SEC Filing Document

Company: T. Rowe Price Active Crypto ETF
Ticker: 
CIK: 2089855
Filing Type: S-1/A
Document Type: S-1/A
Date Filed: 2026-03-16
Accession Number: 0001999371-26-005896
Exchange: 
SIC Code: 6221
SIC Description: Commodity Contracts Brokers & Dealers
URL: https://www.sec.gov/Archives/edgar/data/2089855/000199937126005896/active-s1a_031626.htm

Chunk 27 of 62
Word Count: 1498
Character Count: 9796

Document Content:

impact on the value of ether Smart contracts are programs that run on the Ethereum Network and execute automatically when certain conditions are met. Since smart contracts typically cannot be stopped or reversed, vulnerabilities in their programming can have damaging effects. For example, in 2016, a vulnerability in the smart contracts underlying “The DAO” on Ethereum enabled a hacker to steal approximately $60 million in ether, leading to a major hard fork and a 35% drop in ether’s price. Subsequent years saw additional smart contract issues, such as multi-signature wallet vulnerabilities and bugs in ERC20 tokens, resulting in tens or hundreds of millions in losses or frozen funds. Major flaws have also caused disruptions to platforms like MakerDAO and exploited bridges and DeFi protocols, with attackers syphoning billions of dollars in assets. Such incidents highlight how problems in smart contract development or deployment can negatively impact the value of ether.

In some cases, smart contracts
can be controlled by one or more “admin keys” or users with special privileges, or “super users.” These
users may have the ability to unilaterally make changes to the smart contract, enable or disable features on the smart contract,
change how the smart contract receives external inputs and data or transmits ether or other crypto assets, and make other changes
to the smart contract. Furthermore, in some cases inadequate public information may be available about certain smart contracts
or applications, and information asymmetries may exist, even with respect to open-source smart contracts or applications; certain
participants may have hidden informational or technological advantages, making for an uneven playing field. There may be opportunities
for bad actors to perpetrate fraudulent schemes and engage in illicit activities and other misconduct, such as exit scams and rug
pulls (orchestrated by developers and/or influencers who promote a smart contract or application and, ultimately, escape with the
money at an agreed time), or Ponzi or similar fraud schemes.

Many DeFi applications are
currently deployed on the Ethereum Network, and smart contracts relating to DeFi applications currently represent a significant
source of demand for ether. DeFi applications may achieve their investment purposes through self-executing smart contracts that
may allow users, for example, to invest crypto assets in a pool from which other users can borrow without requiring an intermediate
party to facilitate these transactions. These investments may earn interest to the investor based on the rates at which borrowers
repay the loan, and can generally be withdrawn by the investor. For smart contracts that hold a pool of crypto asset reserves,
smart contract super users or admin key holders may be able to extract funds from the pool, liquidate assets held in the pool,
or take other actions that decrease the value of the crypto assets held by the smart contract in reserves. Even for crypto assets
that have adopted a decentralized governance mechanism, such as smart contracts that are governed by the holders of a governance
token, such governance tokens can be concentrated in the hands of a small group of core community members, who would be able to
make similar changes unilaterally to the smart contract. If any such super user or group of core members unilaterally make adverse
changes to a smart contract, the design, functionality, features and value of the smart contract, its related crypto assets may
be harmed. In addition, assets held by the smart contract in reserves may be stolen, misused, burnt, locked up or otherwise become
unusable and irrecoverable. Super users can also become targets of hackers and malicious attackers. If an attacker is able to access
or obtain the super user privileges of a smart contract, or if a smart contract’s super users or core community members take
actions that adversely affect the smart contract, users who transact with the smart contract may experience decreased functionality
of the smart contract or may suffer a partial or total loss of any crypto assets they have used to transact with the smart contract.
Furthermore, the underlying smart contracts may be insecure, contain bugs or other vulnerabilities, or otherwise may not work as
intended. Any of the foregoing could cause users of the DeFi application to be negatively affected, or could cause the DeFi application
to be the subject of negative publicity. Because DeFi applications may be built on the Ethereum Network and represent a significant
source of demand for ether, public confidence in the Ethereum Network itself could be negatively affected, such sources of demand
could diminish, and the value of ether could decrease. Similar risks apply to any smart contract or dApp, and any crypto asset
whose network store smart contracts or run a dApp (including DeFi applications).

