21Shares Dogecoin ETF (TDOG) risk factors, FY2025 10-K

Other

1. 01The value of the Shares relates directly to the price of Dogecoin, which may be highly volatile and subject to fluctuations due to a number of factors
2. 02Dogecoin is a relatively new technological innovation with a limited operating history
3. 03Dogecoin and the Dogecoin Blockchain generally
4. 04Dogecoin’s decentralized, permissionless architecture, combined with its fast and low-cost transactions, makes it an efficient and accessible network for peer-to-peer value transfers and a range of practical use cases
5. 05Dogecoin’s straightforward wallet system and decentralized transaction process make it an accessible and secure option for transferring value in a peer-to-peer manner
6. 06The Dogecoin Blockchain supports multi-signature accounts, where multiple keys can be required to authorize transactions. This adds an extra layer of security for holding and transferring large amounts of Dogecoin
7. 07The significant holdings of Dogecoin by early stakeholders could have an adverse effect on the market price of Dogecoin
8. 08A determination that Dogecoin or any other digital asset is offered or sold as a “security” may adversely affect the price of Dogecoin and the value of the Shares, and result in potentially extraordinary, nonrecurring expenses to, or termination of, the Trust
9. 09Competition from other exchange-traded products could adversely affect the value of the Shares
10. 10Competition from central bank digital currencies (“CBDCs”) could adversely affect the value of Dogecoin and other digital assets
11. 11Operational cost may exceed the award for validating transaction, and increased transaction fees may adversely affect the usage of the Dogecoin Blockchain
12. 12The unlimited supply of Dogecoin may negatively impact the long-term value of Dogecoin, and potentially the integrity of the Dogecoin Network
13. 13Dogecoin’s treatment as a “memecoin” may subject it to even greater levels of volatility than other digital assets
14. 14Spot markets on which Dogecoin trades are relatively new and largely unregulated
15. 15Authorized Participants may act in the same or similar capacity for other competing products
16. 16Spot markets may be exposed to security breaches
17. 17Spot markets may be exposed to fraud and market manipulation
18. 18Over the past several years, a number of digital asset spot markets have been closed or faced issues due to fraud. In many of these instances, the customers of such spot markets were not compensated or made whole for the partial or complete losses of their account balances in such digital asset exchanges
19. 19Spot markets may be exposed to wash trading
20. 20Spot markets may be exposed to front-running
21. 21The market value of Dogecoin is subject to momentum pricing
22. 22The Sponsor will not have any strategy relating to the development of Dogecoin and the Dogecoin Network. However, a lack of expansion in usage of Dogecoin and the Dogecoin Network could adversely affect an investment in Shares
23. 23Irrevocable nature of blockchain-recorded transactions
24. 24The loss or destruction of a private key required to access Dogecoin may be irreversible
25. 25The amount of Dogecoin that may be held in the Trading Balance will be limited to the amount necessary to process a given creation or redemption transaction, as applicable, or to pay for Trust Expenses not assumed by the Sponsor in consideration for the Sponsor Fee
26. 26Loss of a critical banking relationship for, or the failure of a bank used by, the Trust or the Prime Broker could adversely impact the Trust’s ability to create or redeem Baskets, or could cause losses to the Trust
27. 27The Dogecoin Custodians and Prime Broker may act in the same or similar capacity for other competing products
28. 28The Prime Broker routes orders through Connected Trading Venues in connection with trading services under the Prime Broker Agreement. The loss or failure of any such Connected Trading Venues may adversely affect the Prime Broker’s business and cause losses for the Trust
29. 29A disruption of the Internet may affect Dogecoin operations, which may adversely affect the Dogecoin industry and an investment in the Trust
30. 30Potential changes to the Dogecoin Network’s protocols and software could, if accepted and authorized by the Dogecoin Network community, adversely affect an investment in the Trust
31. 31Decentralized governance of the Dogecoin Network could have a negative impact on the performance of the Trust
32. 32Anonymity and illicit financing risk
33. 33In accordance with their regulatory obligations, the Authorized Participants conduct customer due diligence and enhanced due diligence on their counterparties, which enable them to determine each counterparty’s AML and other risks and assign an appropriate risk rating
34. 34The actual or perceived use of Dogecoin and other digital assets in illicit transactions may adversely affect the Dogecoin industry and an investment in the Trust
35. 35The only digital asset to be held by the Trust will be Dogecoin
36. 36With respect to any fork, airdrop or similar event, the Sponsor will cause the Trust to irrevocably abandon the 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
37. 37Any name change and any associated rebranding initiative of Dogecoin may not be favorably received by the digital asset community, which could negatively impact the value of Dogecoin and the value of the shares
38. 38Dogecoin is subject to cybersecurity risks, which could adversely affect an investment in the Trust or the ability of the Trust to operate
39. 39Other digital asset networks have been subject to malicious activity achieved through control of a super-majority of the processing power on the network. Any similar attacks on the Dogecoin Blockchain could negatively impact the value of Dogecoin and the value of the Shares
40. 40If the malicious actor cannot control the validator nodes directly, they might attempt to compromise the validators that are already trusted by the network. This could involve hacking, bribery, deception or coercion
