10-K: Grayscale Bitcoin Cash Trust Reports Strong FY25 Asset Growth

Grayscale Bitcoin Cash Trust (BCHG) reported a 50% increase in net assets to $202.96 million for the fiscal year ended June 30, 2025, driven by BCH price appreciation and new share creations.

Summary

• Net assets increased by 50% to $202,961 thousand as of June 30, 2025, up from $135,014 thousand in the prior fiscal year.
• The net increase in net assets resulting from operations was $44,964 thousand for the fiscal year ended June 30, 2025, compared to $20,286 thousand in the previous year.
• This growth was primarily due to Bitcoin Cash (BCH) price appreciation, with the price rising from $391.88 per BCH on June 30, 2024, to $517.38 per BCH on June 30, 2025.
• The Trust issued 6,757,300 Shares during FY25, contributing approximately 57,238 BCH with a value of $22,983 thousand.
• The Sponsors Fee for FY25 amounted to $3,665 thousand, which was paid by withdrawing 9,481 BCH from the Trust's holdings.
• The Trust's investment objective is for the Shares' value to reflect the value of BCH held, less expenses; however, Shares have historically traded at substantial premiums and discounts. As of June 30, 2025, Shares were quoted on OTCQX at a 10% discount to the Trust's NAV per Share.
• The Trust does not currently operate a redemption program for Shares and the Sponsor has no intention of seeking regulatory approval for one, limiting arbitrage opportunities.
• Grayscale Investments Sponsors, LLC (GSIS) became the sole sponsor of the Trust effective May 3, 2025, following an internal corporate reorganization.
• The Index License Agreement with CoinDesk Indices, Inc., which governs the calculation of the Index Price, was extended to February 29, 2028.

Sentiment

Score: 7

Explanation: The Trust demonstrated strong financial performance with significant asset growth and BCH price appreciation. Key operational agreements were extended, and a major legal challenge was resolved favorably. However, the persistent discount to NAV, the lack of a redemption program, and the inherent volatility and regulatory uncertainty of the digital asset market, particularly for assets other than Bitcoin and Ether, temper the overall positive sentiment.

Positives

• Net assets increased significantly by 50% to $202,961 thousand for the fiscal year ended June 30, 2025.
• BCH experienced strong price appreciation, rising from $391.88 per BCH on June 30, 2024, to $517.38 per BCH on June 30, 2025.
• The net increase in net assets resulting from operations was $44,964 thousand in FY25, indicating healthy operational performance.
• The Trust continued to issue new shares, with 6,757,300 Shares created in FY25, demonstrating ongoing investor interest.
• The Index License Agreement with CoinDesk Indices, Inc. was extended until February 29, 2028, providing stability for the Trust's valuation methodology.
• The lawsuit filed by Osprey Funds, LLC against the Sponsor was dismissed on February 7, 2025, and Osprey withdrew its appeal on May 12, 2025, resolving a significant legal proceeding.
• The SEC terminated its investigation or enforcement actions against several other digital asset market participants, including Binance, Coinbase, and Kraken, between February 2025 and May 2025, potentially signaling a more stable regulatory environment for the broader digital asset ecosystem.

