SEC Filing Document

Company: T. Rowe Price Active Crypto ETF
Ticker: 
CIK: 2089855
Filing Type: S-1
Document Type: S-1
Date Filed: 2025-10-22
Accession Number: 0001999371-25-015832
Exchange: 
SIC Code: 6221
SIC Description: Commodity Contracts Brokers & Dealers
URL: https://www.sec.gov/Archives/edgar/data/2089855/000199937125015832/activecrypto-s1_102225.htm

Chunk 32 of 56
Word Count: 1407
Character Count: 8782

Document Content:

assets have grown in both popularity and market size, the U.S. Congress and a number of U.S. federal and state agencies (including the FinCEN, SEC, CFTC, FINRA, the CFPB, the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS, and state financial institution regulators) have been examining the crypto networks and the crypto asset users, with particular focus on the extent to which crypto assets can be used to launder the proceeds of illegal activities or criminal or terrorist enterprises and the safety and soundness of exchanges or other service providers that hold tokens for users. The imposition of stricter governmental regulation of the crypto asset market may adversely impact the activities of the Fund, for example, by reducing the liquidity of the Eligible Assets markets. Legal status of crypto assets is uncertain in various jurisdictions, which could impact the prices of crypto assets

The legal status of crypto assets varies
substantially across jurisdictions. In many countries, the Eligible Assets legal status is still undefined or changing. Some countries
have banned crypto assets or securities or derivatives in respect to them (including for certain categories of investor), banned the local
banks from working with crypto assets or restricted the use of crypto assets in other ways. Furthermore, in other countries the status
of the Eligible Assets remains undefined and there is uncertainty as to whether some crypto assets are a security, money, a commodity
or property. In some countries, such as the United States, different government agencies define crypto assets differently, leading to
regulatory conflict and uncertainty. This uncertainty is compounded by the rapid evolution of regulations. Countries may, in the future,
explicitly restrict, outlaw or curtail the acquisition, use, trade or redemption of the Eligible Assets. In such a scenario, there may
be adverse effects on the value of the Eligible Assets and the Fund’s Shares, including the termination of the Fund.

A determination that the Eligible
Assets or any other crypto asset is a “security” may adversely affect the value of the Shares, and result in potentially extraordinary,
nonrecurring expenses to, or termination of, the Fund

Depending on its characteristics, a
crypto asset may be considered a “security” under the federal securities laws. The test for determining whether a particular
crypto asset is a “security” is complex and difficult to apply, and the outcome is difficult to predict. Public statements
by senior officials at the SEC indicate that the SEC does not consider the Eligible Assets to be securities, at least currently, and the
staff has provided informal assurances to a handful of promoters that the Eligible Assets are not securities. On the other hand, the SEC
has brought enforcement actions against the promoters of several other crypto assets on the basis that the crypto assets in question are
securities.

Whether a crypto asset is a security
under the federal securities laws depends on whether it is included in the lists of instruments making up the definition of “security”
in the Securities Act, the Exchange Act and the Investment Company Act. Crypto assets as such do not appear in any of these lists, although
each list includes the terms “investment contract” and “note,” and the SEC has often analyzed whether a particular
crypto asset is a security by reference to whether it meets the tests developed by the federal courts interpreting these terms, known
as the Howey and Reves tests, respectively. For many crypto assets, whether or not the Howey or Reves tests are met is difficult to resolve
definitively, and substantial legal arguments can often be made both in favor of and against a particular crypto asset qualifying as a
security under one or both of the Howey and Reves tests. Adding to the complexity, the SEC staff has indicated that the security status
of a particular crypto asset can change over time as the relevant facts evolve.

Any enforcement action by the SEC or
a state securities regulator asserting that any of the Eligible Assets is a security or is being offered and sold as a security, or a
court decision, to that effect would be expected to have an immediate material adverse impact on the trading value of such crypto asset,
as well as the Shares. This is because the business models behind most crypto assets are incompatible with regulations applying to transactions
in securities. If a crypto asset is determined or asserted to be a security, it is likely to become difficult or impossible for the crypto
asset to be traded, cleared or custodied in the United States through the same channels used by non-security crypto assets, which in addition
to materially and adversely affecting the trading value of the crypto asset is likely to significantly impact its liquidity and market
participants’ ability to convert the crypto asset into U.S. dollars.

The lack of regulation of the crypto
asset market causes vulnerabilities to the markets and may impact prices

The Eligible Assets, the Eligible Assets
Networks and the crypto platforms are relatively new and, in many cases, either unregulated or not in compliance with some or all of the
applicable laws and regulations. As a result of this lack of regulation, individuals, or groups may engage in insider trading, fraud or
market manipulation with respect to the Eligible Assets. Such manipulation could cause investors in the Eligible Assets to lose money,
possibly the entire value of their investments. Over the past several years, a number of crypto platforms have been closed due to fraud,
failure or security breaches. The nature of the assets held at crypto platforms make them appealing targets for hackers and a number of
crypto platforms have been victims of cybercrimes and other fraudulent activity. These activities have caused significant, in some cases
total, losses for crypto asset investors. Investors in crypto assets may have little or no recourse should such theft, fraud or manipulation
occur. There is no central registry showing which individuals or entities own crypto assets or the quantity of crypto assets that is owned
by any particular person or entity. There are no regulations in place that would prevent a large holder of crypto assets or a group of
holders from selling their crypto assets, which could depress the price of such assets, or otherwise attempting to manipulate the price
of such crypto assets or their networks. Events that reduce user confidence in the Eligible Assets, the Eligible Assets Networks and the
fairness of crypto platforms could have a negative impact on the price of the Eligible Assets and the value of an investment in the Fund.

Regulatory changes or actions in
foreign jurisdictions may affect the value of the Shares or restrict the use of one or more crypto assets, mining activity or the operation
of their networks in a manner that adversely affects the value of the Shares

Various foreign jurisdictions have,
and may continue to adopt laws, regulations or directives that affect crypto asset networks (including the Eligible Assets Networks),
the crypto asset markets, and their users, particularly crypto platforms and service providers that fall within such jurisdictions’
regulatory scope. Foreign laws, regulations or directives may conflict with those of the United States and may negatively impact the acceptance
of one or more crypto assets by users, merchants and service providers outside the United States and may therefore impede the growth or
sustainability of the crypto asset economy in the European Union, China, Japan, Russia and the United States and globally, or otherwise
negatively affect the value of the Eligible Assets. The effect of any future regulatory change is impossible to predict, but such change
could be substantial and adverse to the Fund and the value of the Shares.

The Fund’s Operating Risks

The Fund is new and has no operational
history

Because the Fund is new, it has a more
limited operating history, fewer shareholders, and less assets than other investment vehicles that have been in existence for longer periods.
It may be more difficult to evaluate the investment program and Sponsor of a Fund with a limited performance track record. This limited
history poses several potential risks to the effective management and operation of the Fund. Crypto assets, such as bitcoin, are known
for their high volatility, unique technical, legal and regulatory challenges, and rapidly evolving market dynamics. The Sponsor’s
limited experience may not fully equip it to navigate these complexities effectively and it may not be successful in implementing its
investment objective.