Form F-3
We note your disclosure that you currently conduct your business through Bit Digital Hong Kong Limited and Bit Digital Strategies Limited. Please tell us whether you or your subsidiaries currently have operations conducted through variable interest entities based in China. To the extent that you do, we may have additional comments.
No. 1
As noted above, while the Company’s former peer-to-peer lending business conducted operations through VIEs, neither the Company nor its subsidiaries, Bit Digital Hong Kong
Limited and Bit Digital Strategies Limited (the “Hong Kong Subsidiaries”), currently conduct, nor did they ever conduct, bitcoin mining operations through VIEs in China. Read in the reply ↗
Provide prominent disclosure about the legal and operational risks associated with being based in or having a substantial amount of the company’s operations in China and Hong Kong. Your disclosure should make clear whether these risks could result in a material change in your operations and/or the value of your securities or could significantly limit or completely hinder your ability to offer or continue to offerRest of the question
securities to investors and cause the value of such securities to significantly decline or be worthless. Your disclosure should address how recent statements and regulatory actions by China’s government, such as those related to the use of variable interest entities and data security or anti-monopoly concerns, has or may impact the company’s ability to conduct its business, accept foreign investments, or list on an U.S. or other foreign exchange.
No. 2
In response to the Staff’s comment, disclosure has been made on the cover page of the Prospectus and in the “Prospectus Summary” on page 1 as to the risks involved, as well as the additional responsive disclosures under “Our Company” in the Prospectus Summary. In addition, the Prospectus Summary discloses that “as a result of our prior structure of an offshore issuer with a wholly-owned foreign entity, or WFOE, and VIEs which are the concern of the SEC as to China-based Issuers, we are setting forth below some of the risks and uncertainties concerning the Company’s prior operations.”Read in the reply ↗Rest of the answer
“Risks Related to Doing Business in China” have been moved up after
“General Risks.” The Company is based in the United States, with its principal office located in New York City since March
1, 2021. The Company does not have a substantial amount of its operations in China and Hong Kong. As set forth in the Company’s
Form 6-K filed on August 20, 2021 disclosing the Company’s Results of Operations for the second quarter ended June 30, 2021, the
Company had 29.2% of its bitcoin mining computers in China. All of those miners are warehoused and are not in operation, awaiting disposition or migration to North America. The Company’s ten (10) remaining employees in China are employed by the Hong Kong Subsidiaries in administration and the warehousing of miners awaiting disposition or migration to North America, and are not engaged in mining operations in China. Since the Company has no VIEs and no mining operations in China, there is no adverse impact on the Company’s ability to conduct business in North America, to accept foreign investment or list on U.S. or other foreign exchange. Disclosure has been made as the legal and operational risks with the Company having previously been based in China.
Prospectus Summary,
In your summary of risk factors, disclose the risks that your corporate structure and being based in or having the majority or a material amount of the company’s operations in China poses to investors. In particular, describe the significant regulatory, liquidity, and enforcement risks with cross-references to the more detailed discussion of these risks in the prospectus.Rest of the question
For example, specifically discuss risks arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and that rules and regulations in China can change quickly with little advance notice; and the risk that the Chinese government may intervene or influence your operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in Chinabased issuers, which could result in a material change in your operations and/or the value of your securities. Acknowledge any risks that any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
No. 3
The registration statement/prospectus has been revised to include responsive disclosure. The risks related to our prior structure and operations are highlighted in the Prospectus
Summary. However, it is noted that the Company does not have a VIE structure and does not own or control any VIEs, is not based in China and does not have a material amount of operations in China. Read in the reply ↗
Disclose each permission that you, your subsidiaries are required to obtain from Chinese authorities to operate and issue these securities to foreign investors. State whether you or your subsidiaries are covered by permissions requirements from the CSRC or CAC and state affirmatively whether you have received all requisite permissions and whether any permissions have been denied.
No. 4
The Company or its subsidiaries are required to establish a commercial entity under the PRC laws or register itself directly with the Chinese government as a foreign company with Chinese authorities to operate in China, which is disclosed in the Amendment. However, neither the Company nor its subsidiaries are required to obtain permission to issue securities to foreign investors. No requirements from the CSRC or CAC are required and no permissions have been requested or denied, and we have disclosed the same in the Amendment under the Prospectus Summary on page 1. Read in the reply ↗
Provide a clear description of how cash is transferred through your organization. Quantify any cash flows and transfers of other assets by type that have occurred between the holding company, and its subsidiaries and direction of transfer. Quantify any dividends or distributions that a subsidiary has made to the holding company and which entity made such transfer, and their tax consequences.Rest of the question
Similarly quantify dividends or distributions made to U.S. investors, the source, and their tax consequences. Describe any restrictions on foreign exchange and your ability to transfer cash between entities, across borders, and to U.S. investors. Describe any restrictions and limitations on your ability to distribute earnings from your businesses, including subsidiaries, to the parent company and U.S. investors.
No. 5
In response to the Staff’s comments,responsive disclosures have been made under “Prospectus Summary – Our Company” on page 2 of the Amendment. Read in the reply ↗
Disclose that trading in your securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or fully investigate your auditor, and that as a result an exchange may determine to delist your securities.
No. 6
The Company’s auditor, Audit
Alliance LLP, is PCAOB registered and based in Singapore. Under the Holding Foreign Companies Accountable Act, the PCAOB is permitted to inspect the Company’s independent public accounting firm. However, we have disclosed under “Prospectus Summary” on page 1, and under Risk Factors on page 28 of the Amendment that, if the PCAOB later determined that it cannot inspect or fully investigate our auditor, trading in our securities may be prohibited under the HFCAA, and, as a result, Nasdaq may determine to delist our securities. Read in the reply ↗
Please provide detailed and clear disclosure about the current status of your mining operations in all geographical locations, such as the United States, Canada and China. For example, please (i) disclose where you intend to locate the miners that are currently in transit to the United States, (ii) disclose how many miners you intend to purchase, including an estimate of the cost of these additional miners, the typeRest of the question
of miners you intend to purchase, the source of funds for such purchases, and the estimated delivery of such miners, (iii) provide a brief description of the type of miners you currently own, (iv) disclose the material terms of your agreements with Compute North, Link Global Technologies and Digihost Technologies, including additional details regarding the profit sharing arrangements and obligations of the parties to each of these agreements, (v) provide a brief description of any regulations in the United States and Canada that impact your operations, (vi) disclose whether you currently have any operations in China, and, if so, please describe these operations, (vii) disclose whether you store your bitcoins with a custodian, and, if so disclose the material terms of any such agreements, and (viii) disclose whether you have insurance for your miners or digital assets, and, if so provide a brief description of the insurance. Also, we note your disclosure that you may sell bitcoin for fiat currency from time to time depending on market conditions and management's determination of your cash flow needs. Please identify the factors that management considers when evaluating market conditions, identify the exchanges that you use, identify the fiat currency you receive for your bitcoins and disclose whether you lend bitcoins to third parties, and, if so the material terms of such loans.
No. 7
The Company has provided responsive disclosures in response to this comment on page 5 of the Amendment under “Our Company.” Read in the reply ↗
We note your disclosure on page 5 that "[i]n May 2021, when the Financial Stability Development Committee of the State Council in China targeted virtual currency mining, the Company suspended operations in China and continued efforts to migrate all of its miners out of China to the United States and Canada, which the Company expects will be completed in the third quarter 2021." Please include a risk factor toRest of the question
address the risk to investors due to a recent change in Chinese government's actions. In this regard, we note your risk factors on pages 7 and 13.
No. 8
The response disclosure on page
3 states that “we anticipate the possibility that certain miner shipments may arrive in the U.S. early in the fourth quarter of 2021.” The Company has provided responsive disclosures in response to this comment under the risk factor titled “We may be subject to fines and penalties for not registering in China to do business” has been amended and restated in the Amendment on page 18 to include a reference to the May 2021 Statement targeting initial currency mining. Read in the reply ↗
Given the Chinese government’s significant oversight and discretion over the conduct of your business, please revise to separately highlight the risk that the Chinese government may intervene or influence your operations at any time, which could result in a material change in your operations and/or the value of your securities.Rest of the question
Also, given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in Chinabased issuers, acknowledge the risk that any such action could significantly limit or cause the value of such securities to significantly decline or be worthless.
