8-K: ARK 21Shares Bitcoin ETF Expands Custody, Adds In-Kind AP

ARK 21Shares Bitcoin ETF enhances operational flexibility by adding BitGo Trust for bitcoin custody and Macquarie Capital as an authorized participant enabling in-kind creations and redemptions.

Summary

• ARK 21Shares Bitcoin ETF (the Trust) entered into a new custodial services agreement with BitGo Trust Company, Inc. on December 12, 2025, for the safekeeping of a portion of its bitcoin holdings.
• The Trust's existing custody arrangements with Coinbase Custody Trust Company, LLC, Anchorage Digital Bank N.A., and BitGo New York Trust Company, LLC remain unaffected, with the Sponsor allocating bitcoin among these custodians.
• The Sponsor will consider factors like concentration, security, insurance, and fees when allocating bitcoin among custodians, but will not disclose specific percentages to shareholders.
• On December 16, 2025, the Trust also entered into a new authorized participant agreement with Macquarie Capital (USA) Inc., allowing for both cash and in-kind creation and redemption orders for blocks of 5,000 shares (Baskets).
• This in-kind creation/redemption feature differentiates the Macquarie agreement from the Trust's other authorized participant agreements.
• The Custodial Services Agreement has an initial term of one year and automatically renews, while the Authorized Participant Agreement continues indefinitely.
• Both agreements include indemnification clauses for certain losses and liabilities, and the Custodial Services Agreement outlines specific risks associated with virtual currency and limitations of liability for the custodian.

Sentiment

Score: 7

Explanation: The filing indicates positive operational enhancements through diversified custody and the introduction of in-kind creation/redemption, which are generally favorable for an ETF. However, the lack of transparency on asset allocation among custodians and specific liability limits for large holdings introduce some minor concerns.

Positives

• Diversification of custody providers with the addition of BitGo Trust Company, Inc., potentially enhancing security and reducing single-point-of-failure risk.
• Introduction of in-kind creation and redemption orders through Macquarie Capital, offering greater flexibility and potentially more efficient arbitrage mechanisms for authorized participants.
• The Sponsor bears the fees and expenses associated with transferring bitcoin between custodians, protecting the Trust and its shareholders from these costs.
• BitGo Trust Company, Inc. is a South Dakota trust company, chartered and regulated to custody digital assets, providing a regulated framework for custody services.
• BitGo is required to maintain reasonable insurance policies and coverage for custodial services.

Negatives

• The Sponsor does not intend to disclose the amount or percentage of the Trust's bitcoin held at any of the custodians, reducing transparency for shareholders.
• The Sponsor may change the allocation of bitcoin between custodians at any time in its sole discretion and without notice to shareholders.
• On-chain transfers of bitcoin between custodian accounts are subject to the risks of the Bitcoin network, including erroneous and generally irreversible transactions.
• BitGo's liability for a single custodial wallet address is limited to $150,000,000 if it holds an excess of this amount for five consecutive business days or more, even though BitGo recommends limiting to $125,000,000.
• BitGo retains any interest or earnings generated from Fiat Currency held in omnibus deposit accounts, which is not passed on to the Client (Trust).

Risks

• Virtual currency is not legal tender, not government-backed, and accounts are not subject to Federal Deposit Insurance Corporation (FDIC) or Securities Investor Protection Corporation (SIPC) protections.
• Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of virtual currency.
• Transactions in virtual currency may be irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be recoverable.
• The volatility and unpredictability of the price of virtual currency relative to fiat currency may result in significant loss over a short period of time.
• The nature of virtual currency may lead to an increased risk of fraud or cyber attack.
• Technological difficulties experienced by the licensee may prevent the access or use of a customer's virtual currency.
• Any bond or trust account maintained by the client for the benefit of its customers may not be sufficient to cover all losses incurred by customers.
• Custodian does not own or control the underlying software protocols which govern the operation of Digital Assets and makes no guarantee of their functionality, security, or availability; underlying protocols are subject to sudden changes in operating rules (forks) that may materially affect the value, function, and/or name of the Digital Assets.
• Custodian does not support airdrops, side chains, or other derivative, enhanced, or forked protocols, tokens, or coins which supplement or interact with a Digital Asset supported by Custodian, unless specifically announced.
• If a custodial wallet address holds an excess of US$150,000,000 for a period of five (5) consecutive business days or more, the Custodian's maximum liability for such custodial wallet address shall be limited to US$150,000,000.
• Any slippage incurred (including trading fees, spreads, or commissions) on a cash equivalent or Digital Asset basis during creation or redemption orders will be the responsibility of the Authorized Participant, not the Trust or Sponsor.
• The Sponsor may suspend the right of redemption, or postpone the Redemption Distribution Date, under certain conditions, including exchange closures, trading suspensions, emergencies, or for the protection of shareholders.

Future Outlook

The Sponsor expects to utilize BitGo's services to custody a portion of the Trust's bitcoin and anticipates utilizing the custodial services of all listed custodians (BitGo, Coinbase, Anchorage, BitGo New York Trust) for the Trust's bitcoin holdings. The Sponsor will continue to allocate bitcoin among these custodians based on various factors, with the flexibility to change allocations without prior notice to shareholders. The Authorized Participant Agreement with Macquarie Capital continues indefinitely, indicating a long-term operational framework for creation and redemption.

