Grayscale CoinDesk Crypto 5 ETF (GDLC) risk factors, FY2026 10-K

Other

1. 01Risk Factors Related to Digital Assets
2. 02The Fund’s own acquisitions or dispositions of Fund Components, since there is no limit on the amount of Fund Components that the Fund may acquire
3. 03Digital assets represent a relatively new and rapidly evolving industry, and the value of the Shares depends on the acceptance of digital assets
4. 04Banks 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 and acceptance of digital assets and adversely affect the price of digital assets generally or individually
5. 05Layer 2 solutions and smart contract functionality developed for use with certain Digital Asset Networks underlying the Fund Components may introduce additional technical and security risks that could adversely affect the value of the relevant Fund Components and the Shares
6. 06Changes in the governance of a Digital Asset Network or protocol may not receive sufficient support from users, miners, or validators, which may negatively affect that Digital Asset Network’s or protocol’s ability to grow and respond to challenges
7. 07Foundations or founding teams may disproportionately influence the development or governance of certain Digital Asset Networks and protocols, which could adversely affect the value of the relevant Fund Component and, consequently, the value of the Shares
8. 08Digital Asset Networks face significant scaling challenges and efforts to increase the volume and speed of transactions may not be successful
9. 09Digital assets may have concentrated ownership, and large sales or distributions by holders of a Fund Component could adversely affect the market price of the applicable Fund Component and the value of the Shares
10. 10A reduction in the processing power expended by miners, or a reduction in staked digital assets by validators, could increase the likelihood of a malicious actor or botnet obtaining control of the relevant Digital Asset Network
11. 11Disruptions or other problems in the supply chain for digital asset mining hardware could cause harm to Digital Asset Networks that rely on mining and adversely affect the value of the Shares
12. 12A temporary or permanent “fork” or a “clone” could adversely affect the value of the Shares
13. 13The Fund could incur liability or operational disruption if Fund Components received by the Fund are associated with sanctioned persons or illicit activity
14. 14Recent 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
15. 15Many Digital Asset Trading Platforms operate with limited regulatory oversight or transparency and may experience fraud, market manipulation, business failures, security failures or operational problems, which may adversely affect the value of the Fund Components and the value of the Shares
16. 16Digital Asset Trading Platforms may be exposed to wash-trading and front-running
17. 17Index Prices have a limited history and a failure of an Index Price could adversely affect the value of the Shares
18. 18The Index Price used to calculate the value of a Fund Component may be volatile, and purchasing and selling activity in the Digital Asset Markets associated with Basket creations and redemptions may affect the relevant Index Price and Share trading prices, adversely affecting the value of the Shares
19. 19Competition from the emergence or growth of other methods of investing in digital assets could have a negative impact on the price of the Fund Components and adversely affect the value of the Shares
20. 20Exchange-traded products that invest in one or more of the Fund Components may reduce demand for the Shares and adversely affect their liquidity and trading price
21. 21Competition from central bank digital currencies could adversely affect the value of the Fund Components and other digital assets
22. 22Digital asset treasury companies may increase volatility and competitive pressures in the digital asset market, which could adversely affect the value of the Shares
23. 23Prices of the Fund Components may be affected due to stablecoins, the activities of stablecoin issuers and their regulatory treatment
24. 24Shareholders will not receive the benefits of any forks or airdrops
25. 25With respect to any fork, airdrop or similar event, the Manager will cause the Fund to irrevocably abandon the Forked Assets associated with such event. As such, shareholders will not receive the benefits of any forks, and the Fund is not able to participate in any airdrop
26. 26The Fund is not permitted to engage in Staking, which could negatively affect the value of the Shares
27. 27The Fund is an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make the Shares less attractive to investors
28. 28The Fund seeks to replicate the performance of the Index as closely as possible. However, the Fund may not achieve perfect correlation with the Index due to various factors
29. 29The Fund relies on third-party service providers to perform certain functions essential to the affairs of the Fund and the replacement of such service providers could pose challenges to the safekeeping of the Fund’s digital assets and to the operations of the Fund
30. 30The liquidity of the Shares may be affected if Authorized Participants cease to perform their obligations under the Participant Agreements or the Liquidity Engager is unable to engage Liquidity Providers
31. 31The Shares may trade at a price that is at, above or below the Fund’s NAV per Share as a result of the non-concurrent trading hours between NYSE Arca and the Digital Asset Trading Platform Market
32. 32Any suspension or other unavailability of the Fund’s redemption program may cause the Shares to trade at a discount to the NAV per Share
33. 33Shareholders may suffer a loss on their investment if the Shares trade above or below the Fund’s NAV per Share
34. 34The Fund is highly concentrated in Bitcoin and Ether, particularly Bitcoin, and declines in the value of either asset could disproportionately reduce the Fund’s NAV and the value of the Shares
35. 35The amount of the Fund’s assets represented by each Share will decline over time as the Fund pays the Manager’s Fee and Additional Fund Expenses, and as a result, the value of the Shares may decrease over time
36. 36The value of the Shares may be influenced by a variety of factors unrelated to the value of the digital assets held by the Fund
37. 37The Fund is not a registered investment company under the Investment Company Act, and the Manager believes that the Fund is not required to register under such act. Consequently, shareholders do not have the regulatory protections provided to investors in investment companies
38. 38There is no guarantee that an active trading market for the Shares will continue to develop
39. 39As the Manager and its management have limited history of operating investment vehicles like the Fund, their experience may be inadequate or unsuitable to manage the Fund