No. 9 disclosures in response to this comment on page 18 of this Amendment, under “Risk Factors – We may be subject to fines and penalties for not registering in China to do business.” in the Amendment. Although the Company is not a China-based Issuer, disclosure has been made as to the possible actions of the Chinese government in light of the Company’s prior operations in China. Read in the reply ↗
In light of recent events indicating greater oversight by the Cyberspace Administration of China over data security, particularly for companies seeking to list on a foreign exchange, please revise your disclosure to explain how this oversight impacts your business and your offering and to what extent you believe that you are compliant with the regulations or policies that have been issued by the CAC to date.
No. 10
This response has been complied with. A risk factor has been added on page 20 of the Amendment, titled “We may be subject to recently announced Measures from the
Cyberspace Administration of China concerning the collection of data and required to obtain clearance from the CAC.” Read in the reply ↗
We note your disclosure that you currently conduct your business through Bit Digital Hong Kong Limited and Bit Digital Strategies Limited. Please tell us whether you or your subsidiaries currently have operations conducted through variable interest entities based in China. To the extent that you do, we may have additional comments.
No. 1
As noted above, while the
Company’s former peer-to-peer lending business conducted operations through VIEs, neither the Company nor its subsidiaries, Bit
Digital Hong Kong Limited and Bit Digital Strategies Limited (the “Hong Kong Subsidiaries”), currently conduct, nor did they ever conduct, bitcoin mining operations through VIEs in China. Read in the reply ↗
Provide prominent disclosure about the legal and operational risks associated with being based in or having a substantial amount of the company’s operations in China and Hong Kong. Your disclosure should make clear whether these risks could result in a material change in your operations and/or the value of your securities or could significantly limit or completely hinder your ability to offer or continue to offerRest of the question
securities to investors and cause the value of such securities to significantly decline or be worthless. Your disclosure should address how recent statements and regulatory actions by China’s government, such as those related to the use of variable interest entities and data security or anti-monopoly concerns, has or may impact the company’s ability to conduct its business, accept foreign investments, or list on an U.S. or other foreign exchange.
No. 2
In response to the Staff’s comment, disclosure has been made on the cover pages of the Prospectus and Prospectus Supplement Summary and in the Summary of Information on page 3 of the Prospectus and the Prospectus Supplement Summary beginning on page S-3, as to the risks involved, as well as the additional responsive disclosures that “as a result of our prior structure of an offshore issuer with a wholly-owned foreign entity, or WFOE, and VIEs which are the concern of the SEC as to China-based Issuers, we are setting forth below some of the risks and uncertainties concerning theRead in the reply ↗Rest of the answer
Company’s prior operations.” “Risks Related to Doing Business in China” have been moved up after “General
Risks.” The Company is based in the United States, with its principal office located in New York City since March 1, 2021. The Company does not have a substantial amount of its operations in China and Hong Kong. As set forth in the Company’s Form 6-K filed on August
20, 2021 disclosing the Company’s Results of Operations for the second quarter ended June 30, 2021, the Company had 29.2% of its bitcoin mining computers in China. All of those miners are warehoused and are not in operation, awaiting disposition or migration to North
America. The Company’s ten (10) remaining employees in China are employed by the Hong Kong Subsidiaries in administration and the warehousing of miners awaiting disposition or migration to North America, and are not engaged in mining operations in China. Since the
Company has no VIEs and no mining operations in China, there is no adverse impact on the Company’s ability to conduct business in
North America, to accept foreign investment or list on U.S. or other foreign exchange. Disclosure has been made as the legal and operational risks with the Company having previously been based in China.
In your summary of risk factors, disclose the risks that your corporate structure and being based in or having a material amount of the company’s operations in China poses to investors. In particular, describe the significant regulatory, liquidity, and enforcement risks with cross-references to the more detailed discussion of these risks in the prospectus.Rest of the question
For example, specifically discuss risks arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and that rules and regulations in China can change quickly with little advance notice; and the risk that the Chinese government may intervene or influence your operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in your operations and/or the value of your securities. Acknowledge any risks that any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
No. 3
The registration statement/prospectus has been revised to include responsive disclosure. The risks related to our prior structure and operations are highlighted under Summary of Information on page 3 of the Prospectus and in the Prospectus Supplement Summary beginning on page S-3. However, it is noted that the Company does not have a VIE structure and does not own or control any VIEs, is not based in China and does not have a material amount of operations in China. Read in the reply ↗
Disclose each permission that you, your subsidiaries are required to obtain from Chinese authorities to operate and issue these securities to foreign investors. State whether you or your subsidiaries are covered by permissions requirements from the CSRC or CAC and state affirmatively whether you have received all requisite permissions and whether any permissions have been denied.
No. 4
The Company or its subsidiaries are required to establish a commercial entity under the PRC laws or register itself directly with the Chinese government as a foreign company with Chinese authorities to operate in China, which is disclosed in the Amendment. However, neither the Company nor its subsidiaries are required to obtain permission to issue securities to foreign investors.Read in the reply ↗Rest of the answer
No requirements from the CSRC or CAC are required and no permissions have been requested or denied, and we have disclosed the same in the Prospectus under “Summary of Information” on page 3 and in the Prospectus Supplement Summary beginning on page S-3.
Provide a clear description of how cash is transferred through your organization. Quantify any cash flows and transfers of other assets by type that have occurred between the holding company, and its subsidiaries and direction of transfer. Quantify any dividends or distributions that a subsidiary has made to the holding company and which entity made such transfer, and their tax consequences.Rest of the question
Similarly quantify dividends or distributions made to U.S. investors, the source, and their tax consequences. Describe any restrictions on foreign exchange and your ability to transfer cash between entities, across borders, and to U.S. investors. Describe any restrictions and limitations on your ability to distribute earnings from your businesses, including subsidiaries, to the parent company and U.S. investors.
No. 5
In response to the Staff’s comments, responsive disclosures have been made under “Summary of Information – Our Business” on page 3 of the Prospectus and in the Prospectus Supplement Summary – “Our Business” beginning on page S-5. Read in the reply ↗
Disclose that trading in your securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or fully investigate your auditor, and that as a result an exchange may determine to delist your securities.
No. 6
The Company’s auditor, Audit
Alliance LLP, is PCAOB registered and based in Singapore. Under the Holding Foreign Companies Accountable Act, the PCAOB is permitted to inspect the Company’s independent public accounting firm. However, we have disclosed under “Summary of Information –
Our Business” on page 4, and under Risk Factors on page 18 of the Prospectus and in the Prospectus Supplement Summary on page S-4 that if the PCAOB later determined that it cannot inspect or fully investigate our auditor, trading in our securities may be prohibited under the HFCAA, and, as a result, NasdaqRead in the reply ↗Rest of the answer
may determine to delist our securities.
Please provide detailed and clear disclosure about the current status of your mining operations in all geographical locations, such as the United States, Canada and China. ​ For example, please (i) disclose where you intend to locate the miners that are currently in transit to the United States, (ii) disclose how many miners you intend to purchase, including an estimate of the cost of these additional miners, theRest of the question
type of miners you intend to purchase, the source of funds for such purchases, and the estimated delivery of such miners, (iii) provide a brief description of the type of miners you currently own, (iv) disclose the material terms of your agreements with Compute North, Link Global Technologies and Digihost Technologies, including additional details regarding the profit sharing arrangements and obligations of the parties to each of these agreements, (v) provide a brief description of any regulations in the United States and Canada that impact your operations, (vi) disclose whether you currently have any operations in China, and, if so, please describe these operations, (vii) disclose whether you store your bitcoins with a custodian, and, if so disclose the material terms of any such agreements, and (viii) disclose whether you have insurance for your miners or digital assets, and, if so provide a brief description of the insurance. Also, we note your disclosure that you may sell bitcoin for fiat currency from time to time depending on market conditions and management's determination of your cash flow needs. Please identify the factors that management considers when evaluating market conditions, identify the exchanges that you use, identify the fiat currency you receive for your bitcoins and disclose whether you lend bitcoins to third parties, and, if so the material terms of such loans.
