creation or redemption of Baskets, regardless of whether or not such tax
or charge is imposed directly on the Authorized Participant, and agree to
indemnify the Sponsor and the Trust if they are required by law to pay any such
tax, together with any applicable penalties, additions to tax and interest
thereon.
Secondary
Market Transactions
As
noted, the Trust will create and redeem Shares from time to time, but only in
one or more Baskets. The creation and redemption of Baskets are only made in
exchange for delivery to the Trust or the distribution by the Trust of the
amount of BNB (or corresponding amount of cash) equal to the number of Shares
included in the Baskets being created or redeemed determined on the day the
order to create or redeem Baskets is properly received.
As
discussed above, Authorized Participants are the only persons that may place
orders to create and redeem Baskets. Authorized Participants must be registered
broker-dealers or other securities market participants, such as banks and other
financial institutions that are not required to register as broker-dealers to
engage in securities transactions. An Authorized Participant is under no
obligation to create or redeem Baskets, and an Authorized Participant is under
no obligation to offer to the public Shares of any Baskets it does
create.
Authorized
Participants that do offer to the public Shares from the Baskets they create
will do so at per-Share offering prices that are expected to reflect, among
other factors, the trading price of the Shares on the Exchange, the NAV of the
Trust at the time the Authorized Participant purchased the Baskets, the NAV of
the Shares at the time of the offer of the Shares to the public, the supply of
and demand for Shares at the time of sale, and the liquidity of BNB or other
portfolio investments. Baskets are generally redeemed when the price per Share
is at a discount to the NAV per Share. Shares initially comprising the same
Basket but offered by Authorized Participants to the public at different times
may have different offering prices. An order for one or more Baskets may be
placed by an Authorized Participant on behalf of multiple clients. Authorized
Participants who make deposits with the Trust in exchange for Baskets receive no
fees, commissions or other forms of compensation or inducement of any kind from
either the Trust or the Sponsor and no such person has any obligation or
responsibility to the Sponsor or the Trust to effect any sale or resale of
Shares. Shares trade in the secondary market on the Exchange.
Shares
are expected to trade in the secondary market on the Exchange. Shares may trade
in the secondary market at prices that are lower or higher relative to their NAV
per Share. The amount of the discount or premium in the trading price relative
to the NAV per Share may be influenced by various factors, including the number
of Shareholders who seek to purchase or sell Shares in the secondary market and
the liquidity of BNB.
USE
OF PROCEEDS
Proceeds
received by the Trust from the issuance of Baskets consist of BNB or cash.
Rewards received by the Trust from staking are retained by the Trust and may be
delegated for staking. Deposits of BNB are held by the BNB Custodian or the
Additional BNB Custodian on behalf of the Trust. Deposits of cash are delivered
to the Cash Custodian, following which the Sponsor shall instruct the Cash
Custodian to transfer the cash to the BNB Custodian to enable the BNB Custodian
to facilitate the purchase of BNB from Liquidity Providers, followed by the
transfer of such BNB to the BNB Custodian or the Additional BNB Custodian, in
each case, at the Sponsor's instruction.
OWNERSHIP
OR BENEFICIAL INTEREST IN THE TRUST
The
beneficial interest in the Trust is divided into shares. Each Share of the Trust
represents an equal beneficial interest in the net assets of the Trust, and each
holder of Shares is entitled to receive such holder's pro rata share of
distributions of income and capital gains, if any.
All
Shares are fully paid and non-assessable. No Share will have any priority or
preference over any other Share of the Trust. All distributions, if any, will be
made ratably among all Shareholders from the assets of the Trust according to
the number of Shares held of record by such Shareholders on the record date for
any distribution or on the date of termination of the Trust, as the case may be.
Except as otherwise provided by the Sponsor, Shareholders will have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust. Every Shareholder, by virtue of having purchased
or acquired a Share, shall have expressly consented and agreed to be bound by
the terms of the Trust Agreement.
The
Sponsor will have full power and authority, in its sole discretion, without
seeking the approval of the Trustee or the Shareholders (a) to establish and
designate and to change in any manner and to fix such preferences, voting
powers, rights, duties and privileges of the Trust as the Sponsor may from time
to time determine, (b) to divide the beneficial interest in the Trust into an
unlimited amount of shares, with or without par value, as the Sponsor will
determine, (c) to issue shares without limitation as to number (including
fractional shares), to such persons and for such amount of consideration,
subject to any restriction set forth in the By-Laws, if any, at such time or
times and on such terms as the Sponsor may deem appropriate, (d) to divide or
combine the shares into a greater or lesser number without thereby materially
changing the proportionate beneficial interest of the shares in the assets held,
and (e) to take such other action with respect to the shares as the Sponsor may
deem desirable. The ownership of Shares will be recorded on the books of the
Trust or a transfer or similar agent for the Trust. No certificates certifying
the ownership of Shares will be issued except as the Sponsor may otherwise
determine from time to time. The Sponsor may make such rules as it considers
appropriate for the issuance of share certificates, transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust, or any
transfer or similar agent, as the case may be, will be conclusive as to the
identity of the Shareholders and as to the number of Shares held from time to
time by each.
CONFLICTS
OF INTEREST
There
are present and potential future conflicts of interest in the Trust's structure
and operation you should consider before you purchase Shares. The Sponsor will
use this notice of conflicts as a defense against any claim or other proceeding
made. If the Sponsor is not able to resolve these conflicts of interest
adequately, it may impact the Trust's ability to achieve its investment
objective.
The
officers, directors and employees of the Sponsor do not devote their time
exclusively to the Trust. These persons are directors, officers or employees of
other entities which may compete with the Trust for their services. They could
have a conflict between their responsibilities to the Trust and to those other
entities.
The
Sponsor has the authority to manage the investments and operations of the Trust,
and this may allow it to act in a way that furthers its own interests which may
create a conflict with your best interests. Shareholders have no voting rights,
which will limit their ability to influence matters such as amendment of the
Trust Agreement, change in the Trust's basic investment policy, dissolution of
the Trust, or the sale or distribution of the Trust's assets.
The
Sponsor serves as the sponsor to the Trust. The Sponsor may have a conflict to
the extent that its trading decisions for the Trust may be influenced by the
effect they would have on other funds its affiliates may manage. In addition,
the Sponsor may be required to indemnify its officers, directors and key
employees with respect to their activities on behalf of other funds, if the need
for indemnification arises. This potential indemnification could cause the
Sponsor's assets to decrease. If the Sponsor's other sources of income are not
sufficient to compensate for the indemnification, it could cease operations,
which could in turn result in Trust losses and/or termination of the
Trust.
Affiliates
of the Sponsor, including Van Eck Associates Corporation, have and may in the
future issue various exchange traded products and other pooled investment
vehicles that provide exposure to certain digital assets in US and non-US
jurisdictions. In addition, the Sponsor's affiliates may engage in trading of
BNB across affiliates. The Sponsor has adopted and implemented policies and
procedures that are reasonably designed to ensure compliance with applicable
law, including a Compliance Manual and Code of Ethics, which address conflicts
of interest. Additionally, the Sponsor has adopted policies and procedures
requiring that certain personnel pre-clear trading activity in certain digital
assets, including BNB. The Sponsor believes that these pre-clearance
requirements, in addition to other controls, are reasonably designed to mitigate
the risk of conflicts of interest and other impermissible activity.
The
Sponsor and affiliates thereof may participate in transactions related to BNB,
either for their own account (subject to certain internal employee trading
operating practices) or for the account of others, such as clients, and such
transactions may occur prior to, during, or after the commencement of this
offering. Such transactions may not serve to benefit the Shareholders of the
Trust and may have a positive or negative effect on the value of the BNB held by
the Trust and, consequently, on the market value of BNB.
Because
these parties may trade BNB for their own accounts at the same time as the
Trust, prospective Shareholders should be aware that such persons may take
positions in BNB which are opposite, or ahead of, the positions taken for the
Trust. There can be no assurance that any of the foregoing will not have an
adverse effect on the performance of the Trust.
If
the Sponsor acquires knowledge of a potential transaction or arrangement that
may be an opportunity for the Trust, it will have no duty to offer such
opportunity to the Trust. The Sponsor will not be liable to the Trust or the
Shareholders for breach of any fiduciary or other duty if Sponsor pursues such
opportunity or directs it to another person or does not communicate such
opportunity to the Trust. Neither the Trust nor any Shareholder has any rights
or obligations by virtue of the Trust Agreement, the trust relationship created
thereby, or this Prospectus in such business ventures or the income or profits
derived from such business ventures. The pursuit of such business ventures, even
if competitive with the activities of the Trust, will not be deemed wrongful or
improper.