41. 41If any of these exploitations or attacks occur, it could result in a loss of public confidence in Dogecoin and a decline in the value of Dogecoin and, as a result, adversely impact an investment in the Shares
42. 42A temporary or permanent “fork” or “clone” of the Dogecoin Blockchain could adversely affect the value of the Shares
43. 43Mathematical or technological advances could undermine the Dogecoin Blockchain’s consensus mechanism
44. 44The Dogecoin Network faces scaling challenges and efforts to increase the volume of transactions may not be successful
45. 45New competing digital assets may result in a reduction in demand for Dogecoin, which could have a negative impact on the price of Dogecoin and may have a negative impact on the performance of the Trust
46. 46Competition from other digital assets – including existing or future “forks” of the Dogecoin Network – could have a negative impact on the price of Dogecoin and adversely affect an investment in the Shares
47. 47Even beyond directly similar assets, any new competing digital assets may result in a reduction in demand for Dogecoin, which could have a negative impact on the price of Dogecoin and may have a negative impact on the performance of the Trust
48. 48Competition from the emergence or growth of other digital assets or memecoins could have a negative impact on the price of Dogecoin and adversely affect the value of the Shares
49. 49Competition from other exchange-traded products could adversely affect the value of the Shares
50. 50High-profile individuals and organizations have publicly aligned themselves with support of the Dogecoin Network which may subject Dogecoin to external risks not experienced by other digital assets
51. 51A single party – whether an individual, corporation, or mining pool – could come to control a significant portion of the Dogecoin Network, and could enact amendments that are deemed undesirable to other users
52. 52Prices of Dogecoin may be affected due to stablecoins, the activities of stablecoin issuers and their regulatory treatment
53. 53Given the 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 Dogecoin
54. 54Operational cost may exceed the award for validating transactions fees, and increased transaction fees may adversely affect the usage of the Dogecoin Blockchain
55. 55Validators may cease participating in validating if certain jurisdictions limit or otherwise regulate validating activities, which could negatively impact the value of Dogecoin and the value of the Shares
56. 56Large-Scale Sales or Distributions
57. 57Congestion or delay in the Dogecoin Blockchain may delay purchases or sales of Dogecoin by the Trust
58. 58Investment Related Risks
59. 59The NAV or the Principal Market NAV may not always correspond to the market price of Dogecoin
60. 60Deviations between the Trust’s NAV and NAV per Share versus the Trust’s Principal Market NAV and Principal Market NAV per Share may occur
61. 61Owning Shares is different from directly owning Dogecoin
62. 62Pricing Benchmark tracking risk
63. 63The value of the Shares may be influenced by a variety of factors unrelated to the value of Dogecoin
64. 64The Administrator is solely responsible for determining the value of the Trust’s Dogecoin, the Trust’s NAV and the Trust’s Principal Market NAV. The value of the Shares may experience an adverse effect in the event of any errors, discontinuance or changes in such valuation calculations
65. 65Dogecoin Counterparties’ buying and selling activity associated with the creation and redemption of Baskets may adversely affect an investment in the Shares
66. 66Selling activity associated with sales of Dogecoin in connection with redemption orders may decrease the Dogecoin prices, which will result in lower prices for the Shares. Decreases in Dogecoin prices may also occur as a result of selling activity by other market participants
67. 67The inability of Dogecoin Counterparties to hedge their Dogecoin exposure may adversely affect the liquidity of Shares and the value of an investment in the Shares
68. 68Arbitrage transactions intended to keep the price of Shares closely linked to the price of Dogecoin may be problematic if the process for the creation and redemption of Baskets encounters difficulties, which may adversely affect an investment in the Shares
69. 69Security threats and cyber-attacks 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
70. 70The Trust’s Dogecoin Custodians could become insolvent
71. 71The Trust is subject to risks due to its concentration of investments in a single asset
72. 72The lack of active trading markets for the Shares may result in losses on Shareholders’ investments at the time of disposition of Shares
73. 73Several factors may affect the Trust’s ability to achieve its investment objective on a consistent basis
74. 74The amount of Dogecoin represented by the Shares will continue to be reduced during the life of the Trust due to the transfer of the Trust’s Dogecoin to pay for the Sponsor Fee and other liabilities
75. 75The development and commercialization of the Trust is subject to competitive pressures
76. 76A loss of confidence in, or breach of, a Dogecoin Custodian may adversely affect the Trust and the value of an investment in the Shares
77. 77The Sponsor may need to find and appoint a replacement custodian or prime broker quickly, which could pose a challenge to the safekeeping of the Trust’s Dogecoin
78. 78The value of the Shares will be adversely affected if the Trust is required to indemnify the Sponsor, the Service Provider, the Trustee, the Administrator, the Transfer Agent, the Dogecoin Custodians or the Prime Broker
79. 79Intellectual property rights claims may adversely affect the Trust and the value of the Shares
80. 80By purchasing the Shares, shareholders agree and consent to the provisions set forth in the Trust Agreement
81. 81The Pricing Benchmark has a limited history
82. 82Right to change the pricing benchmark