No. 7
The Company has provided responsive disclosures in response to this comment in the Prospectus under “Summary of Information - Our Business” on page 4 and in the
Prospectus Supplement Summary under “Our Business” beginning on page S-5. Read in the reply ↗
We note your disclosure on page 2 that "[i]n May 2021, when the Financial Stability Development Committee of the State Council in China targeted virtual currency mining, the Company suspended operations in China and continued to migrate all miners out of China, which will be completed in the third quarter 2021." Please include a risk factor to address the risk to investors due to a recent change in ChineseRest of the question
government's actions. In this regard, we note your risk factors on pages 15 and 29.
No. 8
The responsive disclosure, beginning on page 4 of the Prospectus under “Summary of Information – Our Business” and in the Prospectus Supplement Summary under
“Our Business” beginning on page S-5, states that “we anticipate the possibility that certain miner shipments may arrive in the U.S. early in the fourth quarter of 2021.” The Company has provided responsive disclosures in response to this comment under the risk factor titled “We may be subject to fines and penalties for any non-compliance with or liabilities in our historical business in China in a certain period from now on” hasRead in the reply ↗Rest of the answer
been amended and restated in the Prospectus on page 15 to include a reference to the
May 2021 Statement targeting initial currency mining.
Given the Chinese government’s significant oversight and discretion over the conduct of your business, please revise to separately highlight the risk that the Chinese government may intervene or influence your operations at any time, which could result in a material change in your operations and/or the value of your securities.Rest of the question
Also, given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in Chinabased issuers, acknowledge the risk that any such action could significantly limit or cause the value of such securities to significantly decline or be worthless.
No. 9 disclosures in response to this comment on page 15 of the Prospectus, under “Risk Factors – We may be subject to fines and penalties for any non-compliance with or liabilities in our historical business in China in a certain period from now on.” Although the Company is not a China-based Issuer, disclosure has been made as to the possible actions of the Chinese government in light of the
Company’s prior operations in China. Read in the reply ↗
In light of recent events indicating greater oversight by the Cyberspace Administration of China over data security, particularly for companies seeking to list on a foreign exchange, please revise your disclosure to explain how this oversight impacts your business and your offering and to what extent you believe that you are compliant with the regulations or policies that have been issued by the CAC to date.
No. 10
This response has been complied with. A risk factor has been added on page 16 of the Prospectus, titled “We may be subject to recently announced Measures from the
Cyberspace Administration of China concerning the collection of data and required to obtain clearance from the CAC.” Read in the reply ↗
We note your response to our prior comment 2. Although we note disclosure that your activities may not be deemed to be operation activities by a foreign legal person or entity under PRC law, you nevertheless appear to have remaining operations in China, including warehousing 29.2% of your hardware and engaging 10 employees.Rest of the question
Please provide prominent disclosure about the legal and operational risks associated with your remaining operations in China, including a discussion on how the recent ban of digital asset transactions in China impacts your business and whether it will impact your corporate structure going forward. Your disclosure should make clear whether these risks could result in a material change in your operations and/or the value of your securities or could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Alternatively, if you believe that your remaining operations in China pose no such risks, including no risks to the value of your securities, please provide us your factual and legal analysis explaining why that is the case.
to No. 1
Prominent disclosure has been made on both the cover page of the prospectus, as well as at the beginning of the Prospectus Summary, as to the current status of the
Company’s operations as well as risks posed by having been a China-based issuer. While these statements and regulatory actions may have an adverse effect on the Company in view of its prior operations, they are not expected to result in an adverse impact on our corporate structure going forward or have a material change in our operations and/or the value of our securities or significantly limit or completely hinder ourRead in the reply ↗Rest of the answer
ability to offer or continue to offer securities to investors or cause the value of such securities to significantly decline or be worthless. We do not believe such developments will adversely impact the Company’s ability to conduct its business, accept foreign investments, or continued listing on Nasdaq or decrease value of our securities and/or significantly limit or completely hinder our ability to offer or continue to offer our securities to investors.
The Company has disclosed in the Prospectus Summary that mining operations in China completely terminated in June 2021. All miners which had been warehoused were migrated out of China by September 2021. The ten (10) remaining employees in China, all employed by Bit Digital Hong Kong Limited, include five (5) persons now working in Hong Kong in administration. See Response No. 6 for further information.
The Company further described that it does not own or control any VIEs or intends to form a VIE. In view of its limited operations in mainland China, which are primary run out of Hong Kong, it has terminated the process to form a WFOE. The Company has disclosed both in the Prospectus Summary and Risk
Factors the risks and uncertainties that the Company may be subject to any fines or penalties as a result of its prior operations as a
China-based issuer.
We note your response to our prior comments 1 and 2. On page 1, you state that you are "in the process of registering a wholly-owned subsidiary to do business in China, and you reference your entities operating in China. Please provide a separately captioned section in the Prospectus Summary explaining your current and planned corporate structure, including diagrams for each.Rest of the question
Include a discussion of the purpose of your planned PRC subsidiary, and describe the operations in which it will engage. Explain whether this will involve the use of a variable interest entity. To the extent material, discuss any attendant risks to this new PRC subsidiary or the business you plan to do in China and include cross references to relevant risk factors. Also, please clearly describe the operations of your operating entities in China and include cross references to relevant risk factors. Prospectus Summary, page 1
to No. 2
As noted in Response No. 1 under the first bullet in the Prospectus Summary, the Company stated: “As a result of the China-ban on digital asset transactions, it had terminated the process of forming a WFOE subsidy in mainland China. The diagram inserted under the second bullet in the Prospectus
Summary does not contemplate any new entities being added to the existing six (6) subsidiaries of the Company.
The operations of the Company’s two Hong Kong subsidiaries are set forth in the fourth bullet of the Prospectus Summary.Read in the reply ↗Rest of the answer
Cross references to the appropriate Risk Factors are set forth under the first bullet.
We note your response to our prior comment 3. In your summary of risk factors describe any significant liquidity risks relating to your prior, current, or future corporate structure or operations in China, with cross-references to the more detailed discussion of these risks in the prospectus.
to No. 3
The Company responded under the last bullet in the Prospectus Summary; “Since the Company has no subsidiaries in mainland China and has terminated the process to form one in mainland China, the Company is not subject to liquidity risks in mainland China, nor does it believe it was subject to liquidity risks. Read in the reply ↗
We note your response to our prior comment 5. Please revise your "Transfer of cash" and "Payment of dividends or distributions" discussions on page 5 to quantify the transactions discussed. Additionally, revise your "Payment of dividends or distributions" discussion to discuss the tax consequences of the transactions discussed therein. Our Company, page 2
to No. 4
In response to the Staff’ comments, we have quantified the “Transfer of cash” and “Payment of dividends or distributions” on page 8 as below:
-
Transfer of cash
From the Company’s commencement of mining business in February 2020 to October 3, 2021, the Company did not transfer any cash from the holding company to any of its subsidiaries.
During the year ended December 31, 2020, the Company raised proceeds of approximately $5.2 million from certain private placements, and the proceeds were directly transferred from investors to the designated accounts of Bit Digital Hong KongRead in the reply ↗Rest of the answer
Limited (“BT HK”), the Company’s wholly owned subsidiary in Hong Kong.
During the period from January 1, 2021 to October 3, 2021, the Company raised proceeds of approximately $37 million from both private placements and direct offering. The proceeds were directly transferred from investors to designated accounts of Bit Digital USA, Inc. (“BT USA”), the Company’s subsidiary in U.S. The $80 million of gross proceeds raised in the September 2021 Private Placement by the Company have been transferred to Bit Digital
USA and/or invested in the United States in interest-bearing accounts.
Payment of dividends or distributions
During the period from February 2020 to the date of this response letter, the Company did not make any dividends or distribution from any of its subsidiaries, nor did the Company make any dividends or distributions to its US investors.
Pursuant to the Enterprise Income Tax Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC, or has set up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between Mainland China and the Hong Kong
Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to enjoy the reduced withholding tax: (i) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (ii) it must have directly owned such percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. In August 2015, the State Administration of Taxation promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or Circular 60, which became effective on November 1, 2015. Circular
60 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities.
