iShares Ethereum Trust ETF (ETHA) risk factors, FY2024 10-K

Other

1. 01Risk Factors Related to Digital Assets
2. 02The acceptance of software patches or upgrades by some, but not all, nodes, users and validators in a digital asset network, such as the Ethereum network, could result in a “fork” in such network’s blockchain, including the Ethereum blockchain, resulting in the operation of multiple separate networks
3. 03Digital assets represent a new and rapidly evolving industry, and the value of the Shares depends on the acceptance of ether
4. 04Changes in the governance of a digital asset network may not receive sufficient support from users and validators, which may negatively affect that digital asset network’s ability to grow and respond to challenges
5. 05Potential amendments to the Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community, adversely affect an investment in the Trust
6. 06Digital asset networks face significant scaling challenges and efforts to increase the volume and speed of transactions may not be successful
7. 07Digital assets may have concentrated ownership and large sales or distributions by holders of such digital assets could have an adverse effect on the market price of such digital assets
8. 08Liquid staking applications pose centralization concerns
9. 09A temporary or permanent “fork” could adversely affect the value of the Shares
10. 10Shareholders will not receive the benefits of any Incidental Rights and any IR Digital Asset, including any forked or airdropped assets
11. 11In the event of a hard fork of the Ethereum network, 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
12. 12Any name change and any associated rebranding initiative by the core developers of ether may not be favorably received by the digital asset community, which could negatively impact the value of ether and the value of the Shares
13. 13Validators may suffer losses due to staking, or staking may prove unattractive to validators, which could make the Ethereum network less attractive
14. 14Proof-of-stake blockchains are a relatively recent innovation and have not been subject to as widespread use or adoption over as long of a period of time as traditional proof-of-work blockchains
15. 15The value of the Shares relates directly to the value of ether, the value of which may be highly volatile and subject to fluctuations due to a number of factors
16. 16trading activity on digital asset platforms, which, in many cases, are largely unregulated or may be subject to manipulation;
17. 17the liquidity of digital asset markets and any increase or decrease in trading volume or market making on digital asset markets;
18. 18an active derivatives market for ether or for digital assets generally;
19. 19poor risk management or fraud by entities in the digital assets ecosystem;
20. 20the Trust’s own acquisitions or dispositions of ether, since there is no limit on the number of ether that the Trust may acquire, and the Sponsor is an affiliate of BlackRock, which is a prominent participant in financial markets
21. 21Because the Trust holds only ether and cash, an investment in the Trust may be more volatile than an investment in a more broadly diversified portfolio
22. 22The Index has a limited performance history, the Index price could fail to track the global ether price, and a failure of the Index price could adversely affect the value of the Shares
23. 23The Index price used to calculate the value of the Trust’s ether may be volatile, adversely affecting the value of the Shares
24. 24The Index Administrator could experience system failures or errors
25. 25Competition from central bank digital currencies (“CBDCs”) and emerging payments initiatives involving financial institutions could adversely affect the value of ether and other digital assets
26. 26Prices of ether may be affected due to stablecoins (including Tether and USDC), the activities of stablecoin issuers and their regulatory treatment
27. 27Competition from the emergence or growth of other digital assets or methods of investing in ether could have a negative impact on the price of ether and adversely affect the value of the Shares
28. 28The Trust may be negatively impacted by the effects of the spread of illnesses or other public health emergencies on the global economy and the markets and service providers relevant to the performance of the Trust
29. 29The amount of the Trust’s assets represented by each Share will decline over time as the Trust pays the Sponsor’s Fee and additional expenses born by the Trust, and as a result, the value of the Shares may decrease over time
30. 30The Trust is a passive investment vehicle that does not seek to generate returns beyond tracking the price of ether. The Trust is not actively managed and will be affected by a general decline in the price of ether
31. 31An investment in the Shares deviates from a direct investment in ether
32. 32The Trust is not permitted to engage in Staking Activities, which could negatively affect the value of the Shares
33. 33The value of the Shares may be influenced by a variety of factors unrelated to the value of ether
34. 34The liquidity of the Shares may also be affected by the withdrawal from participation of Authorized Participants or Ether Trading Counterparties
35. 35The 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
36. 36exemption 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
37. 37The lack of an active trading market for the Shares may result in losses on your investment at the time of disposition of your Shares
38. 38The lack of ability to facilitate in-kind creations and redemptions of Shares could have adverse consequences for the Trust
39. 39As an owner of Shares, you will not have the rights normally associated with ownership of other types of shares