MarketVector
is the index sponsor and index administrator for the MarketVectorTM
[ ] and a wholly-owned subsidiary of VanEck, which
may create conflicts of interest as a result of such relationship. In addition,
CryptoCompare Data Limited is the calculation agent for the
MarketVectorTM
[ ] and an affiliate of VanEck. Appropriate
procedures have been implemented to avoid any conflicts of interest adversely
affecting the interests of
Shareholders.
However, Shareholders should be aware that MarketVector has not taken the
interests of the Shareholders into consideration when creating the
MarketVectorTM
[ ], and MarketVector will have no obligation to
take the interests of the Shareholders into account when maintaining, modifying,
rebalancing, reconstituting or discontinuing the MarketVectorTM
[ ]. Actions taken by MarketVectorTM
in respect of the MarketVectorTM
[ ] may have an adverse impact on the value or
liquidity of the Shares. The interests of MarketVector and the Shareholders may
not be aligned. MarketVector will have no responsibility or liability to the
Shareholders.
Resolution
of Conflicts Procedures
The
Trust Agreement provides that whenever a conflict of interest exists between the
Sponsor or any of its affiliates, on the one hand, and the Trust or any
Shareholders or any other person, on the other hand, the Sponsor will resolve
such conflict of interest considering the relative interest of each party
(including its own interest) and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
accepted accounting practices or principles.
DUTIES
OF THE SPONSOR
The
general fiduciary duties which would otherwise be imposed on the Sponsor (which
would make its operation of the Trust as described herein impracticable due to
the strict prohibition imposed by such duties on, for example, conflicts of
interest on behalf of a fiduciary in its dealings with its beneficiaries), are
replaced entirely by the terms of the Trust Agreement (to which terms all
Shareholders, by subscribing to the Shares, are deemed to consent).
Additionally,
under the Trust Agreement, the Sponsor has the following obligations as a
sponsor of the Trust:
•execute,
file, record and/or publish all certificates, statements and other documents and
do any and all other things as may be appropriate for the formation,
qualification and operation of the Trust and for the conduct of its business in
all appropriate jurisdictions;
•retain
independent public accountants to audit the accounts of the Trust;
•employ
attorneys to represent the Trust;
•select
the Trust's Trustee, administrator, transfer agent, custodian(s), BNB trading
platform counterparties and OTC market participant counterparties, index
provider, marketing agent(s); insurer(s) and any other service provider(s) and
cause the Trust to enter into contracts with such service
provider(s);
•negotiate
and enter into insurance agreements to secure and maintain the insurance
coverage to the extent described in the Prospectus;
•develop
a marketing plan for the Trust on an ongoing basis and prepare marketing
materials regarding the Trust;
•maintain
the Trust's website;
•acquire
and sell BNB, which may be facilitated by the BNB Custodian, with a view to
providing Shareholders with exposure to BNB at a price that reflects the
performance of the price of BNB less the expenses of the Trust's operations,
valuing the Trust's Shares daily based on the reported MarketVectorTM
[ ], or any other pricing or valuation methodology
adopted by the Sponsor in its discretion (for the avoidance of doubt, the
Sponsor may select such subsequent pricing or valuation methodology without
Shareholder approval);
•determine
the Trust's NAV and NAV per Share, and select, remove, change, or replace the
pricing or valuation methodology or policies used to value the Trust's assets
and determine NAV and NAV per Share, in its sole discretion;
•enter
into an Authorized Participant Agreement with each Authorized Participant and
discharge the duties and responsibilities of the Trust and the Sponsor
thereunder;
•receive
directly or through its delegates from Authorized Participants and process or
cause its delegates to process properly submitted purchase orders, as described
in the Trust Agreement and in the Authorized Participant Agreement;
•in
connection with purchase orders, receive directly or through its delegates the
number of BNB and/or cash in an amount equal to the Basket Deposit from
Authorized Participants;
•in
connection with purchase orders, after accepting an Authorized Participant's
purchase order and receiving BNB in an amount equal to the Basket Deposit, or
the amount of cash needed to purchase the quantity of BNB corresponding to the
Basket Deposit, the Sponsor or its delegate will direct the Trust's appointed
transfer agent to credit the Baskets to fill the Participant's purchase order
within one Business Day immediately following the receipt of BNB and/or
cash;
•receive
directly or through its delegates from Authorized Participants and process or
cause its delegates to process properly submitted redemption orders, as
described in the Trust Agreement and in the Authorized Participant
Agreement;
•in
connection with redemption orders, after receiving the redemption order
specifying the number of Baskets that the Authorized Participant wishes to
redeem and after the Trust's DTC account has been credited with the Baskets to
be redeemed, the Sponsor or its delegates will transfer to the redeeming
Authorized Participant: i) in the case of an in- kind redemption, an amount of
BNB equal to the amount of BNB represented by the Baskets being redeemed; ii) in
the case of a redemption for cash, the cash proceeds of the sale of such
BNB;
•the
Sponsor will, if permitted by the terms of the Trust Agreement, use its
discretion to determine, in good faith, which peer-to-peer network, among a
group of incompatible forks of the BNB Chain, is generally accepted as the BNB
Chain and should therefore be considered the appropriate network for the Trust's
purposes;
•assist
in the preparation and filing of reports and proxy statements (if any) to the
Shareholders, the periodic updating of the Registration Statement and Prospectus
and other reports and documents for the Trust required to be filed by the Trust
with the SEC and other governmental bodies;
•use
its best efforts to maintain the status of the Trust as a grantor trust for U.S.
federal income tax purposes, including making such elections, filing such tax
returns, and preparing, disseminating and filing such tax reports, as it is
advised by its counsel or accountants are from time to time required by any
statute, rule or regulation of the United States, any State or political
subdivision thereof, or other jurisdiction having taxing authority in respect of
the Trust or its administration;
•monitor
all fees charged to the Trust, and the services rendered by the service
providers to the Trust, to determine whether the fees paid by, and the services
rendered to, the Trust are at competitive rates and are the best price and
services available under the circumstances, and if necessary, renegotiate the
fee structure to obtain such rates and services for the Trust;
•perform
such other services as the Sponsor believes the Trust may from time to time
require; and
•in
general, to carry out any other business in connection with or incidental to any
of the foregoing powers, to do everything necessary, suitable or proper for the
accomplishment of any purpose or the attainment of any object or the furtherance
of any power herein set forth, either alone or in association with others, and
to do every other act or thing incidental or appurtenant or growing out of or
connected with the aforesaid business or purposes, objects or
powers.
To
the extent that a law (common or statutory) or in equity, the Sponsor has duties
(including fiduciary duties) and liabilities relating thereto to the Trust, the
Shareholders or to any other person, the Sponsor will not be liable to the
Trust, the Shareholders or to any other person for its good faith reliance on
the provisions of the Trust Agreement or this Prospectus unless such reliance
constitutes gross negligence, bad faith, or willful misconduct on the part of
the Sponsor.