We note your response to our prior comment 7, and reissue in part. In that regard, please: • Revise to provide quantitative information regarding each of your hosting agreements with Compute North, Link Global, and Digihost, regarding, for example, fees and profit sharing; • Disclose the material terms of your agreement with BlockFusion USA, including quantitative terms; • Provide a brief description of anyRest of the question
regulations in Canada that impact your operations; • Further disclose the material terms of your custodian agreements with Matrixport Cactus and Copper, including for example in what manner they are required to store your digital assets, whether they are contractually required to hold your digital assets in cold storage, what security precautions your custodians are required to undertake, what inspection rights you have, and what type of insurance your custodians are required to have to protect you from loss; • Identify the factors that management considers when evaluating market conditions in considering whether to sell bitcoin; • Disclose whether your custodians store all digital assets you own, including stablecoins, or explain in sufficient detail how you store such stablecoins; • Disclose whether you hold any insurance for your digital assets, and, if so, provide a brief description of the insurance; and • State the interest rate you charge on bitcoin loans that you make.
to No. 5
This comment has been complied with.
● All quantitative information concerning the three (3) hosting agreements have been described under “Our Company - Hosting Agreements.”
● All material terms of the agreement with Blockfusion USA including quantitative terms have been described under “Our Company - Hosting Agreements.”
●
Canadian regulations are described with “Our Company - Hosting Agreements - Link Global Technologies, Inc.” and “Risks Factors – Risks Related to Canadian Government Regulations.” The Company has a non-material number of miners in Alberta, Canada.
● TheRead in the reply ↗Rest of the answer
material terms of the Custodian Agreements with Matrixport
– Cactus Custody and Copper are set forth under “Our Company - Custodian Accounts.”
● A description of issuer is set forth under “Our Company
- Custodian Accounts.”
● 5% interest rate on prior loans is described under “Our
We note your response to our prior comment 8. Disclose in the "Our Business" section beginning on page 4, whether you continued any bitcoin mining operations after any government mining bans in China, national or otherwise, were put into effect. To the extent you continued any mining operations after any bans were put into effect, provide specific risk factor disclosure addressing the possible consequences.Rest of the question
In that regard we note that in May 2021 the Chinese government targeted virtual currency mining, but you did not cease mining operations in China until June 2021.
to No. 6
We have added disclosures in response to the Commission’s comment. Specifically, we have disclosed the following:
On May 21, 2021, the Financial
Stability and Development Committee of the State Council in China proposed to “crack down on bitcoin mining and trading.”
However, it was not under the September 24, 2021 NDRC Notification, described below, that digital asset transactions were banned.Read in the reply ↗Rest of the answer
In May
2021, local governments began to issue corresponding measures in succession to respond to the central government’s proposal, including
Xinjiang Changji Hui Autonomous Prefecture Development and Reform Commission issuing a notice on the immediate shutdown of enterprises engaged in cryptocurrency mining on June 9, 2021. During that three-week period, we only had mining operations in Sichuan Province and not in Xinjiang. On June 18, 2021, according to the public media report, Sichuan Provincial Development and Reform Commission and Sichuan
Energy Bureau issued a notice on the shutdown of cryptocurrency mining projects with the deadline of June 25, 2021. That is the reason why we had ceased all remaining mining operations in PRC on June 21, 2021.
On September 24, 2021, the newly issued Notification of Overhauling the Mining Activity of Cryptocurrency, or the Notification No. 1283, was published on the National
Development and Reform Commission People’s Republic of China (the “NDRC”)’s official website, to accelerate the sort-out of the cryptocurrency mining. The Notification No. 1283 was joint issued by the NDRC, the People’s Bank of China, the Ministry of Public Security of the PRC and the other eight important central departments, showing the firm attitude of the PRC government to the cryptocurrency mining.
In consideration of the
PRC government’s attitude and our intentional business plan, we will not conduct any cryptocurrency mining operations or cryptocurrency trading operations in the mainland of the PRC. All of our remaining miners which had been warehoused as of June 2021 have been migrated out of the PRC on September 30, 2021.
We have not received any administrative penalty for our historical mining business as of the date of this prospectus. The NDRC notice set forth penalties on a going forward basis for all of the PRC. While we do not believe Sichuan Province will seek to impose retroactive fines, penalties, or sanctions, we have disclosed the following risk factors on page 15, in consideration that we have suspended all the mining activities before the deadline. Nevertheless, uncertainties still exist since the administrative penalties may be imposed on us in a certain period from now on for any noncompliance with or liabilities in our historical business in China. Pursuant to the Law of the People’s
Republic of China on Administrative Penalties (Revised in 2021), where an unlawful act conducted in China is not discovered within two years of its commission (the period shall be counted from the date on which the unlawful act is committed, or if the act is ongoing or continuous, from the date on which the act ends), the administrative penalty shall be exempted; and if it involves citizens’ life and health security or financial security, and causes harmful consequences, the above-mentioned period shall be extended to five years, except as otherwise prescribed by laws. See “Risk Factors. We may be subject to fines and penalties for any noncompliance with or liabilities in our historical business in China in a certain period from now on.”
We may be subject to recently announced Measures from the Cyberspace Administration of China, page 20.
We note your response to our prior comment 10. You state on page 20 that "due to [y]our past mining operations in China, [you] may be deemed to be a 'data processor carrying out data processing activities' under the Measures." In light of this, disclose why you believe you "currently are not required to obtain clearance from the CAC before [y]our listing in the United States under the recently enacted or proposedRest of the question
regulations or rules." 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.
to No. 7
This comment has been complied with on page 18 under “Risks Factors – Risks Related to Doing Business in China - We may be subject to recently announced
Measures from the Cyberspace Administration of China concerning the collection of data and required to obtain clearance from the CAC.”
On July 10, 2021, the CAC issued the Measures for Cybersecurity Review (Revision Daft for Comments), or the Measures.Read in the reply ↗Rest of the answer
The scope of review under the Measures extends to critical information infrastructure operators, data processors carrying out data processing activities, and national security risks related to a non-PRC listing, especially the “risks of core data, important data or substantial personal information being stolen, leaked, damaged, illegally used or exported; risks of Critical Information Infrastructure, core data, important data or substantial personal information data being affected, controlled and maliciously used by foreign governments after a foreign listing.”
According to Article 6 of the Measures, operators who possess personal information of over a million users shall apply to the Cybersecurity
Review Office for cybersecurity reviews before listing abroad. Besides, where any activities affect or may endanger national security during the purchase of network products and services by key information infrastructure operators or the data processing by data workers, cybersecurity reviews should be conducted in accordance with the Measures.
Currently, we have not been involved in any investigations on cybersecurity review initiated by the CAC or related governmental regulatory authorities, and we have not received any inquiry, notice, warning, or sanction in such respect as well.
We believe we currently are not required to obtain clearance from the CAC before our listing in the United States under the recently enacted or proposed regulations or rules, because (i) we have never set a digital platform for any user and collected personal data during our mining operation, (ii) only the operators who possess personal information of over one million users shall apply for cybersecurity reviews before listing abroad, and (iii) the Measures has yet to take effect and might be further revised. However, since it is the first time that the cybersecurity review applies to the “data processors”, and due to our past mining operations in China, we may be deemed as a “data processors carrying out data processing activities”, we face uncertainties as to the interpretation or implementation of the Measures, and if required, whether such clearance can be timely obtained.
We note your response to our prior comments 2 and 9. Although we note disclosure that your activities may not be deemed to be operation activities by a foreign legal person or entity under PRC law, you nevertheless appear to have remaining operations in China including warehousing 29.2% of your hardware and engaging 10 employees.Rest of the question
Please provide prominent disclosure about the legal and operational risks associated with your remaining operations in China, including a discussion on how the recent ban of digital asset transactions in China impacts your business and whether it will impact your corporate structure going forward. Your disclosure should make clear whether these risks could result in a material change in your operations and/or the value of your securities or could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Alternatively, if you believe that your remaining operations in China pose no such risks, including no risks to the value of your securities, please provide us your factual and legal analysis explaining why that is the case.
to No. 1
In response to this comment, the Company has included in the Amendment prominent disclosure on both the cover page of the prospectus and at the beginning of Summary of Information, as to the current status of the Company’s operations as well as risks posed by having previously been a China-based issuer.
The Company has disclosed in the Summary of Information that mining operations in China completely terminated in June 2021 and that all of its miners that had been warehoused were migrated out of China by the end of September 2021.
