8-K: Fidelity Bitcoin Fund Amends Trust Agreement for In-Kind Creations and Redemptions

Fidelity Wise Origin Bitcoin Fund has amended its trust agreement to allow for in-kind creation and redemption of shares, pending necessary regulatory approvals.

Summary

• Fidelity Wise Origin Bitcoin Fund (the "Trust") has adopted a Third Amended and Restated Trust Agreement, effective July 21, 2025.
• The primary purpose of this amendment is to enable the Trust to facilitate the creation and redemption of its shares in-kind, meaning directly with bitcoin rather than cash.
• The Trust will not begin accepting orders for in-kind share creations or redemptions until all required regulatory approvals have been secured.
• The Trust was originally established as Wise Origin Bitcoin Trust on March 17, 2021, and its name was changed to Fidelity Wise Origin Bitcoin Fund on October 31, 2023.

Sentiment

Score: 7

Explanation: The amendment introduces a positive operational enhancement (in-kind transactions) for the Bitcoin fund, aligning it with industry best practices. However, the contingency on regulatory approval introduces a degree of uncertainty and potential delay, preventing a higher score.

Positives

• The amendment introduces the capability for in-kind creations and redemptions, a feature often preferred by institutional investors for its potential efficiency and tax benefits in Bitcoin ETFs.
• This change aligns the Trust's operational flexibility with best practices in the digital asset ETF space, potentially reducing tracking error and improving arbitrage mechanisms.

Negatives

• The implementation of in-kind creations and redemptions is contingent upon obtaining necessary regulatory approvals, introducing uncertainty and a potential delay in realizing the benefits of this amendment.

Risks

• The Trust's ability to commence in-kind creations and redemptions is subject to obtaining necessary regulatory approvals, which may not be granted or could be delayed.
• The Sponsor may dissolve the Trust if a U.S. federal or state regulator requires the Trust to shut down, liquidate its bitcoin, or restricts access to the Trust Estate.
• Dissolution may occur if any ongoing event prevents or makes impractical the Trust's reasonable efforts to convert bitcoin to U.S. Dollars.
• The Trust may be dissolved if the SEC determines it is an investment company, the CFTC determines it is a commodity pool, or FinCEN determines it is a money service business requiring compliance with specific regulations.
• The Trust faces the risk of dissolution if it is required to obtain a license or registration under state laws regulating money transmitters or virtual currency businesses.
• The Sponsor may dissolve the Trust if the Custodian resigns or is removed without replacement, or if the Trust becomes insolvent or bankrupt.
• There is a risk of dissolution if the Sponsor determines the Trust Estate size is too small relative to expenses, or if the Trust fails to qualify for grantor trust tax treatment.

Future Outlook

The Trust anticipates commencing in-kind creations and redemptions of shares once the necessary regulatory approvals have been granted. The long-term intent is to operate as a grantor trust for U.S. federal income tax purposes.

Management Comments

• Cynthia Lo Bessette, President of FD Funds Management LLC, signed the 8-K report on behalf of the Fidelity Wise Origin Bitcoin Fund.

Industry Context

The move to permit in-kind creations and redemptions aligns Fidelity Wise Origin Bitcoin Fund with a structure increasingly favored by institutional investors and seen as more efficient for Bitcoin ETFs. This mechanism can reduce reliance on cash transactions, potentially minimizing market impact and improving the fund's ability to track the underlying asset's price. Many recently approved spot Bitcoin ETFs in the U.S. operate with an in-kind redemption model, making this amendment a step towards competitive parity and operational optimization within the burgeoning Bitcoin ETF market.

Comparison to Industry Standards

• The adoption of in-kind creation and redemption mechanisms brings Fidelity Wise Origin Bitcoin Fund in line with the operational models of several other prominent U.S. spot Bitcoin ETFs, such as those offered by BlackRock (IBIT) and Ark Invest/21Shares (ARKB), which also utilize or have the capability for in-kind transactions.
• This contrasts with some initial Bitcoin futures ETFs or older trust structures that relied solely on cash creations/redemptions, which can introduce inefficiencies and tracking errors compared to direct asset transfers.
• The ability to handle physical bitcoin for transactions is considered a more robust and efficient method for managing a Bitcoin-backed product, mirroring the structure of physical gold ETFs.

Corporate Governance

Stakeholder Impact

• Shareholders: Potential for improved efficiency and reduced tracking error due to in-kind creation/redemption mechanism, which could lead to better price alignment with underlying bitcoin holdings. However, the benefit is contingent on regulatory approval.
• Authorized Participants: The amendment directly impacts Authorized Participants by enabling them to create and redeem shares directly with bitcoin, streamlining their operational processes.
• Sponsor (FD Funds Management LLC): Gains increased operational flexibility and the ability to offer a more competitive product in the Bitcoin ETF market, but also bears the responsibility of securing regulatory approvals and managing the new in-kind process.

Next Steps

• Obtain necessary regulatory approvals to commence in-kind creations and redemptions of shares.
• The Sponsor will continue to manage the Trust in accordance with the amended Trust Agreement.
• The Trust will prepare and publish Annual Reports and Quarterly Reports as required by Secondary Market rules or SEC regulations.

Key Dates

Recommendation

The amendment to allow in-kind creations and redemptions is a positive development, aligning the fund with industry best practices and potentially improving its efficiency and market appeal. However, the immediate impact is limited as it is contingent on regulatory approvals. Until these approvals are secured and the in-kind mechanism is active, the change represents a future potential benefit rather than an immediate operational shift. Therefore, a 'hold' recommendation is appropriate, awaiting the realization of this operational enhancement and its market implications.

Keywords

Bitcoin ETF, In-kind redemption, In-kind creation, Trust Agreement, SEC filing, Digital assets, Cryptocurrency, Fidelity Wise Origin Bitcoin Fund, FD Funds Management LLC, Grantor trust, Regulatory approval