Risks related to pricing

1. 83Shareholders also should note that the size of the Trust in terms of total Dogecoin held may change substantially over time and as Baskets are created and redeemed

Regulatory Risk

1. 84Whether Dogecoin is offered or sold as a “security” under U.S. federal securities laws remains unsettled
2. 85There is a lack of consensus regarding the regulation of digital assets, including Dogecoin
3. 86In March 2022, Senators Elizabeth Warren, Jack Reed, Mark Warner, and Jon Tester introduced the Digital Asset Sanctions Compliance Enhancement Act in an attempt to ensure blacklisted Russian individuals and businesses do not use digital assets to evade economic sanctions
4. 87The future activities of the Service Provider could cause the SEC or a court to consider transactions in Dogecoin to be subject to the federal securities laws
5. 88Shareholders do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act or commodity pools under the CEA
6. 89The Trust is not registered as an investment company under the 1940 Act, and the Sponsor believes that the Trust is not permitted or required to register under such act. Consequently, Shareholders do not have the regulatory protections provided to investors in investment companies
7. 90Future and current laws and regulations by a United States or foreign government or quasi-governmental agencies could have an adverse effect on an investment in the Trust
8. 91Future legal or regulatory developments may negatively affect the value of Dogecoin or require the Trust or the Sponsor to become registered with the SEC or CFTC, which may cause the Trust to incur unforeseen expenses or liquidate

Tax Risk

1. 92The ongoing activities of the Trust may generate tax liabilities for Shareholders
2. 93The tax treatment of Dogecoin and transactions involving Dogecoin for United States federal income tax purposes may change
3. 94The tax treatment of Dogecoin and transactions involving Dogecoin for state and local tax purposes is not settled
4. 95A hard “fork” of the Dogecoin Blockchain could result in Shareholders incurring a tax liability
5. 96The intended tax treatment of the Trust will limit the flexibility of the Trust’s investment decisions

Other Risks

1. 97The 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
2. 98The 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
3. 99The market infrastructure of the Dogecoin spot market could result in the absence of active Authorized Participants able to support the trading activity of the Trust, which would affect the liquidity of the Shares in the secondary market and make it difficult to dispose of Shares
4. 100Shareholders 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
5. 101The Sponsor and the Service Provider each rely heavily on key personnel. The departure of any such key personnel could negatively impact the Trust’s operations and adversely impact an investment in the Trust
6. 102Shareholders have no right or power to take part in the management of the Trust. Accordingly, no investor should purchase Shares unless such investor is willing to entrust all aspects of the management of the Trust to the Trustee, the Sponsor and the Service Provider
7. 103The Trust is new, and if it is not profitable, the Trust may terminate and liquidate at a time that is disadvantageous to Shareholders
8. 104Shareholders 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
9. 105Shareholders may be adversely affected by creation or redemption orders that are subject to postponement, suspension or rejection under certain circumstances
10. 106Shareholders may be adversely affected by an overstatement or understatement of the NAV or the Principal Market NAV calculation of the Trust due to the valuation methodology employed on the date of the NAV or the Principal Market NAV calculation
11. 107Shareholders may be adversely affected by the amendment of the Trust Agreement without shareholder consent