The Company further disclosed in the AmendmentRead in the reply ↗Rest of the answer
that it does not own or control any VIEs nor does it intend to form a VIE in the future. In view of its limited operations in mainland China, which are primarily run out of Hong Kong, the Company has abandoned its prior efforts to form a WFOE. The Company has disclosed both in the Prospectus Summary and in the Risk Factors the risks and uncertainties that the Company may be subject to any fines or penalties as a result of its prior operations as a China-based issuer.
We note your response to our prior comments 1 and 2. On pages 3 and S-4, you state that you are in the process of registering a wholly-owned subsidiary to do business in China, and, on pages 3 and S-5, you state that you have operating entities in China.Rest of the question
Please provide a separately captioned section in the Summary of Information and Prospectus Supplement Summary explaining your current and planned corporate structure, including diagrams for each. Include a discussion of the purpose of your planned PRC subsidiary and describe the operations in which it will engage. Explain whether this will involve the use of a variable interest entity. To the extent material, discuss any attendant risks to this new PRC subsidiary or the business you plan to do in China and include cross references to relevant risk factors. Also, please clearly describe the operations of your operating entities in China and include cross references to relevant risk factors. Incorporation by Reference, page 2
to No. 2
As noted above in Response
No. 1, under the first bullet in the Summary of Information, the Company included in the Amendment disclosure that it had abandoned the process of forming a WFOE subsidiary in mainland China. The diagram inserted under the second bullet in the Summary of Information does not contemplate any new entities being added to the existing six (6) subsidiaries of the Company. The operations of the Company’s two Hong Kong subsidiaries are set forth in the fourth bullet of the Summary of Information. Read in the reply ↗
Please revise your disclosure on page 2 to specifically incorporate by reference your 6-K for the quarter ended June 30, 2021 filed on August 20, 2021.
to No. 3
In response to this comment, the list of documents incorporated by reference in the Amendment has been updated. Read in the reply ↗
We note your response to our prior comment 3. In your Summary of Information on page 3 and the Prospectus Supplement Summary on page S-4, describe any significant liquidity risks relating to your prior, current, or future corporate structure or operations in China, with cross-references to the more detailed discussion of these risks in the prospectus.
to No. 4
In response to this comment, the Amendment includes disclosure in the last bullet in the “Summary of Information,” which clarifies that “[s]ince the Company has no subsidiaries in mainland China and has terminated the process to form one in mainland China, the Company is not subject to liquidity risks in mainland China.” Read in the reply ↗
We note your response to our prior comment 5. Please revise your "Transfer of cash" and "Payment of dividends or distributions" discussions on page 7 to quantify the transactions discussed. Additionally, revise your "Payment of dividends or distributions" discussion to discuss the tax consequences of the transactions discussed therein Our Business, page 4
to No. 5
In response to the Staff’s comments, we have quantified the “Transfer of cash” and “Payment of dividends or distributions” on page 13. Read in the reply ↗
We note your response to our prior comment 7, and reissue in part. In that regard, please: • Revise to provide quantitative information regarding each of your hosting agreements with Compute North, Link Global, and Digihost, regarding, for example, fees and profit sharing; • Disclose the material terms of your agreement with BlockFusion USA, including quantitative terms; • Provide a brief description of anyRest of the question
regulations in Canada that impact your operations; • Further disclose the material terms of your custodian agreements with Matrixport Cactus and Copper, including for example in what manner they are required to store your digital assets, whether they are contractually required to hold your digital assets in cold storage, what security precautions your custodians are required to undertake, what inspection rights you have, and what type of insurance your custodians are required to have to protect you from loss; • Identify the factors that management considers when evaluating market conditions in considering whether to sell bitcoin; • Disclose whether your custodians store all digital assets you own, including stablecoins, or explain in sufficient detail how you store such stablecoins; • Disclose whether you hold any insurance for your digital assets, and, if so, provide a brief description of the insurance; and • State the interest rate you charge on bitcoin loans that you make. Risk Factors, page 10
to No. 6
In response to this comment, the Company revised the disclosure appearing in “Summary of Information – Our Company,” starting on page 6 of the Prospectus. Specifically, the Company notes for the Staff that:
All quantitative information concerning the three (3) hosting agreements have been described under “Our Company - Hosting Agreements.”
All material terms of the agreement with Blockfusion USA including quantitative terms have been described under “Our Company - Hosting Agreements.”
Canadian regulations are described with “Our Company - Hosting Agreements - Link GlobalRead in the reply ↗Rest of the answer
Technologies, Inc.” and “Risks Factors – Risks Related to Canadian Government Regulations.” The Company has a non-material number of miners in Alberta, Canada.
The material terms of the Custodian Agreements with Matrixport Cactus Custody and Copper are set forth under “Our Company - Custodian Accounts.”
We note your response to our prior comment 8. Disclose in the "Our Business" section beginning on page 4, whether you continued any bitcoin mining operations after any government mining bans in China, national or otherwise, were put into effect. To the extent you continued any mining operations after any bans were put into effect, provide specific risk factor disclosure addressing the possible consequences.Rest of the question
In that regard we note that in May 2021 the Chinese government targeted virtual currency mining, but you did not cease mining operations in China until June 2021.
No numbered answer found in the reply. Read the reply ↗
We note your response to our prior comment 10. You state on page 16 that "due to [y]our past mining operations in China, [you] may be deemed to be a 'data processor carrying out data processing activities' under the Measures." In light of this, disclose why you believe you "currently are not required to obtain clearance from the CAC before [y]our listing in the United States under the recently enacted or proposedRest of the question
regulations or rules."
to No. 7
In response to this comment, we have added disclosures on the cover page of the prospectus; on page 5 in the fourth bullet under Summary of Information; page 9 under “Migration and Status of Mining Operations”; and page 18 under Risk Factors – “We may be subject to fines and penalties for any noncompliance with or liabilities in our historical business in China in a certain period from now on.”
8. We note your response to our prior comment
10.Read in the reply ↗Rest of the answer
You state on page 16 that “due to [y]our past mining operations in China, [you] may be deemed to be a ‘data processor carrying out data processing activities’ under the Measures.” In light of this disclosure, why do you believe you “currently are not required to obtain clearance from the CAC before [y]our listing in the United States under the recently enacted or proposed regulations or rules.”
Response to No. 8
In response to this comment, the Company has revised its disclosure, including on page 21 of the Prospectus under “Risks Factors – We may be subject to recently announced Measures from the Cyberspace Administration of China concerning the collection of data and required to obtain clearance from the CAC.”
Please expand your disclosure on the prospectus cover page to provide a description of how cash is transferred through your organization. State whether any transfers, dividends, or distributions have been made to date.
to No. 1. This comment has been complied with. Disclosure has been made as to the transfer or cash and other assets and the payment of dividends and distributions to date. Read in the reply ↗
Please remove the disclosure on the cover page that recent statements and regulatory actions by China's government "are not expected to result in an adverse impact on [y]our corporate structure going forward or have a material change in [y]our operations and/or the value of [y]our securities or significantly limit or completely hinder [y]our ability to offer or continue to offer securities to investors or cause theRest of the question
value of such securities to significantly decline or be worthless," and that you "do not believe such developments will adversely impact the Company’s ability to conduct its business, accept foreign investments, or continued listing on Nasdaq or decrease the value of [y]our securities and/or significantly limit or completely hinder [y]our ability to offer or continue to offer our securities to investors." Your cover page should highlight the risks posed by having been a China-based issuer and by your previous and current operations in China. In this regard, we note your disclosure on pages 15 to 20.
to No. 2. This comment has been complied with. We revised the disclosure concerning recent statements and regulatory actions by China’s government and replaced them with the material risks posed by having been a China-based issuer and by our previous and current operations in China, which are provided in greater detail under “Risk Factors” commencing on page 15. Read in the reply ↗
We note your responses to our prior comments 1 and 2 and reissue in part. On page 1, you continue to state that you currently conduct your business through your "operating entities in China." In addition, on page 2 you disclose that your operations in China include "the deployment of [your] crypto assets by Bit Digital Strategies Limited." If you continue to have operating subsidiaries in China, please explain whyRest of the question
they are not depicted in the diagram on page 2. Additionally, if applicable, please provide a separately captioned section in the Prospectus Summary explaining your current corporate structure, and clearly describe the operations of your operating entities in China and include cross references to relevant risk factors. Also, revise for consistency with your disclosure on page 2 where you state that you have no subsidiaries in mainland China. Finally, please clarify your current business operations in Hong Kong, and disclose whether your business operations in Hong Kong will continue given that all of your mining operations are conducted in the United States and Canada.