40. 40The Sponsor and the Trustee may agree to amend the Trust Agreement without the consent of the Shareholders
41. 41Shareholders do not have the protections associated with ownership of shares in an investment company registered under the Investment Company Act or the protections afforded by the CEA
42. 42The Trust is not a registered investment company under the Investment Company 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
43. 43As 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
44. 44Security threats to the Trust’s account at the Ether 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 value of the Shares
45. 45Ether transactions are irrevocable and stolen or incorrectly transferred ether may be irretrievable. As a result, any incorrectly executed ether transactions could adversely affect the value of the Shares
46. 46If the Trade Credits are not available or become exhausted, the Trust may face delays in buying or selling ether that may adversely impact Shareholders; if the Trust does not repay the Trade Credits on time, its assets may be liquidated by the Trade Credit Lender and its affiliates
47. 47Loss of a critical banking relationship for, or the failure of a bank used by, the Prime Execution Agent could adversely impact the Trust’s ability to create or redeem Baskets, or could cause losses to the Trust
48. 48The Prime Execution Agent routes orders through Connected Trading Venues in connection with trading services under the Prime Execution Agent Agreement. The loss or failure of any such Connected Trading Venues may adversely affect the Prime Execution Agent’s business and cause losses for the Trust
49. 49The Trust may be required, or the Sponsor may deem it appropriate, to terminate and liquidate at a time that is disadvantageous to Shareholders
50. 50The Trust Agreement includes provisions that limit Shareholders’ voting rights and restrict Shareholders’ right to bring a derivative action
51. 51The Sponsor is solely responsible for determining the value of the net asset value of the Trust and NAV, and any errors, discontinuance or changes in such valuation calculations may have an adverse effect on the value of the Shares
52. 52Extraordinary expenses resulting from unanticipated events may become payable by the Trust, adversely affecting the value of the Shares
53. 53The Trust’s delivery or sale of ether to pay expenses or other operations of the Trust could result in Shareholders incurring tax liability without an associated distribution from the Trust
54. 54The value of the Shares will be adversely affected if the Trust is required to indemnify the Sponsor, the Trustee, the Delaware Trustee, the Trust Administrator, the Ether Custodian or the Cash Custodian under the Trust Documents
55. 55Intellectual property rights claims may adversely affect the Trust and the value of the Shares
56. 56Risk Factors Related to the Regulation of the Trust and the Shares
57. 57A determination that ether or any other digital asset is a “security” may adversely affect the value of ether and the value of the Shares, and result in potentially extraordinary, nonrecurring expenses to, or termination of, the Trust
58. 58Competing 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
59. 59Regulatory changes or actions in foreign jurisdictions may affect the value of the Shares or restrict the use of one or more digital assets, validating activity or the operation of their networks or the digital asset platform market in a manner that adversely affects the value of the Shares
60. 60Anonymity and illicit financing risk
61. 61Regulatory changes or interpretations could obligate the Trust, the Trustee or the Sponsor to register and comply with new regulations, resulting in potentially extraordinary, nonrecurring expenses to the Trust
62. 62The treatment of the Trust for U.S. federal income tax purposes is uncertain
63. 63The treatment of digital assets for U.S. federal income tax purposes is uncertain
64. 64Future developments regarding the treatment of digital assets for U.S. federal income tax purposes could adversely affect the value of the Shares
65. 65Future 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
66. 66A U.S. Tax-Exempt Shareholder may recognize “unrelated business taxable income” a consequence of an investment in Shares
67. 67Shareholders could incur a tax liability without an associated distribution of the Trust
68. 68A hard “fork” of the ether blockchain could result in Shareholders incurring a tax liability
69. 69Risk Factors Related to Potential Conflicts of Interest
70. 70Investment vehicles advised or managed by affiliates of the Sponsor hold a minority interest in Coinbase Global, the parent of Coinbase Inc., which serves as the Trust’s Prime Execution Agent and operates one of the digital asset platforms included in the Index price and is the parent of the Ether Custodian
71. 71Shareholders 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 ether
72. 72Although the Ether Custodian is a fiduciary with respect to the Trust’s assets, it could resign or be removed by the Sponsor, which may trigger early dissolution of the Trust
73. 73Coinbase serves as the ether custodian and prime execution agent for several competing exchange-traded Ethereum products, which could adversely affect the Trust’s operations and ultimately the value of the Shares
74. 74Shareholders may be adversely affected by the lack of independent advisers representing investors in the Trust
75. 75There is no guarantee that every employee, officer, director, or similar person associated with the Sponsor, Trustee, or the BlackRock Affiliates will comply with the Policies, duties and training and refrain from engaging in insider trading in violation of their duties to the Trust and Sponsor
76. 76Risk Factors Related to ERISA