Negatives

• Shares have historically traded at substantial premiums (max 1,852%, avg 238%) and discounts (max 59%, avg 21%) to NAV per Share, failing to consistently meet the investment objective. As of June 30, 2025, Shares traded at a 10% discount.
• The lack of an ongoing redemption program means there is no arbitrage mechanism to keep the value of Shares closely linked to the Index Price, which may lead to continued premiums or discounts.
• The Sponsor currently has no intention of seeking regulatory approval from the SEC for an ongoing redemption program.
• BCH is only selectively accepted as a means of payment by retail and commercial outlets, and its use by consumers remains limited, impacting its utility and demand.
• Digital asset markets, including BCH, are subject to extreme volatility and disruption, as evidenced by events like the FTX failure in November 2022 and subsequent insolvencies of other industry participants.
• Concentrated ownership of BCH, with the largest 100 wallets holding approximately 39% of the circulating supply, poses a risk of adverse price effects from large sales or distributions.
• The Bitcoin Cash Network is vulnerable to a 51% attack, with the top three mining pools controlling over 50% of the hash rate, which could allow manipulation of the blockchain.
• Digital asset mining operations consume significant amounts of electricity, raising environmental concerns and potentially leading to government regulations restricting mining activities.
• The U.S. federal income tax treatment of digital assets is uncertain, which could result in adverse tax consequences for shareholders.
• Potential conflicts of interest exist between the Sponsor and its affiliates, including Grayscale Securities (the sole Authorized Participant) and DCG (the indirect parent company with other digital asset investments).
• The Custodian's maximum liability for a cold storage address is limited to $100 million if the value exceeds this threshold for five consecutive business days, potentially exposing the Trust to losses above this amount.

Risks

• Extreme volatility of trading prices for digital assets, including BCH, could cause the value of the Shares to be volatile and/or have a material adverse effect on their value.
• The medium-to-long term value of the Shares is uncertain due to factors related to the capabilities and development of blockchain technologies and the fundamental investment characteristics of digital assets.
• The value of the Shares depends on the acceptance of digital assets, such as BCH, which represent a new and rapidly evolving industry.
• Digital assets may have concentrated ownership, and large sales or distributions by holders could adversely affect the market price of such digital assets.
• A temporary or permanent fork or a clone of the Bitcoin Cash Network could adversely affect the value of the Shares.
• Recent developments in the digital asset economy have led to extreme volatility, disruption, loss of confidence, negative publicity, and market-wide declines in liquidity.
• The value of the Shares relates directly to the value of BCH held by the Trust, which may be highly volatile and subject to fluctuations due to numerous factors.
• Due to the Rule 144 holding period, lack of an ongoing redemption program, and the Trust's ability to halt creations, there is no arbitrage mechanism to keep the Shares closely linked to the Index Price, leading to historical substantial premiums or discounts.
• Shares may trade at a price that is at, above, or below the Trust's NAV per Share due to non-current trading hours between OTCQX and the Digital Asset Trading Platform Market.
• The largely unregulated nature and lack of transparency surrounding Digital Asset Trading Platforms may adversely affect the value of digital assets and, consequently, the Shares.
• The Index has a limited history, and a failure of the Index Price to accurately reflect BCH's market price could adversely affect the value of the Shares.
• Competition from the emergence or growth of other digital assets could negatively impact the price of BCH and adversely affect the value of the Shares.
• The Trust relies on third-party service providers (Custodian, Authorized Participants), and their replacement or disruption could pose challenges to safekeeping BCH and Trust operations.
• Shareholders may suffer a loss on their investment if the Shares trade above or below the Trust's NAV per Share.
• A determination that BCH or any other digital asset is a security may adversely affect the value of BCH and the Shares, potentially leading to extraordinary expenses or termination of the Trust.
• Regulatory changes or actions by the U.S. Congress or any U.S. federal or state agencies may affect the value of the Shares or restrict the use of BCH, mining activity, or the operation of the Bitcoin Cash Network.
• Changes in the policies of the U.S. Securities and Exchange Commission (SEC) could adversely impact the value of the Shares.
• Regulatory changes or other events in foreign jurisdictions may affect the value of the Shares or restrict the use of digital assets, mining activity, or Digital Asset Trading Platform Market operations.
• The Authorized Participant, the Trust, or the Sponsor could be subject to regulation as a money service business or money transmitter, resulting in extraordinary expenses and decreased liquidity for Shares.
• Regulatory changes or interpretations could obligate the Trust or the Sponsor to register and comply with new regulations, leading to potentially extraordinary, nonrecurring expenses.
• Potential conflicts of interest may arise among the Sponsor or its affiliates and the Trust, potentially favoring their own interests.
• The potential discontinuance of the Sponsor's continued services could be detrimental to the Trust.
• If the Custodian resigns or is removed without replacement, it could trigger early termination of the Trust.
• Security threats to the Digital Asset Account could result in the halting of Trust operations and a loss of Trust assets or damage to the Trust's reputation.
• BCH transactions are irrevocable, and stolen or incorrectly transferred BCH may be irretrievable, adversely affecting the value of the Shares.
• The lack of full insurance and shareholders' limited rights of legal recourse against the Trust and its service providers expose the Trust and its shareholders to the risk of loss of BCH.
• The Trust may be required, or the Sponsor may deem it appropriate, to terminate and liquidate at a time that is disadvantageous to shareholders.
• The Trust Agreement includes provisions that limit shareholders' voting rights and restrict their right to bring a derivative action.
• The Sponsor is solely responsible for determining the value of the NAV and NAV per Share, and any errors, discontinuance, or changes in such calculations may adversely affect the value of the Shares.
• Extraordinary expenses resulting from unanticipated events may become payable by the Trust, adversely affecting the value of the Shares.
• The Trust's delivery or sale of BCH to pay expenses could result in shareholders incurring tax liability without an associated distribution from the Trust.
• The 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.
• Intellectual property rights claims may adversely affect the Trust and the value of the Shares.
• Pandemics, epidemics, and other natural and man-made disasters could negatively impact the value of the Trust's holdings and/or significantly disrupt its affairs.
• Shareholders may not receive the benefits of any forks or airdrops due to operational, tax, securities law, regulatory, legal, and practical issues.
• The treatment of the Trust for U.S. federal income tax purposes is uncertain, and a challenge by the IRS could result in adverse tax consequences.
• The treatment of digital assets for U.S. federal income tax purposes is uncertain, and future guidance could adversely affect the value of the Shares.
• Future 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.
• A U.S. tax-exempt shareholder may recognize unrelated business taxable income (UBTI) as a consequence of an investment in Shares.
• The tax treatment of BCH and transactions involving BCH for state and local tax purposes is not settled.
• Non-U.S. Holders may be subject to U.S. federal withholding tax on income derived from forks, airdrops, and similar occurrences.