to No. 3. This comment has been complied with. We do not have any operating subsidiaries in mainland China, or elsewhere, other than the six that are described in the diagram. We deleted the reference on page 1 that our Hong Kong subsidiaries are “our operating subsidiaries in
China.” Thus, the sole limited operations in China are set forth in the first bullet under the Corporate Structure diagram along with a cross-reference to relevant risk factors. Read in the reply ↗
We note your disclosure on page 2 that no permissions have been requested from the CSRC or the CAC. Please disclose the consequences if such permissions should have been requested and obtained. In addition, revise your disclosure on page 2 to address the fact that there is pending legislation that would reduce the number of consecutive noninspection years required for triggering prohibitions under the HFCA Act fromRest of the question
three years to two years.
to No. 4. This comment has been complied with. The second bullet under the diagram has been expanded to set forth the consequences if permission should have been requested from the CSRC or the CAC. The third bullet under the diagram has been expanded to disclose the fact there is pending legislation that would reduce the number of consecutive non-inspection years required for triggering prohibitions under the HFCA from three years to two years. Read in the reply ↗
Please describe the "security interest in the miners and other equipment" that you granted to Compute North. In addition, we note that the term of your agreement with Compute North is for the remainder of any Equipment Term. Please disclose the remainder of your current Equipment Terms.
to No. 5. This comment has been complied with. The security interest has been described exactly as it is provided in the contract. The remainder terms of the two batches of miners have been disclosed. Disclosure has been made of the current status of operations at both Compute North and
Link Global. Read in the reply ↗
Refer to your response to comment 5. Please disclose whether your custodians store all digital assets you own, including stablecoins, or explain in sufficient detail how you store such stablecoins. In addition, state whether you hold any insurance for your digital assets, and, if so, provide a brief description of the insurance.Rest of the question
In this regard, we note your disclosure on page 7 that you are actively seeking insurance for your digital assets. Currency Transactions, page 7
to No. 6.
This comment has been complied with. We have disclosed that the custodians store all digital assets we own, including bitcoins, stablecoins, ETH or WBTC tokens. We have expanded the discussion of the amounts of insurance maintained by our custodians on our digital assets. Read in the reply ↗
We note your disclosure that you exchange bitcoins for USDT or USDC. Please disclose the risks associated with such digital assets, including the risk of volatility of the digital assets and the risk that such digital assets could be deemed securities under the U.S. federal securities laws.Rest of the question
Please describe your internal processes for how you determine whether the digital assets you hold are securities within the meaning of the U.S. federal securities laws and clarify that such processes are risk based assessments and are not a legal standard or binding on regulators. Please also tell us whether you have any plans to hold any other types of digital assets in the future, and, if so and if known, identify such digital assets, and describe how you would make a determination of whether to hold other types of digital assets.
to No. 7. This comment has been complied with. We have disclosed the risks on holding bitcoins, ETH, WBTC tokens and stablecoins from both an SEC standpoint, as well as the volatility of digital assets. We have disclosed how we determine whether digital assets are securities, that we have temporarily taken and may from time to time temporarily take receipt of immaterial amounts of other digital assets, and that other than bitcoin, stablecoins, WBTC tokens and ETH, we have no plans to hold material amounts of any other types of digital assets in the future.Read in the reply ↗Rest of the answer
A cross-reference has been made to the appropriate risk factors.
Please disclose why you hold digital assets other than Bitcoin.
to No. 8. This comment has been complied with. We have disclosed under Custodian Accounts and Currency Transactions that we only sell Bitcoin where there is a need to fund working capital and the purchase of mining equipment, as well as for deployment by our subsidiary Bit Digital Strategies Limited. Read in the reply ↗
Please remove the disclosure on the cover page that recent statements and regulatory actions by China's government are not expected "to adversely impact the Company's ability to conduct its business, accept foreign investors, or continued listing on Nasdaq, which would decrease the value of your securities and/or significantly limit or completely hinder [y]our ability to continue to offer [y]our securities toRest of the question
investors." Your cover page should highlight the risks posed by having been a China-based issuer and by your previous and current operations in China. In this regard, we note your disclosure on pages 12 to 18.
18. Response to No. 1. This comment has been complied with. We revised the disclosure concerning recent statements and regulatory actions by China’s government and replaced them with the material risks posed by having been a China-based issuer and by our previous and current operations in China, which are provided in greater detail under “Risk Factors” commencing on page 12. Read in the reply ↗
Please expand your disclosure on the prospectus cover page to provide a description of how cash is transferred through your organization. State whether any transfers, dividends, or distributions have been made to date.
to No. 2. This comment has been complied with. Disclosure has been made as to the transfer or cash and other assets and the payment of dividends and distributions to date. Read in the reply ↗
Please disclose the current state of your operations in China and Hong Kong. In this regard, on page 1 you continue to state that you currently conduct your business through your "operating entities in China." In addition, on page 2 you disclose that your operations in China include "the deployment of [your] crypto assets by Bit Digital Strategies Limited." If you continue to have operating subsidiaries in China,Rest of the question
please explain why they are not depicted in the diagram on page 1. Additionally, if applicable, please provide a separately captioned section in the Prospectus Summary explaining your current corporate structure, and clearly describe the operations of your operating entities in China and include cross references to relevant risk factors. Also, revise for consistency with your disclosure on page 2 where you state that you have no subsidiaries in mainland China. Finally, please clarify your current business operations in Hong Kong, and disclose whether your business operations in Hong Kong will continue given that all of your mining operations are conducted in the United States and Canada.
to No. 3. This comment has been complied with. We do not have any operating subsidiaries in mainland China, or elsewhere, other than the six that are described in the diagram. We deleted the reference on page 1 that our Hong Kong subsidiaries are “our operating subsidiaries in China.”
Thus, the sole limited operations in China are set forth in the first bullet under the Corporate Structure diagram along with a cross-reference to relevant risk factors. Read in the reply ↗
We note your disclosure on page 2 that no permissions have been requested from the CSRC or the CAC. Please disclose the consequences if such permissions should have been requested and obtained. In addition, revise your disclosure on page 2 to address the fact that there is pending legislation that would reduce the number of consecutive noninspection years required for triggering prohibitions under the HFCA Act fromRest of the question
three years to two years.
to No. 4. This comment has been complied with. The second bullet under the diagram has been expanded to set forth the consequences if permission should have been requested from the CSRC or the CAC. The third bullet under the diagram has been expanded to disclose the fact there is pending legislation that would reduce the number of consecutive non-inspection years required for triggering prohibitions under the HFCA from three years to two years. Read in the reply ↗
Please describe the "security interest in the miners and other equipment" that you granted to Compute North. In addition, we note that the term of your agreement with Compute North is for the remainder of any Equipment Term. Please disclose the remainder of your current Equipment Terms.
to No. 5. This comment has been complied with. The security interest has been described exactly as it is provided in the contract. The remainder terms of the two batches of miners have been disclosed. Disclosure has been made of the current status of operations at both Compute North and Link
Global. Read in the reply ↗
Please disclose whether your custodians store all digital assets you own, including stablecoins, or explain in sufficient detail how you store such stablecoins. In addition, state whether you hold any insurance for your digital assets, and, if so, provide a brief description of the insurance. In this regard, we note your disclosure on page 7 that you are actively seeking insurance for your digital assets.
to No. 6. This comment has been complied with. We have disclosed that the custodians store all digital assets we own, including bitcoins, stablecoins, ETH or
WBTC tokens. We have expanded the discussion of the amounts of insurance maintained by our custodians on our digital assets. Read in the reply ↗
We note your disclosure that you exchange bitcoins for USDT or USDC. Please disclose the risks associated with such digital assets, including the risk of volatility of the digital assets and the risk that such digital assets could be deemed securities under the U.S. federal securities laws.Rest of the question
Please describe your internal processes for how you determine whether the digital assets you hold are securities within the meaning of the U.S. federal securities laws and clarify that such processes are risk based assessments and are not a legal standard or binding on regulators. Please also tell us whether you have any plans to hold any other types of digital assets in the future, and, if so and if known, identify such digital assets, and describe how you would make a determination of whether to hold other types of digital assets.
to No. 7. This comment has been complied with. We have disclosed the risks on holding bitcoins, ETH, WBTC tokens and stablecoins from both an SEC standpoint, as well as the volatility of digital assets. We have disclosed how we determine whether digital assets are securities, that we have temporarily taken and may from time to time temporarily take receipt of immaterial amounts other digital assets, and that other than bitcoin, stablecoins,
WBTC tokens and ETH, we have no plans to hold material amounts of any other types of digital assets in the future.Read in the reply ↗Rest of the answer
A cross-reference has been made to the appropriate risk factors.