LIABILITY
AND INDEMNIFICATION
Trustee
The
Trustee will not be liable for the acts or omissions of the Sponsor, the
Transfer Agent or any other person, nor will the Trustee be liable for
supervising or monitoring the performance and the duties and obligations of the
Sponsor, the Transfer Agent, the Trust or any other person under the Trust
Agreement. The Trustee will not be personally liable under any circumstances,
except for its own willful misconduct, bad faith or gross negligence. In
particular, but not by way of limitation:
(a)the
Trustee will not be personally liable for any error of judgment made in good
faith except to the extent such error of judgment constitutes gross negligence
on its part;
(b)no
provision of the Trust Agreement will require the Trustee to expend or risk its
personal funds or otherwise incur any financial liability in the performance of
its rights or powers hereunder, if the Trustee shall have reasonable grounds for
believing that the payment of such funds or adequate indemnity against such risk
or liability is not reasonably assured or provided to it;
(c)under
no circumstances will the Trustee be personally liable for any representation,
warranty, covenant, agreement, or indebtedness of the Trust;
(d)the
Trustee will not be personally responsible for or in respect of the validity or
sufficiency of the Trust Agreement or for the due execution hereof by the
Sponsor;
(e)the
Trustee has not prepared or verified, and shall have no duty, responsibility or
obligation or any liability therefore, for any information, disclosure, or other
statement in any memorandum or other documents issued in connection with the
sale or transfer of any Shares;
(f)the
Trustee will not be liable or any actions taken or omitted to be taken by it in
accordance with the written instructions of the Sponsor;
(g)the
Trustee will be under no obligation to exercise any of the rights or powers
vested in it by the Trust Agreement, or to institute, conduct or defend any
litigation under the Trust Agreement or any other agreements to which the Trust
is a party, at the request, order or direction of the Sponsor unless the Sponsor
has offered CSC Delaware Trust Company (in its individual capacity and in its
capacity as Trustee) security or indemnity satisfactory to it against the costs,
expenses and liabilities that may be incurred by it (including, without
limitation, the reasonable fees and expenses of its counsel) therein or
thereby;
(h)Notwithstanding
anything contained herein to the contrary, the Trustee will not be required to
take any action in any jurisdiction other than in the State of Delaware if the
taking of such action would (i) require the consent, approval, authorization or
order of, giving of notice to, or the registration with or taking any action in
respect of, any state or other governmental authority or agency of any
jurisdiction other than the State of Delaware, (ii) result in any fee, tax or
other governmental charge becoming payable by the Trustee under the laws of any
jurisdiction or any political subdivision thereof other than the State of
Delaware, or (iii) subject the Trustee to personal jurisdiction, other than in
the State of Delaware, for causes of action arising from personal acts unrelated
to the consummation of the actions of the trustee contemplated by this Trust
Agreement;
(i)the
Trustee will incur no liability to anyone in acting upon any signature,
instrument, notice, resolution, request, consent, order, certificate, report,
opinion, bond or other document or paper reasonably believed by it to be genuine
and reasonably believed by it to be signed by the proper party or parties. The
Trustee may accept a certified copy of a resolution of any governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the manner of ascertainment of which is not specifically
prescribed herein, the Trustee may for all purposes hereof rely on a
certificate, signed by an authorized officer of the Sponsor or any other
corresponding
directing party, as to such fact or matter, and such certificate will constitute
full protection to the Trustee for any action taken or omitted to be taken by it
in good faith in reliance thereon;
(j)in
the exercise or administration of the trust hereunder, the Trustee (i) may act
directly or through agents or attorneys pursuant to agreements entered into with
any of them, and the Trustee will not be liable for the default or misconduct of
such agents or attorneys if such agents or attorneys will have been selected by
the Trustee in good faith and with due care and (ii) may consult with counsel,
accountants and other skilled persons to be selected by it in good faith and
with due care and employed by it, and it will not be liable for anything done,
suffered or omitted in good faith by it in accordance with the advice or opinion
of any such counsel, accountants or other skilled persons;
(k)except
as expressly provided in Article 3 of the Trust Agreement, the Trustee acts
solely as a trustee under the Trust Agreement and not in its individual
capacity, and all persons having any claim against the Trustee by reason of the
transactions contemplated by the Trust Agreement will look only to the Trust's
property for payment or satisfaction thereof; and
(l)the
Trustee will not be liable for punitive, exemplary, consequential, special or
other similar damages under any circumstances.
The
Trustee, in its individual capacity and in its capacity as Trustee, or any
officer, affiliate, director, employee, or agent of the Trustee (each, an
"Indemnified Person") will be entitled to indemnification from the Sponsor or
the Trust, to the fullest extent permitted by law, from and against any and all
losses, claims, taxes, damages, reasonable expenses, and liabilities (including
liabilities under State or federal securities laws) of any kind and nature
whatsoever (collectively, "Expenses"), to the extent that such Expenses arise
out of or are imposed upon or asserted against such Indemnified Persons with
respect to the creation, operation or termination of the Trust, the execution,
delivery or performance of the Trust Agreement or the transactions contemplated
in the Trust Agreement; provided, however, that the Sponsor and the Trust will
not be required to indemnify any Indemnified Person for any Expenses that are a
result of the willful misconduct, bad faith or gross negligence of such
Indemnified Person. The obligations of the Sponsor and the Trust to indemnify
the Indemnified Persons will survive the termination of the Trust
Agreement.
Sponsor
The
Sponsor will not be under any liability to the Trust, the Trustee or any
Shareholder for any action taken or for refraining from the taking of any action
in good faith pursuant to the Trust Agreement, or for errors in judgment or for
depreciation or loss incurred by reason of the sale of any BNB or other assets
held in trust hereunder; provided, however, that this provision will not protect
the Sponsor against any liability to which it would otherwise be subject by
reason of its own gross negligence, bad faith, or willful misconduct. The
Sponsor may rely in good faith on any paper, order, notice, list, affidavit,
receipt, evaluation, opinion, endorsement, assignment, draft or any other
document of any kind prima facie properly executed and submitted to it by the
Trustee, the Trustee's counsel or by any other Person for any matters arising
hereunder. The Sponsor will in no event be deemed to have assumed or incurred
any liability, duty, or obligation to any Shareholder or to the Trustee other
than as expressly provided for herein. The Trust will not incur the cost of that
portion of any insurance which insures any party against any liability, the
indemnification of which is herein prohibited.
In
addition, as described in the Trust Agreement, (i) whenever a conflict of
interest exists or arises between the Sponsor or any of its Affiliates, on the
one hand, and the Trust, on the other hand; or (ii) whenever the Trust Agreement
or any other agreement contemplated herein or therein provides that the Sponsor
will act in a manner that is, or provides terms that are, fair and reasonable to
the Trust, the Sponsor will resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, and any
applicable generally accepted accounting practices or principles. In the absence
of bad faith by the Sponsor, the resolution, action or terms so made, taken or
provided by the Sponsor will not constitute a breach of the Trust Agreement or
any other agreement contemplated herein or of any duty or obligation of the
Sponsor at law or in equity or otherwise.
The
Sponsor and its shareholders, members, directors, officers, employees,
Affiliates and subsidiaries (each a "Sponsor Indemnified Party") will be
indemnified by the Trust and held harmless against any loss, liability or
expense incurred hereunder without gross negligence, bad faith, or willful
misconduct on the part of such Sponsor Indemnified Party arising out of or in
connection with the performance of its obligations under the Trust Agreement or
any actions taken in accordance with the provisions of the Trust Agreement. Any
amounts payable to a Sponsor Indemnified Party under Section 4.06 of the Trust
Agreement may be payable in advance or will be secured by a lien on the Trust.
The Sponsor will not be under any obligation to appear in, prosecute or defend
any legal action that in its opinion may involve it in any expense or liability;
provided, however, that the Sponsor may, in its discretion, undertake any action
that it may deem necessary or desirable in respect of the Trust Agreement and
the rights and duties of the parties hereto and the interests of the
Shareholders and, in such event, the legal expenses and costs of any such action
will be expenses and costs of the Trust and the Sponsor will be entitled to be
reimbursed therefor by the Trust. The obligations of the Trust to indemnify the
Sponsor Indemnified Parties will survive the termination of the Trust
Agreement.
PROVISIONS
OF LAW
According
to applicable law, indemnification of the Sponsor is payable only if the Sponsor
determined, in good faith, that the act, omission or conduct that gave rise to
the claim for indemnification was in the best interest of the Trust and the act,
omission or activity that was the basis for such loss, liability, damage, cost
or expense was not the result of negligence or misconduct and such liability or
loss was not the result of negligence or misconduct by the Sponsor, and such
indemnification or agreement to hold harmless is recoverable only out of the
assets of the Trust.
Provisions
of Federal and State Securities Laws
This
offering is made pursuant to federal and state securities laws. The SEC and
state securities agencies take the position that indemnification of the Sponsor
that arises out of an alleged violation of such laws is prohibited unless
certain conditions are met.
These
conditions require that no indemnification of the Sponsor or any underwriter for
the Trust may be made in respect of any losses, liabilities or expenses arising
from or out of an alleged violation of federal or state securities laws unless:
(i) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the party seeking
indemnification and the court approves the indemnification; (ii) such claim has
been dismissed with prejudice on the merits by a court of competent jurisdiction
as to the party seeking indemnification; or (iii) a court of competent
jurisdiction approves a settlement of the claims against the party seeking
indemnification and finds that indemnification of the settlement and related
costs should be made, provided that, before seeking such approval, the Sponsor
or other indemnitee must apprise the court of the position held by regulatory
agencies against such indemnification. These agencies are the SEC and the
securities administrator of the State or States in which the plaintiffs claim
they were offered or sold interests.