40. 40The Fund tracks the CD5, which may lead the Fund’s portfolio to be underrepresented with respect to digital assets that are increasing in value and/or overrepresented with respect to digital assets that are declining in value
41. 41Security threats to the Fund’s Vault Balance or Settlement Balance could result in the halting of Fund operations, including the creation and redemption of Baskets, and a loss of Fund assets or damage to the reputation of the Fund, each of which could result in a reduction in the value of the Shares
42. 42Transactions in digital assets are irrevocable and stolen or incorrectly transferred digital assets may be irretrievable. As a result, any incorrectly executed digital asset transactions could adversely affect the value of the Shares
43. 43The lack of full insurance and shareholders’ limited rights of legal recourse against the Fund, Manager, Transfer Agent and Custodial Entities expose the Fund and its shareholders to the risk of loss of the Fund’s digital assets for which no person or entity is liable
44. 44The Fund may be required, or the Manager may deem it appropriate, to terminate and liquidate at a time that is disadvantageous to shareholders
45. 45The LLC Agreement includes provisions that limit shareholders’ voting rights and restrict shareholders’ right to bring a derivative action
46. 46The Manager is solely responsible for determining the value of the NAV and NAV per Share and any errors, discontinuance or changes in such valuation calculations may have an adverse effect on the value of the Shares
47. 47Extraordinary expenses resulting from unanticipated events may become payable by the Fund, adversely affecting the value of the Shares
48. 48The value of the Shares will be adversely affected if the Fund is required to indemnify the Manager, the Transfer Agent or the Custodian under the Fund Documents
49. 49Intellectual property rights claims may adversely affect the Fund and the value of the Shares
50. 50Pandemics, epidemics and other natural and man-made disasters could negatively impact the value of the Fund’s holdings and/or significantly disrupt its affairs
51. 51The lack of ability to facilitate in-kind creations and redemptions of Shares could have adverse consequences for the Fund
52. 52Coinbase Global serves as the digital asset custodian and prime execution agent for several competing exchange-traded digital asset products, which could adversely affect the Fund’s operations and ultimately the value of the Shares
53. 53Certain of the Authorized Participants engaged by the Fund may serve in a similar capacity for competing exchange-traded digital asset products, which could adversely affect the arbitrage mechanism, the Fund’s operations, the performance of the Fund and ultimately the value of the Shares
54. 54Shareholders 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 investors’ investment in the Shares
55. 55Changes in the securities-law treatment of Fund Components or transactions involving Fund Components under federal or state law could adversely affect the value of the Fund Components and the Shares and require the Fund to change its operations or terminate
56. 56DeFi protocols pose heightened regulatory risks that could reduce demand for and the value of certain Fund Components and adversely affect the value of the Shares
57. 57Regulatory changes or other events in foreign jurisdictions may affect the value of the Shares or restrict the use of one or more digital assets, validating or mining activity or the operation of their networks or the Digital Asset Trading Platform Market in a manner that adversely affects the value of the Shares
58. 58If regulators or public utilities take actions that restrict or otherwise impact mining activities, there may be a significant decline in such activities, which could adversely affect PoW-based Digital Asset Networks and the value of the Shares
59. 59If regulators subject an Authorized Participant, the Fund or the Manager to regulation as a money service business or money transmitter, this could result in extraordinary expenses to the Authorized Participant, the Fund or the Manager and also result in decreased liquidity for the Shares
60. 60Statutory or regulatory changes or interpretations could obligate the Fund or the Manager to register and comply with new regulations, resulting in potentially extraordinary, nonrecurring expenses to the Fund
61. 61Although there is no certainty in this regard, the Fund may be a “passive foreign investment company” for U.S. federal income tax purposes
62. 62Due to the new and evolving nature of digital assets and the absence of comprehensive guidance with respect to digital assets, many significant aspects of the U.S. federal income tax treatment of digital assets are uncertain
63. 63Future developments regarding the treatment of digital assets for U.S. federal income tax purposes could adversely affect the value of the Shares
64. 64Future developments in the treatment of digital assets for tax purposes other than U.S. federal income tax purposes could adversely affect the value of the Shares
65. 65It is possible that the Fund could be subject to U.S. federal income tax with respect to income generated in connection with certain of its activities
66. 66The Fund may be subject to U.S. federal withholding tax on income derived from forks, airdrops and similar occurrences or from Staking or digital asset lending activities
67. 67The Fund is a Cayman Islands limited liability company. The rights of the Fund’s shareholders may be different from the rights of shareholders governed by the laws of U.S. jurisdictions
68. 68Mail sent to the Fund at its registered office may be delayed in reaching the Manager
69. 69The Fund may be required to disclose information, including information relating to investors, to regulators
70. 70The Fund is a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than that under U.S. law, the Fund’s shareholders may have less protection for their shareholder rights than they would under U.S. law
71. 71The Fund has prepared a document outlining the Fund’s data protection obligations and the data protection rights of investors (and individuals connected with investors) under the DPA (the “Fund Privacy Notice”). The Fund Privacy Notice is contained within the subscription agreement
72. 72Risk Factors Related to Potential Conflicts of Interest
73. 73DCG is a minority interest holder in Kraken, which operates one of the Digital Asset Trading Platforms included in the Index Price for certain of the digital assets held by the Fund
74. 74Shareholders cannot be assured of the Manager’s continued services, the discontinuance of which may be detrimental to the Fund
75. 75Although the Custodian is a fiduciary with respect to the Fund’s assets, if the Custodian resigns or is removed by the Manager or otherwise, without replacement, it would trigger early termination of the Fund
76. 76Shareholders may be adversely affected by the lack of independent advisers representing investors in the Fund