Validators may suffer
losses due to staking, which could make the Ethereum Network less attractive

Validation on the Ethereum
Network requires ether to be transferred into smart contracts on the underlying blockchain networks not under the Fund’s
or anyone else’s control. If the Ethereum Network source code or protocol fail to behave as expected, suffer cybersecurity
attacks or hacks, experience security issues, or encounter other problems, such assets may be irretrievably lost. In addition,
the Ethereum Networks dictate requirements for participation in validation activity, and may impose penalties, or “slashing,”
if the relevant activities are not performed correctly, such as if the staker acts maliciously on the network, “double signs”
any transactions, or experience extended downtimes. If validators’ staked ether is slashed by the Ethereum Network, their
assets may be confiscated, withdrawn, or burnt by the network, resulting in losses to them. Furthermore, the Ethereum Network requires
the payment of base fees and the practice of paying tips is common, and such fees can become significant as the amount and complexity
of the transaction grows, depending on the degree of network congestion and the price of ether. Any cybersecurity attacks, security
issues, hacks, penalties, slashing events, or other problems could damage validators’ willingness to participate in validation,
discourage existing and future validators from serving as such, and adversely impact the Ethereum Network’s adoption or the
price of ether. Any disruption of validation on the Ethereum Network could interfere with network operations and cause the Ethereum
Network to be less attractive to users and application developers than competing blockchain networks, which could cause the price
of ether to decrease.

Proof of Stake (PoS) blockchains
are a relatively recent innovation, and may not achieve widespread scale or adoption or perform as successfully as traditional
proof-of-work blockchains

Certain crypto assets, such
as bitcoin, use a “proof-of-work” consensus algorithm. The genesis block on the Bitcoin blockchain was mined in 2009,
and Bitcoin’s blockchain has been in operation since then. Many newer blockchains enabling smart contract functionality,
including the current Ethereum Network uses PoS or other consensus-based algorithms. While their proponents believe that they may
have certain advantages, the consensus mechanisms and governance systems underlying many newer blockchain protocols have not been
tested at scale over as long of a period of time or subject to as widespread use or adoption as, for example, bitcoin’s proof-of-work
consensus mechanism has. This could lead to these blockchains, and their associated crypto assets, having undetected vulnerabilities,
structural design flaws, suboptimal incentive structures for network participants (e.g., validators), technical disruptions, or
a wide variety of other problems, any of which could cause these blockchains not to function as intended, lead to outright failure
to function entirely causing a total outage or disruption of network activity, or to suffer other operational problems or reputational
damage, leading to a loss of users or adoption or a loss in value of the associated crypto assets, including the Fund’s assets.
There can be no assurance that the PoS blockchain or other consensus-based blockchains, on which the Fund’s assets rely will
achieve widespread scale or adoption or perform successfully; any failure to do so could negatively impact the value of the Fund’s
assets.

If the crypto asset award
or transaction fees for recording transactions on the Ethereum Network are not sufficiently high to incentivize validators, or
if certain jurisdictions continue to limit or otherwise regulate validating activities, validators may cease expanding validating
power or demand high transaction fees, which could negatively impact the value of ether

In 2021, the Ethereum Network
implemented the EIP 1559 upgrade. EIP 1559 changed the methodology used to calculate transaction fees paid to ether validators
in such a manner that reduced the total net issuance of ether fees paid to validators. If the crypto asset awards for validating
blocks or the transaction fees for recording transactions on the Ethereum Network are not sufficiently high to incentivize validators,
or if certain jurisdictions continue to limit or otherwise regulate validating activities, validators may cease expending validating
power to validate blocks and confirmations of transactions on the Ethereum Network could be slowed. For example, the realization
of one or more of the following risks could materially adversely affect the value of the Shares:

●	A reduction in staked ether on the Ethereum Network could increase the likelihood of a malicious
actor obtaining control of the network.