MANAGEMENT;
VOTING BY SHAREHOLDERS
The
Shareholders of the Trust take no part in the management or control, and have no
voice in, the Trust's operations or business. Except in limited circumstances,
Shareholders have no voting rights under the Trust Agreement.
The
Sponsor generally has the right to amend the Trust Agreement as it applies to
the Trust provided that the Shareholders have the right to vote only if
expressly required under Delaware or federal law or rules or regulations of the
Exchange, or if submitted to the Shareholders by the Sponsor in its sole
discretion. No amendment affecting the Trustee will be binding upon or effective
against the Trustee unless consented to by the Trustee in the form of an
instruction letter.
The
Trust does not have any directors, officers or employees. The creation and
operation of the Trust has been arranged by the Sponsor. The Sponsor is not
governed by a board of directors. The following persons, in their respective
capacities as directors or executive officers of the Sponsor perform certain
functions with respect to the Trust that, if the Trust had directors or
executive officers, would typically be performed by them. The principals and
executive officers of the Sponsor are as follows:
Jan
F. van Eck
Mr.
van Eck, (born 1963), serves as the Chief Executive Officer and President of the
Sponsor and VanEck. Mr. van Eck joined VanEck in 1992 and its Executive
Management Team in 1998. Additionally, he is the President and CEO of Van Eck
Securities Corporation. Furthermore, Mr. van Eck is a Trustee, the President and
Chief Executive Officer of VanEck Vectors ETF Trust, VanEck Funds and VanEck VIP
Trust. Furthering VanEck's mission to anticipate asset classes and trends, Mr.
van Eck has created strategic beta, tactical allocation, emerging markets, and
commodity- related investment strategies in mutual fund, ETF, and institutional
formats. Mr. van Eck founded the VanEck's ETF business in 2006. One of the
world's largest ETF sponsors, the Van Eck offers ETFs, branded VanEck Vectors®,
globally across equity and fixed income asset classes. Mr. van Eck holds a JD
from Stanford University and graduated Phi Beta Kappa from Williams College with
a major in Economics. He has registrations with the National Futures Association
and the Financial Industry Regulatory Authority. Mr. van Eck is a Director of
the National Committee on United States- China Relations. He routinely appears
on CNBC and Bloomberg Television, and was a 2013 Finalist for Institutional
Investor's Fund Leader of the Year and a 2019 finalist for ETF.com's Lifetime
Achievement Award.
John
J. Crimmins
Mr.
Crimmins (born 1957) serves as Vice President, Treasurer and Chief Financial
Officer of the Sponsor. Mr. Crimmins joined VanEck in 2009 as Vice President of
Portfolio Administration. He is primarily responsible for overseeing portfolio
accounting and administration. He also serves as Chief Financial Officer and
Treasurer to the VanEck Funds, VanEck VIP Trust and VanEck ETF Trust. Prior to
joining VanEck, Mr. Crimmins was the Chief Financial, Operating and Compliance
Officer for Kern Capital Management LLC from 1997 to 2009 and the Vice President
and Director of Mutual Fund Administration for Evergreen Investment Services
from 1987 to 1997. Previously, Mr. Crimmins acted as Vice President and
Controller for Pilgrim Group for three years and was in public accounting for
six years. Mr. Crimmins is a Certified Public Accountant and received a BS in
Accounting from St. John's University.
BOOKS
AND RECORDS
The
Trust keeps its books of record and account at the office of the Sponsor located
at 666 Third Avenue, 9th Floor, New York, NY 10017, or at the offices of the
Administrator, or such office, including of an administrative agent, as it may
subsequently designate upon notice. The books and records are open to inspection
by any person who establishes to the Trust's satisfaction that such person is a
Shareholder upon reasonable advance notice at all reasonable times during usual
business hours of the Trust.
The
Trust keeps a copy of the Trust Agreement on file in the Sponsor's office which
will be available for inspection by any Shareholder at all times during its
usual business hours upon reasonable advance notice.
STATEMENTS,
FILINGS, AND REPORTS TO SHAREHOLDERS
After
the end of each fiscal year, the Sponsor will cause to be prepared an annual
report for the Trust containing audited financial statements. The annual report
will be in such form and contain such information as will be required by
applicable laws, rules and regulations and may contain such additional
information which the Sponsor determines shall be included. The annual report
will be filed with the SEC and the Exchange and will be distributed to such
persons and in such manner, as is required by applicable laws, rules and
regulations.
The
Sponsor is responsible for the registration and qualification of the Shares
under the federal securities laws. The Sponsor will also prepare, or cause to be
prepared, and file any periodic reports or updates required under the Exchange
Act. The Administrator will assist and support the Sponsor in the preparation of
such reports.
The
Administrator will make such elections, file such tax returns, and prepare,
disseminate and file such tax reports, as it is advised to by its counsel or
accountants or as required from time to time by any applicable statute, rule or
regulation.
FISCAL
YEAR
The
fiscal year of the Trust is the calendar year. The Sponsor may select an
alternate fiscal year.
GOVERNING
LAW; CONSENT TO DELAWARE JURISDICTION
The
rights of the Sponsor, the Trust, DTC (as registered owner of the Trust's global
certificate for Shares) and the Shareholders are governed by the laws of the
State of Delaware. The Sponsor, the Trust and DTC and, by accepting Shares, each
DTC Participant and each Shareholder, consent to the non-exclusive jurisdiction
of the courts of the State of Delaware and any federal courts located in
Delaware, provided that (i) the forum selection provisions do not apply to suits
brought to enforce a duty or liability created by the 1933 Act, the Exchange Act
or any other claim for which the federal courts have exclusive jurisdiction and
(ii) the federal district courts of the United States of America shall be the
exclusive forum for the resolution of any complaint asserting a cause of action
arising under the 1933 Act, the Exchange Act, or the rules and regulations
promulgated thereunder. Such consent is not required for any person to assert a
claim of Delaware jurisdiction over the Sponsor and the Trust.
Section
22 of the 1933 Act creates concurrent jurisdiction for federal and state courts
over all suits brought to enforce any duty or liability created by the 1933 Act
or the rules and regulations thereunder. Investors cannot waive compliance with
the federal securities laws and the rules and regulations
thereunder.
LEGAL
MATTERS
Litigation
and Claims
Within
the past five years of the date of this Prospectus, there have been no material
administrative, civil or criminal actions against the Sponsor, the Trust or any
principal or affiliate of any of them. This includes any actions pending, on
appeal, concluded, threatened, or otherwise known to them.
Legal
Opinion
Clifford
Chance US LLP has advised the Sponsor in connection with the Shares being
offered and has also rendered an opinion regarding the material federal income
tax consequences relating to the shares. Clifford Chance US LLP also advises the
Sponsor with respect to its responsibilities as sponsor of, and with respect to
matters relating to, the Trust. Certain opinions of counsel will be filed with
the SEC as exhibits to the Registration Statement of which this Prospectus is a
part.
EXPERTS
The
financial statement of VanEck BNB ETF are included herein in reliance on the
report of [ ], an independent registered public
accounting firm, given on the authority of said firm as experts in auditing and
accounting.
MATERIAL
CONTRACTS
Additional
BNB Custodial Services Agreement
For
more information, see the description of the Additional BNB Custodial Services
Agreement provided in "THE TRUST'S SERVICE PROVIDERS—The Additional BNB
Custodian" above.
Administration
and Accounting Agreement
For
more information, see the description of the Administration and Accounting
Agreement provided in "THE TRUST'S SERVICE PROVIDERS—The Administrator"
above.
Cash
Custody Agreement
For
more information, see the description of The Cash Custody Agreement provided in
"THE TRUST'S SERVICE PROVIDERS—The Cash Custodian".
Clearing
Agreement
For
more information, see the description of The Clearing Agreement provided in "THE
TRUST'S SERVICE PROVIDERS—The Clearing Agreement – The BNB Custodian's Role in
the Clearing Agreement".
Custodial
Services Agreement
For
more information, see the description of the Custodial Services Agreement
provided in "THE TRUST'S SERVICE PROVIDERS—The BNB Custodian"
above.
Transfer
Agency Agreement
On
[ ], the Trust entered into a transfer agency and
service agreement (the "Transfer Agency Agreement") with the Transfer Agent.
