CoinShares Digital Securities Limited
Audited financial statements for the year ended 31 December 2022
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Audited financial statements
For the year ended 31 December 2022
Contents
Page
Company Information
1
Directors' Report 2-3
Global Statement for the Financial Statements 4
Independent Auditor's Report 5-8
Statement of Comprehensive Income 9
Statement of Financial Position 10
Statement of Changes in Equity 11
Statement of Cash Flows 12
Notes to the Financial Statements 13-31
The following pages do not form part of the audited financial statements:
Appendix 1: Detailed administration expenses (unaudited)
32
CoinShares Digital Securities Limited
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Company Information
For the year ended 31 December 2022
The Company
Registered Numbe
r
127061
Registered Office 2nd Floo
r
2 Hill Street
St Helie
r
Jerse
y
JE2 4U
A
Directors Jeri-Lea Brown
Stuart Pinnington
Kirsty Lawrence (appointed 28 October 2022)
Townsend Lansing Jr. (appointed 28 October 2022)
Benjamin Gilbert (resigned 20 October 2022)
Company Secretar
y
Independent Audito
r
Baker Tilly Channel Islands Limited
PO Box 437
1st Floor, Kensington Chambers
46-50 Kensington Place
St Helie
r
Jerse
y
JE4 OZE
Barclays Bank PLC.
13 Library Place,
St Helie
r
Jerse
y
JE4 8NE
CoinShares Digital Securities Limited
Bank
CoinShares Digital Securities Limited
CoinShares Corporate Services (Jersey) Limited
Page 1
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Directors' Report
For the year ended 31 December 2022
Incorporation
The Company is incorporated, domiciled and tax resident in Jersey, Channel Islands.
Principal activit
y
Results and dividends
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
So far as the directors are aware, there is no relevant audit information of which the Company's auditor is unaware, and
each director has taken all the steps he or she ought to have as a director in order to make himself or herself aware of
any relevant audit information and to establish that the company's auditor is aware of that information.
CoinShares Digital Securities Limited
The directors present their report and the financial statements of CoinShares Digital Securities Limited (the 'Company') for
the year ended 31 December 2022.
Company law requires the directors to prepare financial statements for each financial period. Under that law, the directors
have elected to prepare the financial statements in accordance with applicable law and International Financial Reporting
Standards as adopted by the European Union ('IFRS') which comprise Standards and Interpretations approved by the
International Standards Board. Under company law the directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of affairs of the Company as at the end of that period, and of
the profit or loss of the Company for that period.
The directors are responsible for keeping proper accounting records that are sufficient to show and explain the
Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to
enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991, as amended. They
are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The directors confirm the statements comply with these
requirements.
The total comprehensive income for the year amounted to £nil (2021: £76,636).
The principal activity of the Company is to act as an issuer of exchange traded products ('ETPs').
The directors are responsible for preparing the Directors' Report and financial statements in accordance with applicable
laws and regulations.
select suitable accounting policies for the Company's financial statements and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
The directors do not recommend the payment of a dividend for the year (2021: £nil).
Statement of Directors responsibilities
state whether applicable accounting standards have been followed, subject to any material departures disclosed and
explained in the financial statements; and
In preparing these financial statements, the directors are required to:
Page 2
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Directors' Report (continued)
For the year ended 31 December 2022
Going concern
Comparative information
Independent Audito
r
..........................................................
CoinShares Corporate Services (Jersey) Limited
Company Secretary
The report was approved by the board of directors on 14 April 2023 and signed on its behalf by:
Baker Tilly Channel Islands Limited has expressed its willingness to continue in office.
The Company has net assets of £nil (2021: £nil) at the end of the reporting period. All expenses of the Company are
settled by CoinShares (Jersey) Limited ('CSJL') through the issuance of fees to CSJL to cover the Company's expenses
as agreed in the Service Level Agreement dated 21 May 2021. The directors have prepared these financial statements on
a going concern basis due to CSJL's contractual obligation to cover the Company's expenses, and ongoing financial
support received from other Group entities, inclusive of its parent company, which will continue to be provided for the
foreseeable future.
In preparing the financial statements the directors made an assessment of the Company's ability to continue as a going
concern. In assessing whether the going concern assumption is appropriate the directors considered all available
information about the future, which is at least, but is not limited to, twelve months from the date when the financial
statements were authorised for issue.
When making the assessment the directors considered and disclosed all material uncertainties related to events or
conditions that cast significant doubt upon the Company's ability to continue as a going concern.