Please disclose why you hold digital assets other than Bitcoin. Risk Factors, page 12
to No. 8. This comment has been complied with. We have disclosed under Custodian Accounts and Currency Transactions that we only sell Bitcoin where there is a need to fund working capital and the purchase of mining equipment, as well as for deployment by our subsidiary Bit Digital Strategies
Limited. Read in the reply ↗
Please expand your risk factor disclosure to discuss that the United States Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would decrease the number of non-inspection years from three years to two, thus reducing the time period before your securities may be prohibited from trading or delisted.Rest of the question
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.
to No. 9. This comment has been complied with. On page 18 under the title “Regulatory Bodies of the United State may be limited in their ability to conduct investigations or inspections of our operations in China.” Read in the reply ↗
Refer to your response to comment 8. On page 8, you disclose that "other than bitcoin, stablecoins, WBTC tokens and ETH, [you] have no plans to hold material amounts of any other types of digital assets in the future." Please disclose whether you have plans to hold material amounts of stablecoins, WBTC tokens and ETH, and, if so, disclose the business reasons for holding material amounts of such digital assets.Rest of the question
In addition, please disclose the specific stablecoins you plan to hold as well as the other types of digital assets you plan to hold in the future, regardless of the amount of any such digital assets.
to No. 1
This comment has been complied with.
We have made the following disclosure under Digital Asset Transactions on p. 8: “We use Amber Group’s OTC desk for selling or exchanging bitcoins for US dollars, USDT (Tether, a stablecoin) or USDC (USD coin, a stablecoin) WBTC tokens, or ETH (Ethereum token).
We have held and may continue to hold these digital assets in order to fund working capital, to purchase mining equipment and for other general corporate purposes.Read in the reply ↗Rest of the answer
We have temporarily taken and may from time to time temporarily take receipt of other digital assets, the amounts of which have not been material. Other than bitcoin, stablecoins, WBTC tokens and ETH, we have no plans to hold material amounts of any other types of digital assets in the future.”
We note that you have removed a part of this risk factor relating to the PRC legal system and uncertainties in enforcement of laws, rules and regulations in China. Please revise this risk factor to add back the removed disclosure.
to No. 2
The removed disclosure has been added back. It is consistent with the risk factor disclosure on the cover page under “Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to us.” Read in the reply ↗
Refer to your response to comment 7. We note your disclosure that you exchange bitcoins for USDT or USDC. Please disclose the risks associated with such digital assets, such as the risk of volatility of the digital assets. In addition, please describe in more detail your internal processes for how you determine whether the digital assets you hold or plan to hold are securities within the meaning of the U.S.Rest of the question
federal securities laws.
to No. 3
This comment has been complied with under the risk factor titled, “A particular digital asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if a regulator disagrees with our characterization of a digital asset, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, which may adversely affect our business, operating results and financial condition.Read in the reply ↗Rest of the answer
Furthermore, a determination that Bitcoin or any other digital assets that we own or mine is a “security” may adversely affect the value of Bitcoin and our business”.
Refer to your response to comment 8. On page 7, you disclose that "other than bitcoin, stablecoins, WBTC tokens and ETH, [you] have no plans to hold material amounts of any other types of digital assets in the future." Please disclose whether you have plans to hold material amounts of stablecoins, WBTC tokens and ETH, and, if so, disclose the business reasons for holding material amounts of such digital assets.Rest of the question
In addition, please disclose the specific stablecoins you plan to hold as well as the other types of digital assets you plan to hold in the future, regardless of the amount of any such digital assets.
to No. 1
This comment has been complied with.
We have made the following disclosure under Digital Asset Transactions on p. 7: “We use Amber Group’s OTC desk for selling or exchanging bitcoins for US dollars, USDT (Tether, a stablecoin) or USDC (USD coin, a stablecoin) WBTC tokens, or ETH (Ethereum token).
We have held and may continue to hold these digital assets in order to fund working capital, to purchase mining equipment and for other general corporate purposes.Read in the reply ↗Rest of the answer
We have temporarily taken and may from time to time temporarily take receipt of other digital assets, the amounts of which have not been material. Other than bitcoin, stablecoins, WBTC tokens and ETH, we have no plans to hold material amounts of any other types of digital assets in the future.”
Please revise the last sentence in the second paragraph of this section to add back "ETH" and "WBTC," or advise why you have removed these digital assets from the list. Risk Factors, page 13
to No. 2 Read in the reply ↗
We note that you have removed a heading of a risk factor on page 40 relating to determining a status of a digital asset as a security. Please include the removed subheading related to this risk. In addition, refer to your response to comment 7. We note your disclosure that you exchange bitcoins for USDT or USDC.Rest of the question
Please disclose the risks associated with such digital assets, such as the risk of volatility of the digital assets. In addition, please describe in more detail your internal processes for how you determine whether the digital assets you hold or plan to hold are securities within the meaning of the U.S. federal securities laws.
to No. 3
This comment has been complied with on page 40 under the risk factor titled, “A particular digital asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if a regulator disagrees with our characterization of a digital asset, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, which may adversely affect our business, operating results and financial condition.Read in the reply ↗Rest of the answer
Furthermore, a determination that Bitcoin or any other digital assets that we own or mine is a “security” may adversely affect the value of Bitcoin and our business”.
We note that you have removed a part of this risk factor relating to the PRC legal system and uncertainties in enforcement of laws, rules and regulations in China. Please revise this risk factor to add back the removed disclosure.
to No. 4
The removed disclosure has been added back. It is consistent with the risk factor disclosure on the cover page under “Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to us.” Read in the reply ↗
Refer to your response to comment 1. Please disclose the specific stablecoins you plan to hold as well as the other types of digital assets you plan to hold in the future, regardless of the amount of any such digital assets.Rest of the question
In this regard, we note your disclosure here that "[o]ther than bitcoin, stablecoins, WBTC tokens and ETH, we have no plans to hold material amounts of any other types of digital assets in the future." In addition, please disclose whether you plan to hold material amounts of stablecoins, WBTC tokens and ETH, and, if so, please state the reason for holding material amounts of WBTC, stablecoins and WBTC tokens.
No. 1
This comment has been complied with. The disclosures previously on page 7 in the next to last paragraph under “Migration and Status of Mining Operations” have been combined with the first paragraph under “Digital Asset Transactions” on page 8 in response to this comment. Read in the reply ↗
Refer to your response to comment 3. We note your disclosure that "[s]tablecoins today are backed by fiat currency, such as the U.S. dollar." Please note that there is no accepted definition of "stablecoin" and not all are backed by fiat currency. Please remove this term throughout and specifically identify the digital assets you intend to hold.
to No. 2
This comment has been complied with.