Pursuant
to the Transfer Agency Agreement, the Transfer Agent is generally responsible
for the day-to-day administration of the Trust. The responsibilities of the
Transfer Agent include: (i) establishing and maintaining each Authorized
Participant's account in the Trust; (ii) receiving and processing orders for the
purchase of creation units from the Sponsor or Trust and deliver any cash
payment to the custodian; (iii) receiving and processing redemption requests and
directions from the Sponsor or Trust; and (iv) recording the issuance of Shares
of the Trust and maintaining a record of the total number of Shares of the Trust
which are issued and outstanding, based upon data provided to it by the
Trust.
The
Transfer Agreement will have a one-year initial term and will automatically be
renewed for successive one year periods, unless terminated pursuant to the terms
of the agreement.
Marketing
Agreement
On
[ ], the Sponsor entered into a marketing agent
agreement (the "Marketing Agreement") with the Marketing Agent.
Under
the Marketing Agreement, the Sponsor has agreed to develop and prepare, subject
to the review and written approval of the Marketing Agent, marketing materials
for the Trust, which will comply with all applicable laws, rules and regulations
in all material respects. The Sponsor shall prepare and make all regulatory
filings for all marketing materials prepared by either party on a timely
basis.
The
Marketing Agreement also provides that the Marketing Agent shall develop and
prepare, subject to the review and written approval of the Sponsor, marketing
materials for the Trust, which will comply with all applicable laws, rules and
regulations in all material respects. If the Marketing Agent becomes the sponsor
of the trust, it shall prepare and make all regulatory filings for all marketing
materials prepared by either party on a timely basis.
The
Marketing Agent will use its best efforts to market the Shares in accordance
with the terms of the Marketing Agreement. In addition, the Marketing Agent will
develop a "landing page" for the Trust, which can be part of an existing
non-exclusive website. The website may include, among other things, sales
material, prospectuses, and closing prices.
License
Agreement
On
[ ], the Sponsor entered into an index license
agreement with MarketVector (as amended, the "License Agreement"), whereby
MarketVector has granted the Sponsor a transferable, non-exclusive limited
license for the territory of the United States to use (i) the MarketVector™
[ ] and (ii) the trade name and service mark rights
to “Market Vector™”. The License Agreement is effective for a period of one year
from the effective date of the agreement and automatically renew for successive
one-year terms unless the Sponsor terminates the agreement in accordance with
the terms of the License Agreement or provides notice of its intent to not renew
the License Agreement.
Sublicense
Agreement
On
[ ], the Trust entered into an index sublicense
agreement (the "Sublicense Agreement") with the Sponsor, pursuant to which the
Sponsor has granted the Trust a transferable, worldwide license to use (i) the
MarketVector™ [ ] and (ii) the trade name and
service mark rights to "Market Vector". The Sublicense Agreement is effective
for three years and shall automatically renew for successive one-year terms
unless the Trust terminates the agreement in accordance with the terms of the
Sublicense Agreement or provides notice of its intent to not renew the
Sublicense Agreement.
UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES
The
following discussion of the material U.S. federal income tax consequences that
generally will apply to the purchase, ownership and disposition of Shares by a
U.S. Shareholder (as defined below) represents, insofar as it describes
conclusions as to U.S. federal income tax law and subject to the limitations and
qualifications described therein, the opinion of Clifford Chance US LLP, special
U.S. federal income tax counsel to the Sponsor. The discussion below is based on
the Code, Treasury Regulations promulgated thereunder and judicial and
administrative interpretations of the Code, all as in effect on the date of this
Prospectus and all of which are subject to change either prospectively or
retroactively. The tax treatment of Shareholders may vary depending upon their
own particular circumstances. Certain Shareholders (including but not limited to
banks, financial institutions, insurance companies, regulated investment
companies, real estate investment trusts, tax-exempt organizations, tax-exempt
or tax- advantaged retirement plans or accounts, brokers or dealers, traders,
partnerships for U.S. federal income tax purposes, persons holding Shares as a
position in a "hedging," "straddle," "conversion," "constructive sale" or other
integrated transaction for U.S. federal income tax purposes, persons whose
"functional currency" is not the U.S. dollar, persons required for U.S. federal
income tax purposes to accelerate the recognition of any item of gross income
with respect to the Shares as a result of such income being recognized on an
applicable financial statement, or other investors with special circumstances)
may be subject to special rules not discussed below. In addition, the following
discussion applies only to investors who will hold Shares as "capital assets"
(generally, property held for investment). Moreover, the discussion below does
not address the effect of any state, local or foreign tax law consequences (or
any consequences under any U.S. federal tax law other than U.S. federal income
tax law) that may apply to an investment in Shares. Purchasers of Shares are
urged to consult their own tax advisers with respect to all U.S. federal, state,
local and foreign tax law considerations potentially applicable to their
investment in Shares.
For
purposes of this discussion, a "U.S. Shareholder" is a Shareholder that is for
U.S. federal income tax purposes:
•an
individual who is a citizen or resident of the United States;
•a
corporation (or entity treated as a corporation for U.S. federal income tax
purposes) created or organized in or under the laws of the United States, any
state thereof or the District of Columbia;
•an
estate, the income of which is includible in gross income for U.S. federal
income tax purposes regardless of its source; or
•a
trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the
trust.
If
a partnership or other entity or arrangement treated as a partnership for U.S.
federal income tax purposes holds Shares, the tax treatment of a partner
generally depends upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding Shares, the
discussion below may not be applicable and we urge you to consult your own tax
adviser for the U.S. federal income tax implications of the purchase, ownership
and disposition of such Shares.
Taxation
of the Trust
The
Sponsor and the Trustee will treat the Trust as a "grantor trust" for U.S.
federal income tax purposes. In the opinion of Clifford Chance US LLP, although
not free from doubt due to the lack of directly governing authority, the Trust
should be classified as a "grantor trust" for U.S. federal income tax purposes
(and the following discussion assumes such classification). As a result, the
Trust itself should not be subject to U.S. federal income tax. Instead, the
Trust's income and expenses should "flow through" to the Shareholders, and the
Trustee will report the Trust's income, gains, losses and deductions to the IRS
on that basis. The opinion of Clifford Chance US LLP is not binding on the IRS
or any court. Accordingly, there can be no assurance that the IRS will agree
with the conclusions of counsel's opinion and it is possible that the IRS or
another tax authority could assert a position contrary to one or all of those
conclusions and that a court could sustain that contrary position. Neither the
Sponsor nor the Trustee will
request
a ruling from the IRS with respect to the classification of the Trust for U.S.
federal income tax purposes or with respect to any other matter. If the IRS were
to assert successfully that the Trust is not classified as a "grantor trust,"
the Trust would likely be classified as a partnership for U.S. federal income
tax purposes, which may affect the timing and other tax consequences to the
Shareholders, and might be classified as a publicly traded partnership that
would be taxable as a corporation for U.S. federal income tax purposes, in which
case the Trust would be taxed in the same manner as a regular corporation on its
taxable income and distributions to Shareholders out of the earnings and profits
of the Trust would be taxed to Shareholders as ordinary dividend income.
However, due to the uncertain treatment of digital currency for U.S. federal
income tax purposes, there can be no assurance in this regard. Except as
otherwise indicated, the remainder of this discussion assumes the correctness of
the opinion of Clifford Chance US LLP, and that the Trust is classified as a
grantor trust for U.S. federal income tax purposes.
The
Trust intends to take the position that Staking Activities, to the extent
treated as conducted by the Trust by reason of its relationship with Staking
Services Provider or holding LSTs, are consistent with its qualification as a
grantor trust. If the IRS were to successfully challenge this position, the
Trust would not qualify as a grantor trust for U.S. federal income tax
purposes.
Taxation
of U.S. Shareholders
Shareholders
will be treated, for U.S. federal income tax purposes, as if they directly owned
a pro rata share of the underlying assets held in the Trust. Shareholders also
will be treated as if they directly received their respective pro rata shares of
the Trust's income, if any, and as if they directly incurred their respective
pro rata shares of the Trust's expenses. In the case of a Shareholder that
acquires its Shares as part of the creation of a Basket, the delivery of BNB to
the Trust in exchange for a pro rata share of the underlying BNB represented by
the Shares will not be a taxable event to the Shareholder, and the Shareholder’s
tax basis and holding period for the Shareholder’s pro rata share of the BNB
held in the Trust will be the same as its tax basis and holding period for the
BNB delivered in exchange therefor. For purposes of this discussion, and unless
stated otherwise, it is assumed that all of a Shareholder's Shares are acquired
on the same date and at the same price per Share. Shareholders that hold
multiple lots of Shares, or that are contemplating acquiring multiple lots of
Shares, should consult their own tax advisers as to the determination of the tax
basis and holding period for the underlying BNB related to such
Shares.
