Bitwise Crypto Index Committee Meeting (September 2020)

San Francisco • September 30, 2020

Meeting called to discuss new rule regarding security status of cryptoassets.

Meeting Details

Date: September 30, 2020

Time: 11:00 – 11:30 a.m. PT

Reason for Meeting: Subsequent meeting proposed at the standard monthly meeting of September 29, 2020

In Attendance: Matt Hougan (Chair), Hunter Horsley (Member), David Lawant (Member)

Meeting Notes

Item 1: Discussion Over a New Proposed Rule Concerning the Risk of a Cryptoasset Being Deemed a Security by US Federal Securities Laws

Following the discussion started on September 29, 2020, the Index Committee discussed adding a new rule to the eligibility requirements that cryptoassets need to fulfill in order to become a constituent of the Bitwise crypto indexes.

The rule would be added under the section III.B.i, as the item “g”, in the Bitwise Crypto Index Methodology, moving all other rules down. It would read as follows:

Does not face undue risk of being deemed a security under US Federal Securities Law in the opinion of the Bitwise Crypto Index Committee, given present knowable facts and circumstances.

The Index Committee members agreed that this rule would contribute to make the index more investable by professional investors and investment funds, including the Bitwise 10 Crypto Index Fund. They also agreed that a cryptoasset being deemed a security would entail uncompensated risks including liquidity risks and enforcement actions.

It was agreed that the implementation of this rule would be done through a checklist conducted at a minimum on a quarterly basis that would entail: i) Internal analysis of the asset’s security status using a developed frameworks ii) Consideration of the Crypto Rating Council’s score of how likely an asset is to be considered a security; iii) The listing status of the asset on US cryptoasset trading venues that are regulated under the BitLicense from the NYSDFS; and iv) Past rulings or opinions issued on the security status of an asset by the relevant regulatory authorities. Decisions will be made based on the totality of facts and circumstances. Index Committee members can call for a one-off review of an asset intra-quarter if they believe it is merited by changes in the facts and circumstances.

The Committee voted 3-0 in favor of approving the new rule.

Item 2: Adjournment

The Chairman adjourned the meeting.

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