Grayscale Dogecoin Trust ETF (GDOG) risk factors, FY2025 10-K

Other

1. 01Risk Factors Related to Digital Assets
2. 02Digital assets such as DOGE were only introduced within the past two decades, 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
3. 03Digital asset networks and related protocols are dependent upon the internet. A disruption of the internet or a digital asset network or related protocol, such as the Dogecoin Network, would affect the ability to transfer digital assets, including DOGE, and, consequently, their value
4. 04Many digital asset networks face significant scaling challenges and are being upgraded with various features to increase the speed and throughput of digital asset transactions. These attempts to increase the volume of transactions may not be effective
5. 05Digital assets represent a relatively new and rapidly evolving industry, and the value of the Shares depends on the acceptance of DOGE
6. 06Changes in the governance of a digital asset network or protocol may not receive sufficient support from users and miners, which may negatively affect that digital asset network’s or protocol’s ability to grow and respond to challenges
7. 07Digital asset networks face significant scaling challenges and efforts to increase the volume and speed of transactions may not be successful
8. 08blockchain. Sharding can increase the scalability of a database, such as a blockchain, by splitting the data processing responsibility among many nodes, allowing for parallel processing and validating of transactions
9. 09Digital 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
10. 10Digital 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
11. 11Moreover, certain mining pools have exceeded in the past, and may exceed now or in Dogecoin’s future, the 50% threshold on the Dogecoin Network. The failure of any mitigating steps, or any future attacks on the Dogecoin Network, could negatively impact the value of DOGE and the value of the Shares of the Trust
12. 12A temporary or permanent “fork” or a “clone” could adversely affect the value of the Shares
13. 13In the event of a hard fork of the Dogecoin 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
14. 14In the event of a hard fork of the Dogecoin Network, the 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 DOGE holdings
15. 15Any name change and any associated rebranding initiative by the core developers of DOGE may not be favorably received by the digital asset community, which could negatively impact the value of DOGE and the value of the Shares
16. 16If the Dogecoin Network is used to facilitate illicit activities, businesses that facilitate transactions in DOGE could be at increased risk of criminal or civil lawsuits, or of having services cut off, which could negatively affect the price of DOGE and the value of the Shares
17. 17In accordance with its regulatory obligations, the Authorized Participant, or the Liquidity Provider, conducts customer due diligence and enhanced due diligence on its counterparties, which enables it to determine each counterparty’s AML and other risks and assign an appropriate risk rating
18. 18Recent 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
19. 19Digital 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 Federal Deposit Insurance Corporation (“FDIC”) receiverships
20. 20The value of the Shares relates directly to the value of DOGE, the value of which may be highly volatile and subject to fluctuations due to a number of factors
21. 21In addition, there is no assurance that DOGE will maintain its value in the long or intermediate term. In the event that the price of DOGE declines, the Sponsor expects the value of the Shares to decline proportionately
22. 22Digital Asset Trading Platforms may be exposed to front-running
23. 23Digital Asset Trading Platforms may be exposed to wash-trading
24. 24The Index has a limited history and a failure of the Index Price could adversely affect the value of the Shares
25. 25The Sponsor will not have any strategy relating to the development of DOGE and the Dogecoin Network. However, a lack of expansion in usage of DOGE and the Dogecoin Network could adversely affect an investment in Shares
26. 26The Index Price used to calculate the value of the Trust’s DOGE may be volatile, and purchasing and selling activity in the Digital Asset Markets associated with Basket creations and redemptions may affect the Index Price and Share trading prices, adversely affecting the value of the Shares
27. 27Competition from the emergence or growth of other digital assets could have a negative impact on the price of DOGE and adversely affect the value of the Shares
28. 28conditions outside the Trust’s control, may cause investors to find it more attractive to gain exposure to DOGE through other vehicles, rather than the Trust
29. 29Congestion or delay on the Dogecoin Network may delay purchases or sales of DOGE by the Trust
30. 30The SEC has approved generic listing standards for commodity-based trust shares and may approve other 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, DOGE and adversely impact the value of the Shares
31. 31Competition from central bank digital currencies (“CBDCs”) and emerging payments initiatives involving financial institutions could adversely affect the price of DOGE and other digital assets
32. 32Prices of DOGE may be affected due to stablecoins (including Tether and USDC), the activities of stablecoin issuers and their regulatory treatment
33. 33The price of DOGE may become closely correlated with other asset classes
34. 34DOGE was originally considered a “memecoin” and may be subject to even greater levels of volatility than other digital assets
35. 35The unlimited supply of DOGE may negatively impact the long-term value of DOGE, and potentially the integrity of the Dogecoin Network
36. 36The Trust relies on third-party service providers to perform certain functions essential to the affairs of the Trust and the replacement of such service providers could pose challenges to the safekeeping of the Trust’s DOGE and to the operations of the Trust
37. 37The 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
38. 38The Shares may trade at a price that is at, above or below the Trust’s NAV per Share as a result of the non-concurrent trading hours between NYSE Arca and the Digital Asset Trading Platform Market
39. 39Any suspension or other unavailability of the Trust’s redemption program may cause the Shares to trade at a discount to the NAV per Share
40. 40Shareholders may suffer a loss on their investment if the Shares trade above or below the Trust’s NAV per Share
41. 41The amount of the Trust’s assets represented by each Share will decline over time as the Trust pays the Sponsor’s Fee and Additional Trust Expenses, and as a result, the value of the Shares may decrease over time
42. 42The value of the Shares may be influenced by a variety of factors unrelated to the value of DOGE