Any
BNB acquired by the Trust as staking rewards would be treated as giving rise to
taxable income under the Staking Guidance. Additionally, such BNB will
constitute a separate lot with a separate tax basis and holding period. It is
likely that a Shareholder will have a tax basis for its share of any BNB
acquired by the Trust as staking rewards equal to the amount of income that it
recognizes and the Shareholder’s holding period for such BNB will begin as of
the time it recognizes such income.
Current
IRS guidance on the treatment of convertible virtual currencies classifies BNB
as "property" that is not currency for U.S. federal income tax purposes and
clarifies that BNB could be held as a capital asset, but it does not address
several other aspects of the U.S. federal income tax treatment of BNB. Because
BNB is a new technological innovation, the U.S. federal income tax treatment of
BNB or transactions relating to investments in BNB may evolve and change from
those discussed below, possibly with retroactive effect. In this regard, the IRS
indicated that it has made it a priority to issue additional guidance related to
the taxation of virtual currency transactions, such as transactions involving
BNB. While it has started to issue such additional guidance, whether any future
guidance will adversely affect the U.S. federal income tax treatment of an
investment in BNB or in transactions relating to investments in BNB is unknown.
Moreover, future developments that may arise with respect to digital currencies
may increase the uncertainty with respect to the treatment of digital currencies
for U.S. federal income tax purposes. This discussion assumes that any BNB the
Trust may hold is properly treated for U.S. federal income tax purposes as
property that may be held as a capital asset and is not currency for purposes of
the provisions of the Code relating to foreign currency gain and
loss.
Although
the Trust generally does not intend to sell BNB, it may use BNB to pay certain
expenses of the Trust, which under current IRS guidance will be treated as a
sale of such BNB, and/or it may periodically sell BNB in an amount sufficient to
pay those expenses using fiat currency. If the Trust sells BNB (for example to
generate cash to pay fees or expenses) or is treated as selling BNB (for example
by using BNB to pay fees or expenses), a Shareholder will recognize gain or loss
in an amount equal to the difference between (a) the Shareholder's pro rata
share
of the amount realized by the Trust upon the sale and (b) the Shareholder's tax
basis for its pro rata share of the BNB that was sold. A Shareholder's tax basis
for its share of any BNB sold by the Trust should generally be determined by
multiplying the Shareholder's total basis for its share of all of the BNB held
in the Trust immediately prior to the sale, by a fraction the numerator of which
is the amount of BNB sold, and the denominator of which is the total amount of
the BNB held in the Trust immediately prior to the sale. After any such sale, a
Shareholder's tax basis for its pro rata share of the BNB remaining in the Trust
should be equal to its tax basis for its share of the total amount of the BNB
held in the Trust immediately prior to the sale, less the portion of such basis
allocable to its share of the BNB that was sold.
Upon
a Shareholder's sale of some or all of its Shares (other than a redemption), the
Shareholder will be treated as having sold the portion or all, respectively, of
its pro rata share of the BNB held in the Trust at the time of the sale that is
attributable to the Shares sold. Accordingly, the Shareholder generally will
recognize gain or loss on the sale in an amount equal to the difference between
(a) the amount realized pursuant to the sale of the Shares, and (b) the
Shareholder's tax basis for the portion of its pro rata share of the BNB held in
the Trust at the time of sale that is attributable to the Shares sold, as
determined in the manner described in the preceding paragraph. Based on current
IRS guidance, such gain or loss (as well as any gain or loss realized by a
Shareholder on account of the Trust selling BNB) will generally be long-term or
short-term capital gain or loss, depending upon whether the Shareholder has a
holding period of greater than one year in its pro rata share of the BNB that
was sold. The Trust plans to treat a redemption of a some or all of a
Shareholder's Shares, in exchange for cash, in the same manner as a sale of some
or all of a Shareholder's Shares (as described above) for that amount of cash,
though no assurance can be provided that the IRS will not take a different
position.
Gains
or losses from the sale of BNB to fund cash redemptions are expected to be
treated as incurred by the Shareholder that is being redeemed, and the amount of
such gain or loss generally will equal the difference between (a) the amount
realized pursuant to the sale of the BNB, and (b) the Shareholder's tax basis
for the portion of its pro rata share of the BNB held in the Trust that is sold
to fund the redemption, as determined in the manner described in the paragraph
that is two paragraphs above this one. A redemption of some or all of a
Shareholder's Shares in exchange for the cash received from such sale is not
expected to be treated as a separate taxable event to the
Shareholder.
An
in-kind redemption of some or all of a Shareholder's Shares in exchange for the
underlying BNB represented by the Shares redeemed generally will not be a
taxable event to the Shareholder. The Shareholder's tax basis for the BNB
received in the in-kind redemption generally will be the same as the
Shareholder's tax basis for the portion of its pro rata share of the BNB held in
the Trust immediately prior to the in-kind redemption that is attributable to
the Shares redeemed. The Shareholder's holding period with respect to the BNB
received should include the period during which the Shareholder held the Shares
redeemed in-kind. A subsequent sale of the BNB received by the Shareholder will
be a taxable event, unless a nonrecognition provision of the Code applies to
such sale.
After
any sale or redemption of less than all of a Shareholder's Shares, the
Shareholder's tax basis for its pro rata share of the BNB held in the Trust
immediately after such sale or redemption generally will be equal to its tax
basis for its share of the total amount of the BNB held in the Trust immediately
prior to the sale or redemption, less the portion of such basis which is taken
into account in determining the amount of gain or loss recognized by the
Shareholder upon such sale or, in the case of a redemption, that is treated as
the basis of the BNB received by the Shareholder in the redemption.
If
a hard fork occurs in the BNB Chain, the Trust could hold both the original BNB
and the alternative new asset. The IRS has held that a hard fork resulting in
the creation of new units of cryptocurrency is a taxable event giving rise to
ordinary income. Moreover, the Trust Agreement requires that, if such a
transaction occurs, the Trust will as soon as possible, and subject to the
Custody Agreement, direct the BNB Custodian to distribute the alternative new
asset in-kind to the Sponsor, as agent for the Shareholders, and the Sponsor
will arrange to sell the new alternative asset and for the proceeds to be
distributed to the Shareholders. The receipt, distribution and/or sale of the
new alternative asset may cause Shareholders to incur a U.S. federal income tax
liability. While the IRS has not addressed all situations in which airdrops
occur, it is clear from the reasoning of the IRS's current guidance that it
generally would treat an airdrop as a taxable event giving rise to ordinary
income and it is anticipated that any gain or loss from disposition of any
assets received in the airdrop would generally be treated as giving rise to
capital gain
or
loss that generally would be short-term capital gain or loss, unless the holding
period of those assets were treated as being greater than one year as of the
time they are sold. However, the Sponsor has committed to cause the Trust to
irrevocably abandon any Incidental Rights and IR Virtual Currency to which the
Trust may become entitled in the future. There can be no assurance that these
abandonments would be treated as effective for U.S. federal income tax purposes,
or that the Sponsor will continue to cause the Trust to irrevocably abandon any
Incidental Rights and IR Virtual Currency if there are future regulatory
developments that would make it feasible for the Trust to retain those
assets.
3.8%
Tax on Net Investment Income
Certain
U.S. Shareholders who are individuals are required to pay a 3.8% tax on the
lesser of the excess of their modified adjusted gross income over a threshold
amount ($250,000 for married persons filing jointly and $200,000 for single
taxpayers) or their "net investment income," which generally includes capital
gains from the disposition of property. This tax is in addition to any capital
gains taxes due on such investment income. A similar tax applies to estates and
trusts. U.S. Shareholders should consult their own tax advisers regarding the
effect, if any, this tax may have on their investment in the
Shares.
Brokerage
Fees and Trust Expenses
Any
brokerage or other transaction fee incurred by a Shareholder in purchasing
Shares will be treated as part of the Shareholder's tax basis in the underlying
assets of the Trust. Similarly, any brokerage fee incurred by a Shareholder in
selling Shares will reduce the amount realized by the Shareholder with respect
to the sale.
