TEXT-EXTRACT 2 filename2.txt United States securities and exchange commission logo September 29, 2023 David Mann Chief Executive Officer Franklin Templeton Digital Holdings Trust One Franklin Parkway San Mateo, CA 94403 Re: Franklin Templeton Digital Holdings Trust Registration Statement on Form S-1 Filed September 12, 2023 File No. 333-274474 Dear David Mann: We have reviewed your registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter by amending your registration statement and providing the requested information. If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response. After reviewing any amendment to your registration statement and the information you provide in response to these comments, we may have additional comments. Registration Statement on Form S-1 General 1. Based on our preliminary review of your registration statement, we have the following initial set of comments. Once you have amended your registration statement and responded to each of these comments, we will provide you with more detailed comments relating to your registration statement, as appropriate. 2. We note that your registration statement includes a number of blanks or omitted information, including, for example, the Initial AP, Authorized Participants and disclosure regarding the material terms of the material agreements, as well as inclusion of the material agreements as exhibits to the registration statement. Please revise to include this information in your next amendment, or tell us when you intend to do so. Please also confirm your understanding that the staff will need sufficient time to review this David Mann FirstName LastNameDavid Mann Franklin Templeton Digital Holdings Trust Comapany 29, September NameFranklin 2023 Templeton Digital Holdings Trust September Page 2 29, 2023 Page 2 FirstName LastName information, and we may have additional comments at that time. 3. We refer you to our December 2022 Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets, located on our website at the following address: https://www.sec.gov/corpfin/sample-letter-companies-regarding-crypto-asset- markets. Please consider the issues identified in the sample letter as applicable to your facts and circumstances, and revise your disclosure accordingly. Risk Factors, page 16 4. Provide a materially complete description of the risks related to bitcoin and the bitcoin network, including, for example, the risks presented by the use of bitcoin in illicit transactions and rewards for mining bitcoin that are designed to decline over time, which may lessen the incentive for miners to process and confirm transactions on the bitcoin network. 5. Please revise your disclosure to address the competition you will face in launching and sustaining your product. Please also revise your risk factors to address the risks associated with this competition, including the risk that your timing in reaching the market and your fee structure relative to other bitcoin ETPs could have a detrimental effect on the scale and sustainability of your product. 6. Please discuss in your risk factors the extent to which material aspects of the business and operations of bitcoin trading platforms are not regulated. Also discuss the risk of manipulation, front-running, security failures or operational problems at bitcoin trading platforms. Business of the Fund Net Asset Value, page 66 7. Please include a materially complete description of the methodology to be used to calculate NAV and disclose how you will value your bitcoin holdings for GAAP purposes. Please also tell us how you intend to develop accounting and valuation policies to address significant events related to crypto assets. For example, explain to us how your valuation policies will address the potential for a blockchain for a crypto asset to diverge into different paths (i.e., a fork ) and airdrops. Business of the Fund Valuation of Bitcoin; The CF Benchmark Index, page 66 8. Please revise your disclosure to provide a materially complete description of the index methodology. Please also address the following in your disclosure regarding the index: Include a table with market share and volume information for each constituent trading platform comprising the index used to calculate the CME CF Bitcoin Reference Rate; David Mann Franklin Templeton Digital Holdings Trust September 29, 2023 Page 3 Explain how the trading platforms are selected and describe how the CME CF Bitcoin Reference Rate is calculated by providing an example of the calculation; Disclose here the extent to which the Sponsor has discretion to select a different index; and Disclose whether the Sponsor will notify investors of changes to the constituent trading platforms used to calculate the index, and, if so, how the Sponsor will notify the investor of such changes. Description of the Shares and the Declaration of Trust Deposit of Bitcoin; Issuance of Creation Unit, page 70 9. Please include a materially complete discussion of the creation and redemption process. As appropriate, please also address the following: Discuss the potential impact on the arbitrage mechanism of the price volatility, trading volume, price differentials across bitcoin trading platforms, and the closing of bitcoin trading platforms due to fraud, failures, security breaches or otherwise; Clarify here whether the Sponsor may generally suspend creations, and, if so, the circumstances under which it may do so; and Describe the mechanics of how the creation and redemption process will work between the Trust, the Authorized Participants and the Custodians, including a discussion of whether and to what extent creation and redemption transactions will be settled on-chain or off-chain, and any risks associated with the settlement process. The Custodians Bitcoin Custodian, page 80 10. Please revise to provide a materially complete discussion of your bitcoin custody arrangements. For example, please consider addressing the following: Describe the material terms of your agreement with the Bitcoin Custodian; Describe how the Bitcoin Custodian will store the private keys, including whether they will be commingled with assets of other customers and the geographic location where they will be stored; Identify who will have access to the private key information and disclose whether any entity will be responsible for verifying the existence of the bitcoins; and Disclose whether and to what extent the Bitcoin Custodian carries insurance for any losses of the bitcoin that it custodies for you. Plan of Distribution, page 89 FirstName LastNameDavid Mann 11. Please discuss whether and to what extent the size of your creation and redemption Comapany NameFranklin baskets could have Templeton Digital an impact on Holdings the arbitrage Trust mechanism in light of the market for bitcoin. September 29, 2023 Page 3 FirstName LastName David Mann FirstName LastNameDavid Mann Franklin Templeton Digital Holdings Trust Comapany 29, September NameFranklin 2023 Templeton Digital Holdings Trust September Page 4 29, 2023 Page 4 FirstName LastName Conflicts of Interest, page 90 12. Please revise to disclose all existing and potential conflicts of interest between your Sponsor and its affiliates and the Trust. Please also clarify whether the Sponsor or any insiders have bitcoin or bitcoin-related exposure that could create conflicts of interest and disclose whether you have a code of conduct or other requirements for pre-clearance of bitcoin-related transactions that apply to your employees, the Sponsor, or any of its affiliates. Experts, page 91 13. Please revise to include this information in your next amendment, or tell us when you intend to do so. Financial Statements, page 96 14. We note your disclosure that your audited financial statements will be provided by amendment. Please confirm you will file these audited financial statements in a pre- effective amendment as soon as they are available in order to allow the staff sufficient time to complete its review. Please also confirm your understanding that the staff will need sufficient time to review the audited financial statements and related information, and we may have additional comments at that time. We remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or absence of action by the staff. Refer to Rules 460 and 461 regarding requests for acceleration. Please allow adequate time for us to review any amendment prior to the requested effective date of the registration statement. You may contact Kate Tillan at 202-551-3604 or Michelle Miller at 202-551-3368 if you have questions regarding comments on the financial statements and related matters. Please contact Sonia Bednarowski at 202-551-3666 or Sandra Hunter Berkheimer at 202-551-3758 with any other questions. Sincerely, Division of Corporation Finance Office of Crypto Assets