43. 43Shareholders 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
44. 44The 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
45. 45There is no guarantee that an active trading market for the Shares will continue to develop
46. 46As 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
47. 47Security threats to the Trust’s Vault Balance or Settlement Balance could result in the halting of Trust operations, including the creation and redemption of Baskets, 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
48. 48DOGE transactions are irrevocable and stolen or incorrectly transferred DOGE may be irretrievable. As a result, any incorrectly executed DOGE transactions could adversely affect the value of the Shares
49. 49The lack of full insurance and shareholders’ limited rights of legal recourse against the Trust, Trustee, Sponsor, Transfer Agent and Custodial Entities expose the Trust and its shareholders to the risk of loss of the Trust’s DOGE for which no person or entity is liable
50. 50The Trust may be required, or the Sponsor may deem it appropriate, to terminate and liquidate at a time that is disadvantageous to shareholders
51. 51The Trust Agreement includes provisions that limit shareholders’ voting rights and restrict shareholders’ right to bring a derivative action
52. 52The Sponsor 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
53. 53Extraordinary expenses resulting from unanticipated events may become payable by the Trust, adversely affecting the value of the Shares
54. 54The Trust’s delivery or sale of DOGE to pay expenses or other operations of the Trust could result in shareholders’ incurring tax liability without an associated distribution from the Trust
55. 55The value of the Shares will be adversely affected if the Trust is required to indemnify the Sponsor, the Trustee, the Transfer Agent or the Custodian under the Trust Documents
56. 56Intellectual property rights claims may adversely affect the Trust and the value of the Shares
57. 57Pandemics, epidemics and other natural and man-made disasters could negatively impact the value of the Trust’s holdings and/or significantly disrupt its affairs
58. 58The Trust is currently only able to accept Cash Orders, which means that an Authorized Participant will deposit cash into, or
59. 59Shareholders will not receive the benefits of any forks or airdrops
60. 60With respect to any fork, airdrop or similar event, the Sponsor will cause the Trust to irrevocably abandon the Incidental Rights and any IR Virtual Currency associated with such event. As such, shareholders will not receive the benefits of any forks, and the Trust is not able to participate in any airdrop
61. 61The Trust will not directly or indirectly participate in any staking program, and accordingly the Shareholders will not receive any staking rewards or other income
62. 62Coinbase Global serves as the DOGE custodian and prime execution agent for several competing exchange-traded DOGE products, which could adversely affect the Trust’s operations and ultimately the value of the Shares
63. 63Certain of the Authorized Participants engaged by the Trust may serve in a similar capacity for competing exchange-traded DOGE products, which could adversely affect the arbitrage mechanism, the Trust’s operations, the performance of the Trust and ultimately the value of the Shares
64. 64Shareholders 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
65. 65A determination that DOGE or any other digital asset is a “security” may adversely affect the value of DOGE and the value of the Shares, and result in potentially extraordinary, nonrecurring expenses to, or termination of, the Trust
66. 66In light of the uncertainties and the fact-based nature of the analysis, the Sponsor’s conclusion, even if reasonable under the circumstances, would not preclude legal or regulatory action based on the presence of a security
67. 67As such, notwithstanding the Sponsor’s receipt of a memorandum regarding the status of DOGE under the federal securities laws from external counsel and the Sponsor’s view that DOGE is not a security, a federal court may in the future take a different view as to the security status of DOGE
68. 68transactions, it is likely that the value of the Shares of the Trust would decline significantly. Furthermore, if a federal court upholds an allegation that DOGE is a security or transactions in DOGE are securities transactions, the Trust itself may be terminated and, if practical, its assets liquidated
69. 69Competing 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
70. 70Regulatory changes or other events in foreign jurisdictions may affect the value of the Shares or restrict the use of one or more digital assets, 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
71. 71If 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 the Dogecoin Network and the value of the Shares
72. 72If regulators subject an Authorized Participant, the Trust or the Sponsor to regulation as a money service business or money transmitter, this could result in extraordinary expenses to the Authorized Participant, the Trust or the Sponsor and also result in decreased liquidity for the Shares
73. 73Statutory or regulatory changes or interpretations could obligate the Trust or the Sponsor to register and comply with new regulations, resulting in potentially extraordinary, nonrecurring expenses to the Trust
74. 74The treatment of the Trust for U.S. federal income tax purposes is uncertain
75. 75The treatment of digital assets for U.S. federal income tax purposes is uncertain
76. 76Future developments regarding the treatment of digital assets for U.S. federal income tax purposes could adversely affect the value of the Shares
77. 77Future 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
78. 78users imposes onerous tax burdens on digital asset users, or imposes sales or value-added tax on purchases and sales of digital assets for fiat currency, such actions could result in decreased demand for DOGE in such jurisdiction
79. 79The tax treatment of DOGE and transactions involving DOGE for state and local tax purposes is not settled
80. 80A U.S. tax-exempt shareholder may recognize “unrelated business taxable income” as a consequence of an investment in Shares
81. 81Risk Factors Related to Potential Conflicts of Interest
82. 82DCG is a minority interest holder in Kraken, which operates one of the Digital Asset Trading Platforms included in the Index Price
83. 83Shareholders 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 DOGE
84. 84Although the Custodian is a fiduciary with respect to the Trust’s assets, if the Custodian resigns or is removed by the Sponsor or otherwise, without replacement, it would trigger early termination of the Trust
85. 85Shareholders may be adversely affected by the lack of independent advisers representing investors in the Trust
86. 86The Trust is an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make the Shares less attractive to investors