Shareholders
will be required to recognize the full amount of gain or loss upon a sale or
deemed sale of BNB by the Trust (as discussed above), even though some or all of
the proceeds of such sale are used by the Trustee to pay Trust expenses.
Shareholders may deduct their respective pro rata shares of each expense
incurred by the Trust to the same extent as if they directly incurred the
expense. Shareholders who are individuals, estates or trusts, however, may be
required to treat some or all of the expenses of the Trust as miscellaneous
itemized deductions, which are nondeductible.
Similar
rules apply to certain miscellaneous itemized deductions of estates and trusts.
In addition, deductions may be subject to phase outs and other limitations under
applicable provisions of the Code.
Investment
by Certain Retirement Plans
Individual
retirement accounts ("IRAs") and participant-directed accounts under
tax-qualified retirement plans are limited in the types of investments they may
make under the Code. Potential purchasers of Shares that are IRAs or
participant-directed accounts under a Code section 401(a) plan should consult
with their own tax advisors as to the tax consequences of a purchase of
Shares.
United
States Information Reporting and Backup Withholding
The
Trustee will file certain information returns with the IRS, and provide certain
tax-related information to Shareholders, in connection with the Trust. To the
extent required by applicable regulations, each Shareholder will be provided
with information regarding its allocable portion of the Trust's annual income,
expenses, gains and losses (if any). A U.S. Shareholder may be subject to United
States backup withholding tax in certain circumstances unless it provides its
taxpayer identification number and complies with certain certification
procedures. Shareholders may be required to meet certain information reporting
or certification requirements imposed by the Foreign Account Tax Compliance Act,
in order to avoid certain information reporting and withholding tax
requirements.
The
amount of any backup withholding will be allowed as a credit against a
Shareholder's U.S. federal income tax liability and may entitle the Shareholder
to a refund, provided that the required information is furnished to the IRS in a
timely manner.
Individual
U.S. Shareholders will generally be required to report on their federal income
tax return the receipt, acquisition, sale, or exchange of any financial interest
in virtual currency, which includes a Shareholder’s interest in BNB held by the
Trust.
Taxation
in Jurisdictions Other Than the United States
Prospective
purchasers of Shares that are based in or acting out of a jurisdiction other
than the United States are advised to consult their own tax advisers as to the
tax consequences under the laws of such jurisdiction (or any other jurisdiction
other than the United States to which they are subject) of their purchase,
holding, sale and redemption of or any other dealing in Shares and, in
particular, as to whether any value added tax, other consumption tax or transfer
tax is payable in relation to such purchase, holding, sale, redemption or other
dealing.
PROSPECTIVE
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS BEFORE DECIDING WHETHER TO
INVEST IN THE SHARES OF THE TRUST.
PURCHASES
BY EMPLOYEE BENEFIT PLANS
The
Employee Retirement Income Security Act of 1974 ("ERISA") and/or Section 4975 of
the Code impose certain requirements on: (i) employee benefit plans and certain
other plans and arrangements, including individual retirement accounts and
annuities, Keogh plans and certain collective investment funds or insurance
company general or separate accounts in which such plans or arrangements are
invested, that are subject to Title I of ERISA and/or Section 4975 of the Code
(collectively, "Plans"); and (ii) persons who are fiduciaries with respect to
the investment of assets treated as "plan assets" within the meaning of U.S.
Department of Labor (the "DOL") regulation 29 C.F.R. § 2510.3-101, as modified
by Section 3(42) of ERISA (the "Plan Assets Regulation"), of a Plan. Investments
by Plans are subject to the fiduciary requirements and the applicability of
prohibited transaction restrictions under ERISA and the Code.
"Governmental
plans" within the meaning of Section 3(32) of ERISA, certain "church plans"
within the meaning of Section 3(33) of ERISA and "non-U.S. plans" described in
Section 4(b)(4) of ERISA, while not subject to the fiduciary responsibility and
prohibited transaction provisions of Title I of ERISA or Section 4975 of the
Code, may be subject to any federal, state, local, non-U.S. or other law or
regulation that is substantially similar to the foregoing provisions of ERISA
and the Code. Fiduciaries of any such plans are advised to consult with their
counsel prior to an investment in the Shares.
In
contemplating an investment of a portion of Plan assets in the Shares, the Plan
fiduciary responsible for making such investment should carefully consider,
taking into account the facts and circumstances of the Plan, the "Risk Factors"
discussed above and whether such investment is consistent with its fiduciary
responsibilities. The Plan fiduciary should consider, among other issues,
whether: (1) the fiduciary has the authority to make the investment under the
appropriate governing plan instrument; (2) the investment would constitute a
direct or indirect non-exempt prohibited transaction with a "party in interest"
or "disqualified person" within the meaning of ERISA and Section 4975 of the
Code respectively; (3) the investment is in accordance with the Plan's funding
objectives; and (4) such investment is appropriate for the Plan under the
general fiduciary standards of investment prudence and diversification, taking
into account the overall investment policy of the Plan, the composition of the
Plan's investment portfolio and the Plan's need for sufficient liquidity to pay
benefits when due. When evaluating the prudence of an investment in the Shares,
the Plan fiduciary should consider the DOL's regulation on investment duties,
which can be found at 29 C.F.R. § 2550.404a-1.
It
is intended that: (a) none of the Sponsor, the Trustee, the BNB Custodian, the
Additional BNB Custodian, the Cash Custodian or any of their respective
affiliates (the "Transaction Parties") has through this report and related
materials provided any investment advice within the meaning of Section 3(21) of
ERISA to the Plan in connection with the decision to purchase or acquire such
Shares; and (b) the information provided in this report and related materials
will not make a Transaction Party a fiduciary to the Plan.
INFORMATION
YOU SHOULD KNOW
This
Prospectus contains information you should consider when making an investment
decision about the Shares. You should rely only on the information contained in
this Prospectus or any applicable prospectus supplement. None of the Trust or
the Sponsor has authorized any person to provide you with different information
and, if anyone provides you with different or inconsistent information, you
should not rely on it. This Prospectus is not an offer to sell the Shares in any
jurisdiction where the offer or sale of the Shares is not
permitted.
The
information contained in this Prospectus was obtained from us and other sources
we believe to be reliable.
You
should disregard anything we said in an earlier document that is inconsistent
with what is included in this Prospectus or any applicable prospectus
supplement. Where the context requires, when we refer to this "Prospectus," we
are referring to this Prospectus and (if applicable) the relevant prospectus
supplement.
You
should not assume that the information in this Prospectus or any applicable
prospectus supplement is current as of any date other than the date on the front
page of this Prospectus or the date on the front page of any applicable
prospectus supplement.
We
include cross references in this Prospectus to captions in these materials where
you can find further related discussions. The table of contents tells you where
to find these captions.
SUMMARY
OF PROMOTIONAL AND SALES MATERIAL
The
Trust expects to use the following sales material it has prepared:
•the
Trust's website, which is accessible at www.vaneck.com; and
•the
Trust Fact Sheet found on the Trust's website.
The
materials described above are not a part of this Prospectus or the registration
statement of which this Prospectus is a part.
INTELLECTUAL
PROPERTY
The
Sponsor owns trademark registrations for the Trust. The Sponsor relies upon
these trademarks through which it markets its services and strives to build and
maintain brand recognition in the market and among current and potential
investors. So long as the Sponsor continues to use these trademarks to identify
its services, without challenge from any third party, and properly maintains and
renews the trademark registrations under applicable laws, rules and regulations,
it will continue to have indefinite protection for these trademarks under
current laws, rules and regulations.
The
Sponsor also owns trademark registrations for the Sponsor. The Sponsor relies
upon these trademarks through which it markets its services and strives to build
and maintain brand recognition in the market and among current and potential
investors. So long as the Sponsor continues to use these trademarks to identify
its services, without challenge from any third party, and properly maintains and
renews the trademark registrations under applicable laws, rules and regulations;
it will continue to have indefinite protection for these trademarks under
current laws, rules and regulations.
WHERE
YOU CAN FIND MORE INFORMATION
The
Trust has filed a registration statement on Form S-1 with the SEC under the 1933
Act. This Prospectus does not contain all of the information set forth in the
registration statement (including the exhibits to the registration statement),
parts of which have been omitted in accordance with the rules and regulations of
the SEC. For further information about the Trust or the Shares, please refer to
the registration statement, which is available online at
www.sec.gov.