Management Comments

• "The sponsor of the Trust, 21Shares US LLC (the Sponsor), expects to utilize BitGos services to custody a portion of the Trusts bitcoin beginning on or about the date of the Custodial Services Agreement."
• "The Trusts existing custody arrangements with Coinbase Custody Trust Company, LLC, Anchorage Digital Bank N.A. and BitGo New York Trust Company, LLC (each a Custodian and together, the Custodians) are unaffected by the entry into the Custodial Services Agreement."
• "The Sponsor anticipates utilizing the custodial services of each of the Custodians to provide custodial services for the Trusts bitcoin."
• "The Sponsor does not intend to disclose the amount or percentage of the Trusts bitcoin held at any of the Custodians, and the Sponsor may change the allocation between the Custodians at any time in its sole discretion and without notice to shareholders of the Trust (the Shareholders)."

Industry Context

The expansion of custody providers and the introduction of in-kind creation/redemption mechanisms reflect a maturing U.S. spot Bitcoin ETF market. Diversifying custodians is a common risk management strategy in the digital asset space, addressing concerns about single points of failure and enhancing security. The ability for in-kind creations and redemptions, as opposed to solely cash-based, is a significant development that aligns with traditional commodity-backed ETFs and can improve arbitrage efficiency, potentially leading to tighter tracking of the underlying asset's price. This move positions ARK 21Shares Bitcoin ETF to offer more competitive and robust operational features within the evolving cryptocurrency investment landscape, potentially attracting more institutional participants.

Comparison to Industry Standards

• Custody Diversification: The use of multiple custodians (BitGo, Coinbase, Anchorage) is a best practice in the digital asset industry, mitigating risks associated with a single custodian. For example, Grayscale Bitcoin Trust (GBTC) primarily uses Coinbase Custody, while other ETFs like BlackRock's IBIT also use Coinbase Custody but may explore diversification. ARK 21Shares' explicit multi-custodian strategy is a strong point.
• In-Kind Creation/Redemption: The introduction of in-kind creation/redemption through Macquarie Capital is a key differentiator. Many early spot Bitcoin ETFs primarily offered cash-only creations/redemptions due to regulatory or operational complexities. In-kind mechanisms are standard in traditional commodity ETFs (e.g., SPDR Gold Shares (GLD) allows in-kind creations/redemptions with gold bullion) and are generally preferred for their efficiency in maintaining NAV alignment with the underlying asset, reducing potential tracking error and tax implications for the fund. This aligns ARK 21Shares with more mature ETF structures.
• Custodial Liability Limits: BitGo's stated liability limit of $150 million per wallet if exceeding the threshold, and a recommendation of $125 million, is a specific detail that investors should note. While insurance is mentioned, the explicit cap on liability for large holdings in a single wallet is a risk factor that requires careful management by the Sponsor. Other custodians may have different liability structures or insurance coverages, and a direct comparison would require reviewing their specific agreements.
• Transparency of Allocation: The Sponsor's decision not to disclose the allocation percentages among custodians is less transparent than some might prefer. While operational flexibility is cited, some industry participants or investors might advocate for greater disclosure on how assets are distributed across different custody solutions to better assess risk.

Corporate Governance

Stakeholder Impact

• Shareholders: Benefit from enhanced operational flexibility and potentially tighter NAV tracking due to in-kind creation/redemption. However, transparency regarding bitcoin allocation among custodians is limited.
• Authorized Participants (e.g., Macquarie Capital): Gain a new revenue stream through transaction fees and increased operational flexibility with the option for in-kind creation/redemption, which can improve arbitrage opportunities.
• Custodians (e.g., BitGo Trust Company, Inc.): BitGo gains a new client and revenue from custodial services. Existing custodians (Coinbase, Anchorage, BitGo New York Trust) maintain their roles.
• Sponsor (21Shares US LLC): Gains greater control and flexibility in managing the Trust's bitcoin holdings and operational efficiency for the ETF. Bears the cost of inter-custodian transfers.

Next Steps

• The Sponsor will continue to allocate the Trust's bitcoin among its multiple custodians (BitGo, Coinbase, Anchorage, BitGo New York Trust Company, LLC).
• The Custodial Services Agreement will automatically renew for successive one-year periods unless either party provides 30 days' notice of non-renewal.
• The Authorized Participant Agreement with Macquarie Capital will continue indefinitely unless terminated in accordance with its terms.
• The Sponsor may adjust the transaction fees for creation and redemption Baskets from time to time as set forth in the applicable Prospectus.
• The Sponsor will publish the daily amount of cash or Digital Asset required for Creation Basket Deposits.

Key Dates

Recommendation

The filing details operational enhancements for the ARK 21Shares Bitcoin ETF, including diversified custody arrangements and the introduction of in-kind creation/redemption. These are generally positive developments that improve the ETF's structure and efficiency, aligning it more closely with traditional commodity ETFs. However, these are operational updates rather than direct financial performance indicators. While the in-kind mechanism could lead to better NAV tracking and reduced costs over time, the immediate impact on the underlying value of the Trust's assets or its investment strategy is neutral. The lack of transparency on specific bitcoin allocation percentages among custodians and the liability limits for large custodial wallets present minor, but notable, governance and risk considerations. Therefore, a 'hold' recommendation is appropriate as these changes improve the fund's mechanics but do not fundamentally alter its investment thesis or current valuation.

Keywords

Bitcoin ETF, Custody Agreement, Authorized Participant, Digital Assets, Cryptocurrency, SEC Filing, ARK 21Shares, BitGo Trust, Macquarie Capital, In-kind Redemption, In-kind Creation, ARKB, Blockchain, Risk Management, Corporate Governance