References to “stablecoin” have been deleted throughout the prospectus. Read in the reply ↗
Please update your disclosure to reflect that the Commission adopted rules to implement the HFCAA and that, pursuant to the HFCAA, the PCAOB has issued its report notifying the Commission of its determination that it is unable to inspect or investigate completely accounting firms headquartered in mainland China or Hong Kong.Rest of the question
In addition, please revise your cover page, summary section and risk factors section to disclose whether your auditor is subject to the determinations announced by the PCAOB on December 16, 2021 and whether and how the HFCAA and related regulations will affect your company. Risk Factors, page 13
to No.1
This comment has been complied with on p. 2 and under “Risk Factors – Regulatory bodies of the United States may be limited in their ability to conduct investigations or inspections of our operations in China” on p. 19. Read in the reply ↗
We note your disclosure regarding your Hong Kong subsidiaries. Please revise your risk factors section to disclose the risks related to your business operations in Hong Kong, including a discussion of the impact if certain PRC laws and regulations were to become applicable in Hong Kong and the risk that the subsidiaries could become subject to the direct oversight of the PRC government at any time due to changes inRest of the question
laws or other unforeseeable reasons, as well as recent policy pronouncements by the PRC government regarding business activities of US-listed Chinese businesses. Please also add a summary of these risks to your cover page.
to No. 2
This comment has been complied with in the last bullet on the cover page of the prospectus, and under a new Risk Factor on p. 19, titled “Our Hong Kong subsidiaries could become subject to the direct oversight of the PRC government at any time if the National laws of Mainland China are applied to Hong Read in the reply ↗
Please update your disclosure to reflect that the Commission adopted rules to implement the HFCAA and that, pursuant to the HFCAA, the PCAOB has issued its report notifying the Commission of its determination that it is unable to inspect or investigate completely accounting firms headquartered in mainland China or Hong Kong.Rest of the question
In addition, please revise your cover page, summary section and risk factors section to disclose whether your auditor is subject to the determinations announced by the PCAOB on December 16, 2021 and whether and how the HFCAA and related regulations will affect your company. Risk Factors, page 13
to No.1
This comment has been complied with on p. 2 and under “Risk Factors – Regulatory bodies of the United States may be limited in their ability to conduct investigations or inspections of our operations in China” on p. 20. Read in the reply ↗
We note your disclosure regarding your Hong Kong subsidiaries. Please revise your risk factors section to disclose the risks related to your business operations in Hong Kong, including a discussion of the impact if certain PRC laws and regulations were to become applicable in Hong Kong and the risk that the subsidiaries could become subject to the direct oversight of the PRC government at any time due to changes inRest of the question
laws or other unforeseeable reasons as well as recent policy pronouncements by the PRC government regarding business activities of US-listed Chinese businesses. Please also add a summary of these risks to your cover page.
to No. 2
This comment has been complied with in the last bullet on the cover page of the prospectus, and under a new Risk Factor on p. 21, titled “Our Hong Kong subsidiaries could become subject to the direct oversight of the PRC government at any time if the National laws of mainland China are applied to Hong
Kong.”
We are also responding to the
Staff’s Comment Letter dated January 19, 2022 concerning Amendment No. 4 to Registration Statement on Form F-3 No. 333-260241 Read in the reply ↗
Please revise your disclosure on pages 2 and 19 to clarify that on December 2, 2021, the SEC adopted amendments to finalize rules implementing the HFCAA. In this regard, please note that the HFCAA finalized by the SEC differs from the Accelerating Holding Foreign Companies Act, which was passed by the Senate in June 2021. Please revise your disclosure to clarify that the U.S.Rest of the question
Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCAA to reduce the number of "non-inspection years" from three years to two years, and thus, would reduce the time before your securities may be prohibited from trading or delisted.
to No. 1
This comment has been complied with on pages 2 and 19. Read in the reply ↗
Refer to your response to comment 1. On page 19, we note that you continue to state that "[o]n December 2, 2021, the SEC adopted amendments to finalize rules implementing the HFCA Act, requiring the SEC to prohibit an issuer’s securities from trading on any U.S.Rest of the question
stock exchanges if its auditor is not subject to PCAOB inspection for two consecutive years instead of three." Please revise to clarify that, on December 2, 2021, the SEC adopted amendments to finalize rules implementing the HFCAA, which requires the SEC to prohibit an issuer's securities from trading on a U.S. national securities exchange and in the over-the-counter market if the auditor is not subject to PCAOB inspection for three years. In addition, please replace your deleted disclosure describing the impact of the HFCAA, which stated that "[a]ccordingly, [y]our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchange if [y]our auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in [y]our ordinary shares being delisted."
No. 1
This comment has been complied with on pages 2 and 20. Read in the reply ↗
Please remove your reference to stablecoins in the first paragraph of this section, and disclose the specific stablecoins, if any, you hold or intend to hold. Risk Factors, page 13
No. 1
This comment has been complied with. Read in the reply ↗
We note that you added the following statement: "[r]ecent statements and regulatory actions by China’s government, such as those related to the use of variable interest entities (VIEs) and ban on digital asset transactions and data security or anti-monopoly concerns, may have an adverse effect on the Company in view of its prior operations, but are not expected to result in an adverse impact on our corporateRest of the question
structure going forward or have a material change in our operations and/or the value of our securities or significantly limit or completely hinder our ability to offer or continue to offer securities to investors or cause the value of such securities to significantly decline or be worthless." In addition, you removed the following statement: "[t]hese risks and others could result in a material change in the value of our securities and/or significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless." Please revise this paragraph to remove the first statement because it appears to be a disclaimer not appropriate for an introduction to the risk factors section. In addition, replace the second statement because you continue to have subsidiaries in Hong Kong.
No. 2
We would very much appreciate hearing from you as to when we may submit an accelerated request. Read in the reply ↗
Please provide us with a legal analysis that details why you continue to qualify as a foreign private issuer after moving your operations to North America. Refer to Rule 405 of Regulation C under the Securities Act of 1933.
No. 1
Rule 405 of Regulation C under the Securities Act of 1933 (the “Act”) defines a foreign private issuer (an “FPI”) as:
any foreign issuer other than a foreign government except an issuer meeting the following conditions:
(a) More than 50% of the outstanding voting securities of such issuer are directly or indirectly owned of record by residents of the United States;
and
(b) Any of the following:
1. The majority of the executive officers or directors are United States citizens or residents; Read in the reply ↗
Please revise your cover page to disclose whether your auditor is subject to the determinations announced by the PCAOB on December 16, 2021 and whether and how the Holding Foreign Companies Accountable Act and related regulations will affect your company.Rest of the question
In addition, please add a cross-reference to where the determination announced by the PCAOB on December 16, 2021 and the Holdings Foreign Companies Accountable Act are discussed in greater detail.
More than 50% of the assets of the issuer are located in the United States; or Read in the reply ↗
Please remove the second bullet point on page 6 that states "since the Company has no PRC subsidiaries in mainland China and has terminated the process to form one in mainland China, the Company is not subject to liquidity risks in mainland China." In this regard we note that the Summary of Information section is intended to contain a summary of material risks.
No. 2
This comment has been complied with. New disclosure has been added to the cover page of the Amendment with appropriate cross-references to where the PCAOB’s determinations were discussed in greater detail.
Summary of Information, page 4
3. Please remove the second bullet point on page 6 that states "since the Company has no PRC subsidiaries in mainland China and has terminated the process to form one in mainland China, the Company is not subject to liquidity risks in mainland China." In this regard we note that the Summary of Information section is intended to contain a summary ofRead in the reply ↗Rest of the answer
material risks.
Response No. 3
This comment has been complied with. The second bullet has been removed in the Amendment.
We note your disclosure on page 5 that "[n]otwithstanding the termination of [y]our bitcoin mining operations in China, [you] presently intend to continue [y]our limited administrative activities described above in China and Hong Kong through our Hong Kong subsidiaries, in order to take advantage of [y]our existing bitcoin mining relationships and continue to access the spot market and Chinese manufacturers ofRest of the question
bitcoin mining equipment." Please disclose whether you may have difficulties in transferring cash to or from your Hong Kong subsidiaries and whether you could have difficulties transferring the bitcoin mining equipment from your Hong Kong subsidiaries to your other subsidiaries. In addition, address this risk in your risk factors section.
No. 4
This comment has been complied with under “Summary of Information” and under “Risk Factors” in the Amendment. Read in the reply ↗
To the extent that any of your officers and directors are located in China or Hong Kong, please add a risk factor that addresses the difficulty of bringing actions against these individuals and enforcing judgments against them. In this regard, we note your disclosure in the last paragraph in your Enforceability of Civil Liabilities section on page 59.
The Company respectfully advises that, in light of this comment, the Company has revised its disclosure on the cover page of the
Prospectus; and under the heading “Risk Factors - You may experience difficulties in effecting service of legal process and enforcing judgments against us and our management, and the ability of U.S. authorities to bring actions abroad” on page 57;
and on the Prospectus Supplement cover page. Read in the reply ↗
Also in this review: company letter, 2022-01-20, company letter, 2022-01-21, company letter, 2022-01-21, company letter, 2022-04-27, company letter, 2022-04-28, company letter, 2022-05-02