Future Outlook

The U.S. administration, under President Trump, has initiated efforts to establish a comprehensive and clear regulatory framework for digital assets, aiming to support responsible growth and innovation. This includes an executive order in January 2025 and a working group report in July 2025 recommending legislation on self-custody, Bank Secrecy Act obligations, CFTC authority over spot markets for non-security digital assets, and tax law clarifications. The SEC has also launched 'Project Crypto' to modernize securities rules for digital assets. However, these initiatives are in early stages, and the future regulatory landscape for digital assets, particularly for those beyond Bitcoin and Ether, remains highly uncertain. The Sponsor does not intend to seek regulatory approval for an ongoing redemption program for the Trust's shares, citing the SEC's current stance.

Management Comments

• "The Trust is not actively managed and will not take any actions to take advantage, or mitigate the impacts, of volatility in the price of BCH."
• "The Sponsor currently has no intention of seeking regulatory approval from the SEC for the Trust to operate an ongoing redemption program."
• "The Sponsor believes that the security procedures in place for the Trust... are reasonably designed to safeguard the Trusts BCH."
• "The Sponsor believes that it is applying the proper legal standards in determining that BCH is not a security in light of the uncertainties inherent in the Howey and Reves tests."
• "The Sponsor does not expect the foregoing proceedings to have a material adverse effect on the Trusts business, financial condition or results of operations."
• "We believe there are currently no risks from any potential cybersecurity threat or cybersecurity incident that are reasonably likely to have a material effect on our results of operations or financial condition, the likelihood or severity of such risks are difficult to predict."