There is continuing to be increased volatility seen in the price of digital assets. The directors do not consider the price
movements to impact the going concern for the Company as the products are fully hedged.
There has been no change to the previously audited figures. In 2021, the directors elected to amend the accounting
period end to 31 December in order to align the Company with the rest of the Group (CSIL and its subsidiaries), as a
result certain comparable financial information presented in these financial statements has not been audited in the format
presented.
Directors' interest in shares
CoinShares Digital Securities Limited
Directors and Company Secretary
The directors and company secretary who served during the year and up to the date of this report are listed on page 1.
The directors holding office at the end of the reporting period had no direct interests in the share capital of the Company
but did have an interest in the ultimate parent company, CoinShares International Limited ('CSIL').
Page 3
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Global Statement for the Financial Statements
For the year ended 31 December 2022
Global Statement for the Financial Statements
Director
CoinShares Digital Securities Limited
I certify that, to the best of my knowledge, the financial statements have been prepared in accordance with the applicable
accounting standards and give a true and fair view of the assets, financial position and performance of the Company and
that the Director's report attached presents a true and fair view of the development of the business, the performance and
the financial position of the Company and that it describes the main risks and uncertainties it faces.
Townsend Lansing Jr.
Date: 14 April 202
3
Page 4
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Independent auditor’s report
To the Members of CoinShares Digital Securities Limited
Opinion
We have audited the financial statements of CoinShares Digital Securities Limited (the Company) which
comprise the statement of financial position as at 31 December 2022, and the statement of
comprehensive income, statement of changes in equity and statement of cash flows for the year then
ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements:
give a true and fair view of the financial position of the Company as at 31 December 2022, and
of its financial performance and its cash flows for the year then ended in accordance with
International Financial Reporting Standards as adopted by the European Union (IFRSs); and
have been prepared in accordance with the requirements of the Companies (Jersey) Law
1991, as amended.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Statements section of our report. We are independent of
the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Jersey, including the FRC’s Ethical Standard, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
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Key audit matter The Risk
How our audit addressed the
matter
Digital assets – Existence,
Rights and Obligations
Total value; £244,641,832
(2021: 456,981,360)
As disclosed in Note 7.
There is a risk that the financial
statements may be materially
misstated due to:
The digital assets not being
owned by the Company; and
The rights and the rewards not
being appropriately transferred
to the Company.
Our audit procedures with
respect to digital assets
included but were not limited
to:
Walkthroughs to gain an
understanding of the
Company’s internal control
for digital assets including
additions and disposals.
Confirmations obtained
from the custodian and
exchanges with which the
digital currency is held.
Test of detail on a sample
of additions and disposals,
we agreed this to
appropriate supporting
documents.
We have no findings to
report.
Other Matter
The statement of comprehensive income and statement of cash flows for the year ended 31 December
2021 were unaudited, this was due to a change in the financial year-end reporting date to align with the
Group’s financial reporting date as disclosed in Note 2.1.
Our Application of Materiality
Materiality for the financial statements as a whole was set at £31,000 (PY: £10,400), determined with
reference to a benchmark of total expenses, of which it represents 1.5% (PY: 1.8%).
In line with our audit methodology, our procedures on individual account balances and disclosures were
performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk
that individually immaterial misstatements in individual account balances add up to a material amount
across the financial statements as a whole.
Performance materiality was set at 60% (PY: 60%) of materiality for the financial statements as a
whole, which equates to £18,000 (PY: £6,240). We applied this percentage in our determination of
performance materiality because the entity is deemed a high risk due to it operating in the
cryptocurrency industry.
We reported to the Board of Directors any uncorrected omissions or misstatements exceeding £ 1,550
(PY: £520), in addition to those that warranted reporting on qualitative grounds.
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Conclusions relating to Going Concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the Company’s
ability to continue as a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described
in the relevant sections of this report.
Other Information
The other information comprises the information included in the annual report other than the financial
statements and our auditor's report thereon. The Directors are responsible for the other information
contained within the annual report. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves. If,
based on the work performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to Report by Exception
In the light of the knowledge and understanding of the Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies
(Jersey) Law 1991, as amended, requires us to report to you if, in our opinion:
proper accounting records have not been kept;
proper returns adequate for the audit have not been received from branches not visited by us;
the financial statements are not in agreement with the accounting records and returns; and
we have not obtained all information and explanation that, to the best of our knowledge and
belief, was necessary for the audit.