Information
about the Trust and the Shares can also be obtained from the Trust's website,
which is accessible at www.vaneck.com. The Trust's website address is only
provided here as a convenience to you and the information contained on or
connected to the website is not part of this Prospectus or the registration
statement of which this Prospectus is part. The Trust is subject to the
informational requirements of the Exchange Act and will file certain reports and
other information with the SEC under the Exchange Act.
The
reports and other information is available online at www.sec.gov.
PRIVACY
POLICY
The
Trust and the Sponsor may collect or have access to certain nonpublic personal
information about current and former Shareholders. Nonpublic personal
information may include information received from Shareholders, such as a
Shareholder's name, social security number and address, as well as information
received from brokerage firms about Shareholder holdings and transactions in
Shares of the Trust.
The
Trust and the Sponsor do not disclose nonpublic personal information except as
required by law or as described in their Privacy Policy. In general, the Trust
and the Sponsor restrict access to the nonpublic personal information they
collect about Shareholders to those of their and their affiliates' employees and
service providers who need access to such information to provide products and
services to Shareholders.
The
Trust and the Sponsor maintain safeguards that comply with federal law to
protect Shareholders' nonpublic personal information. These safeguards are
reasonably designed to (1) ensure the security and confidentiality of
Shareholders' records and information, (2) protect against any anticipated
threats or hazards to the security or integrity of Shareholders' records and
information, and (3) protect against unauthorized access to or use of
Shareholders' records or information that could result in substantial harm or
inconvenience to any Shareholder.
Third-party
service providers with whom the Trust and the Sponsor share nonpublic personal
information about Shareholders must agree to follow appropriate standards of
security and confidentiality, which includes safeguarding such nonpublic
personal information physically, electronically and procedurally.
A
copy of the Sponsor's current Privacy Policy, which is applicable to the Trust,
is provided to Shareholders annually and is also available at
www.vaneck.com.
APPENDIX
A
GLOSSARY
OF DEFINED TERMS
In
this Prospectus, each of the following terms have the meanings set forth after
such term:
"1933
Act": The Securities Act of 1933.
"1940
Act": Investment Company Act of 1940.
"Administrator":
[ ].
"Advisers
Act": Investment Advisers Act of 1940.
"Additional
BNB Account": The special account opened by the Additional BNB Custodian for the
purpose of holding the Trust's BNB.
"Additional
BNB Custodian": [ ].
"Additional
BNB Custody Agreement": The agreement which establishes the rights and
responsibilities of the Additional BNB Custodian, the Sponsor and the Trust with
respect to the custody of the Trust's BNB.
"Authorized
Participant": One that purchases or redeems Baskets from or to the
Trust.
"Authorized
Participant Agreement": An agreement entered into by an Authorized Participant,
the Sponsor and the Trustee that provides the procedures for the creation and
redemption of Baskets.
"Basket":
A block of [ ] Shares used by the Trust to issue or
redeem Shares. "Basket Deposit": The total deposit required to create each
basket.
"Business
Day": Any day other than a day when the Exchange or the New York Stock Exchange
is closed for regular trading.
"Cash
Custodian": [ ].
"Cash
Custody Agreement": The agreement pursuant to which the Cash Custodian acts as
custodian for the Trust's cash and non-BNB assets, if any.
"Custody
Agreement": The agreement which establishes the rights and responsibilities the
BNB Custodian, the Sponsor and the Trust with respect to the custody of the
Trust's BNB.
"CBDC":
Central Bank Digital Currencies.
"CEA":
Commodity Exchange Act of 1936.
"CFPB":
The U.S. Consumer Financial Protection Bureau.
"CFTC":
The U.S. Commodity Futures Trading Commission.
"Code":
Internal Revenue Code of 1986, as amended.
"DOL":
The U.S. Department of Labor, responsible for promulgating and enforcing rules
under ERISA.
"DSTA":
The Delaware Statutory Trust Act.
"DTC":
The Depository Trust Company. DTC will act as the securities depository for the
Shares.
"DTC
Participant": An entity that has an account with DTC.
"ERISA":
The Employment Retirement Income Security Act of 1974.
"BNB
Account": The special account opened by the BNB Custodian for the purpose of
holding the Trust's BNB and facilitating the transfer of BNB required for the
operation of the Trust.
"Exchange
Act": The Securities Exchange Act of 1934.
"Expenses":
Any and all losses, claims, taxes, damages, reasonable expenses, and liabilities
(including those under State or federal securities laws) of any kind of nature
whatsoever for which an Indemnified Person will be entitled to Indemnification,
to the fullest extent permitted by law, from the Sponsor or the
Trust.
"FinCEN":
The U.S. Department of Treasury Financial Crimes Enforcement
Network.
"FINRA":
Financial Industry Regulatory Authority, formerly the National Association of
Securities Dealers.
"IIV":
Intraday indicative value.
"Incidental
Rights": Rights to acquire, or otherwise establish dominion and control over,
any virtual currency or other asset or right, other than BNB, which rights are
incident to the Trust's ownership of BNB and arise without any action of the
Trust, or of the Sponsor or Trustee on behalf of the Trust. The Sponsor shall
cause the Trust to irrevocably abandon Incidental Rights.
"Indemnified
Person": The Trustee or any officer, affiliate, director, employee, or agent of
the Trustee who is entitled to indemnification from the Sponsor or the
Trust.
"Indirect
Participants": Banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a DTC Participant, either directly or
indirectly.
"IR
Virtual Currency": Any virtual currency tokens, or other asset or right, that is
not BNB, and is acquired by the Trust through the exercise (subject to the
applicable provisions of the Trust Agreement) of any Incidental
Right.
"IRA":
Individual retirement account.
"IRS":
U.S. Internal Revenue Service.
"Marketing
Agent": Van Eck Securities Corporation.
"MarketVector":
MarketVector Indexes GmbH, the sponsor of MarketVectorTM
[ ].
"NAV":
Net asset value of the Trust.
"NFA":
National Futures Association.
"OTC":
Over-the-counter market.
"Plans":
Employee benefit plans and/or certain other plans and arrangements subject to
Title I of ERISA and/or Section 4975 of the Code.
"Plan
Assets Regulation": U.S. Department of Labor (DOL) Regulation 29 C.F.R.
§2510.3-101, as modified by Section 3(42) of ERISA, which defines plan
assets.
"Redemption
Order Date": The date a redemption order is received in satisfactory form and
approved by the Marketing Agent. "Register": The record of all shareholders and
holders of the Shares in certificated form kept by the
Administrator.
"SEC":
The U.S. Securities and Exchange Commission.
"Shares":
Common shares representing fractional undivided beneficial interests in the
Trust.
"Shareholders":
Holders of Shares.
"BNB
Account": The special account opened by the BNB Custodian for the purpose of
holding the Trust's BNB and facilitating the transfer of BNB required for the
operation of the Trust.
"BNB
Custodian": [ ].
"BNB
Chain": The decentralized, open source protocol, peer-to-peer electronic network
that comprises the infrastructure of BNB.
"Sponsor
Indemnified Party": The Sponsor and its shareholders, members, directors,
officers, employees, Affiliates and subsidiaries who are indemnified by the
Trust and held harmless against any loss, liability, or expense incurred arising
out of or in connection with the performance of its obligations under or actions
taken according to the Trust Agreement, except for those incurred as a result of
gross negligence, bad faith, or willful misconduct.
"The
Sponsor": VanEck Digital Assets, LLC, a Delaware limited liability
company.
"The
Sponsor Fee": The unified fee of [ ]% to be paid to
the Sponsor by the Trust as compensation for services performed under the Trust
Agreement.
"The
Trust": VanEck BNB ETF.
"Transfer
Agent": [ ].
"Trust
Agreement": The Declaration of Trust and Trust Agreement of VanEck BNB ETF,
dated as of March 31, 2025.
"Trustee":
CSC Delaware Trust Company, a Delaware trust company.
"VanEck":
Van Eck Associates Corporation.
"You":
The owner or holder of Shares.
VANECK
BNB ETF
PROSPECTUS
[ ],
2025
Until
[ ], 2025 (25 calendar days after the date of this
Prospectus) all dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a Prospectus.
This is in addition to the dealers' obligation to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.