Industry Context

The digital asset industry is characterized by extreme volatility and increased regulatory scrutiny, particularly following significant market disruptions such as the FTX collapse in November 2022 and subsequent insolvencies of other major players. While the SEC has recently dismissed complaints against prominent platforms like Binance, Coinbase, and Kraken, and approved spot Bitcoin and Ether ETFs, the regulatory path for other digital assets like BCH remains highly uncertain. Global efforts, including the EU's MiCA framework and U.S. legislative proposals like the GENIUS Act and CLARITY Act, aim to establish clearer regulatory guidelines. Competition from a growing number of alternative digital assets and private blockchain platforms continues to intensify, potentially impacting demand for BCH. The stability of stablecoins, which are crucial for digital asset market liquidity, has also been a concern, with past de-pegging events highlighting systemic risks.

Comparison to Industry Standards

• The Trust's investment objective, to reflect the value of BCH held less expenses, is typical for passively managed digital asset trusts.
• The historical trading of BCHG shares at substantial premiums and discounts to NAV (max 1,852% premium, 59% discount) is a common characteristic of closed-end digital asset trusts without redemption mechanisms, contrasting with the tighter NAV tracking of recently approved spot Bitcoin and Ether ETFs (e.g., Grayscale Bitcoin Trust ETF, Grayscale Ethereum Trust ETF) which allow for in-kind redemptions and arbitrage.
• The 2.5% annual Sponsors Fee is comparable to other Grayscale single-asset trusts but is generally higher than the fees charged by many newly launched spot Bitcoin ETFs, some of which offer promotional fee waivers.
• Coinbase Custody Trust Company, LLC, the Trust's Custodian, is a qualified custodian under Rule 206(4)-2(d)(6) of the Investment Advisers Act, meeting a key regulatory standard for institutional digital asset custody.
• The Index Provider, CoinDesk Indices, Inc., adheres to IOSCO principles for financial benchmarks in its methodology, aligning with recognized best practices for index calculation in traditional financial markets.
• The Trust's classification as an 'emerging growth company' under the JOBS Act provides for reduced disclosure requirements, which is a specific regulatory allowance rather than an industry-wide operational standard.

Management Changes

Corporate Governance

Legal Proceedings

• **Osprey Funds, LLC vs. Grayscale Investments, LLC**: A lawsuit filed on January 30, 2023, alleging violations of the Connecticut Unfair Trade Practices Act (CUTPA) related to advertising. The Sponsor's motion for summary judgment was granted on February 7, 2025, and Osprey subsequently withdrew its appeal on May 12, 2025, effectively resolving the matter in favor of the Sponsor. The Sponsor does not expect this to have a material adverse effect on the Trust.
• **Genesis Global Capital, LLC and Genesis Asia Pacific Pte. Ltd. vs. Digital Currency Group, Inc. and affiliates**: A complaint filed on May 19, 2025, in SDNY Bankruptcy Court, alleging preferential transfers made by Genesis Capital to GSI (predecessor to GSO). Genesis Capital seeks to avoid these transfers and recover property. GSO believes this lawsuit is without merit and intends to vigorously defend against it. The Sponsor does not expect this proceeding to have a material adverse effect on the Trust.

Related Party Transactions

• **Sponsor**: Grayscale Investments Sponsors, LLC (GSIS) is the sole sponsor and an indirect wholly owned subsidiary of Digital Currency Group, Inc. (DCG).
• **Authorized Participant/Distributor/Marketer**: Grayscale Securities, LLC, an affiliate of the Sponsor and a wholly owned direct subsidiary of Grayscale Operating, LLC (an indirect wholly owned subsidiary of DCG), is the only acting Authorized Participant, distributor, and marketer for the Shares.
• **DCG Share Ownership**: Digital Currency Group, Inc. (DCG), the indirect parent company of the Sponsor, beneficially owns 518,888 Shares (1.10%) of the Trust as of September 2, 2025, through its subsidiaries.
• **DCG Share Purchase Authorization**: DCG's board approved the purchase of up to $200 million worth of shares in the Trust and other Grayscale products on March 2, 2022. As of September 2, 2025, DCG had not purchased any Shares of this Trust under this authorization.
• **Index Provider**: CoinDesk Indices, Inc. (CDI) provides the Index. The Sponsor pays CDI a monthly fee and a fee based on the NAV of the Trust under the Index License Agreement.
• **Custodian, Trustee, Transfer Agent**: Fees paid to Coinbase Custody Trust Company, LLC (Custodian), CSC Delaware Trust Company (Trustee), and Continental Stock Transfer & Trust Company (Transfer Agent) are Sponsor-paid Expenses.
• **Kraken Investment**: DCG holds a minority interest (less than 1.0%) in Kraken, one of the Digital Asset Trading Platforms included in the Index.

Stakeholder Impact

• **Shareholders**: Benefit from asset appreciation but face risks from market volatility, the persistent discount to NAV due to the lack of a redemption program, and potential tax liabilities from expense payments without distributions. Their voting rights are limited, and derivative action initiation is restricted.
• **Sponsor (Grayscale Investments Sponsors, LLC)**: Benefits from the 2.5% annual Sponsors Fee. Assumes most ordinary operational expenses. Faces potential conflicts of interest due to its affiliations and DCG's broader digital asset investments, requiring careful management of fiduciary duties.
• **Digital Currency Group, Inc. (DCG)**: As the indirect parent company of the Sponsor and the sole Authorized Participant, DCG has significant influence and financial interest in the Trust's operations and performance. Its investments in other digital assets and ecosystem companies could create conflicts.
• **Custodian (Coinbase Custody Trust Company, LLC)**: Provides critical asset safeguarding services. Its liability is limited, particularly for large cold storage holdings, which could expose the Trust to losses beyond the liability cap.
• **Regulators (SEC, CFTC, FinCEN, etc.)**: Their ongoing scrutiny and evolving regulatory frameworks for digital assets could significantly impact the Trust's operational requirements, the classification of BCH, and the broader market, affecting all stakeholders.

Next Steps

• The Sponsor intends to engage additional Authorized Participants unaffiliated with the Trust in the future.
• The Sponsor may seek to list the Shares on NYSE Arca sometime in the future, but is not currently seeking approval for required rule changes.
• The U.S. administration's interagency working group is tasked with proposing a Federal regulatory framework for digital assets, with recommendations released in July 2025.
• The SEC's 'Project Crypto' initiative aims to modernize securities rules for digital assets, draft clear rules for crypto asset distributions, custody, and trading, and consider interpretive/exemptive authorities.
• The Sponsor intends to evaluate each future fork or airdrop on a case-by-case basis in consultation with the Trust's legal advisers, tax consultants, and Custodian.

Key Dates

Recommendation

The Grayscale Bitcoin Cash Trust (BCHG) demonstrated strong asset growth and positive operational results for FY25, driven by significant BCH price appreciation. The resolution of the Osprey lawsuit and broader regulatory dismissals for other digital asset platforms provide some relief. However, the Trust's shares continue to trade at a discount to NAV, exacerbated by the absence of a redemption program and the Sponsor's stated intention not to seek one. The inherent extreme volatility of digital assets, coupled with ongoing regulatory uncertainty, particularly regarding BCH's classification as a security and potential tax implications, presents significant risks. While the long-term potential of digital assets remains, these structural limitations and market risks suggest a 'hold' recommendation for existing investors, advising caution for new investments until greater regulatory clarity and a mechanism to address the NAV discount are established. The current environment does not warrant a 'buy' due to the discount and risks, nor a 'sell' given the positive asset growth and potential for future appreciation in the underlying asset.

Keywords

Bitcoin Cash, BCH, Grayscale, Digital Assets, Cryptocurrency, SEC Filing, 10-K, Financial Report, Investment Trust, Blockchain, Crypto Custody, Market Volatility, Regulation, OTCQX, CoinDesk Index, Digital Currency Group, Asset Management