Responsibilities of the Directors
As explained more fully in the Directors’ Report set out on page 2, the Directors are responsible for the
preparation of financial statements that give a true and fair view in accordance with IFRSs, and for such
internal control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company or
to cease operations, or has no realistic alternative but to do so.
The Directors are responsible for overseeing the Company’s financial reporting process.
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Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed
below:
Enquiry of management to identify any instances of non-compliance with laws and regulations,
including actual, suspected or alleged fraud;
Reading minutes of meetings of the Board of Directors;
Review of legal invoices;
Review of management’s significant estimates and judgements for evidence of bias;
Review for undisclosed related party transactions;
Using analytical procedures to identify any unusual or unexpected relationships; and
Undertaking journal testing, including an analysis of manual journal entries to assess whether
there were large and/or unusual entries pointing to irregularities, including fraud.
A further description of the auditor’s responsibilities for the audit of the financial statements is located
at the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Other Matters which we are Required to Address
We were appointed by the Board of Directors on 11 August 2021 to audit the financial statements. Our
total uninterrupted period of engagement is 3 years.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Company and
we remain independent of the Company in conducting our audit.
Use of this Report
This report is made solely to the Members of the Company, as a body, in accordance with Article 113A
of the Companies (Jersey) Law 1991, as amended. Our audit work has been undertaken so that we
might state to the Members those matters we are required to state to them in an auditor's report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and its Members, as a body, for our audit work, for this report, or for
the opinions we have formed.
E
wan Spraggon
For and on behalf of Baker Tilly Channel Islands Limited
Chartered Accountants
St Helier, Jersey
Date: 14 April 2023
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Statement of Comprehensive Income
For the year ended 31 December 2022
Unaudited
1 January 2022 to 1 January 2021 to
31 December 2022 31 December 2021
Note
££
Revenue 4 2,101,877 1,220,116
Gross profit 2,101,877 1,220,116
Administration expenses 5 (2,094,339) (1,140,337)
Fair value loss on digital assets 7 (302,608,417) -
Loss on digital asset receivables 9 (151,082) -
Gain/(loss) on ETP liabilities 11 429,278,798 (127,849,591)
Gain on digital asset payables 13 1,285,223 45,069
Loss on foreign exchange (7,538) (3,143)
Operating profit/(loss) 127,804,522 (127,727,886)
Profit/(loss) before taxation 127,804,522 (127,727,886)
Taxation on profit/(loss) 6 - -
Profit/(loss) after taxation 127,804,522 (127,727,886)
7 (127,804,522) 127,804,522
Other comprehensive (loss)/income (127,804,522) 127,804,522
Total comprehensive income - 76,636
The above should be read in conjunction with the accompanying notes on pages 13 to 31 which form an integral part of these
financial statements.
CoinShares Digital Securities Limited
All items dealt with in arriving at the result for the years ended 31 December 2022 and 31 December 2021 relate to continuing
operations.
Fair value (loss)/gain on digital assets
Page 9
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Statement of Financial Position
As at 31 December 2022
As at As at
31 December 2022 31 December 2021
Note
££
ASSETS
Current assets
Digital assets 7 244,641,832 456,981,360
Trade and other receivables 8 676,922 99,288
Digital asset receivables 9 50,015 -
Cash and cash equivalents 10 4,940 4,970
Total assets 245,373,709 457,085,618
LIABILITIES
Current liabilities
ETP liabilities 11 244,043,894 456,835,433
Trade and other payables 12 681,862 104,258
Digital asset payables 13 647,953 145,927
Total liabilities 245,373,709 457,085,618
NET ASSETS - -
EQUITY
Share capital 14 - -
Retained earnings - -
Total equity - -
Director
CoinShares Digital Securities Limited
The financial statements on pages 9 to 31 were approved and authorised for issue by the Board of Directors of the Company
and signed on its behalf by:
The above should be read in conjunction with the accompanying notes on pages 13 to 31 which form an integral part of these
financial statements.
Kirsty Lawrence
Date: 14 April 2023
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Statement of Changes in Equity
For the year ended 31 December 2022
Ordinary Retained
Shares Earnings Total equity
£££
At 1 January 2021 - (76,636) (76,636)
Loss for the year (unaudited) - (127,727,886) (127,727,886)
Other comprehensive income (unaudited) - 127,804,522 127,804,522
Total comprehensive income (unaudited) - 76,636 76,636
At 31 December 2021 - - -
At 1 January 2022 - - -
Profit for the year - 127,804,522 127,804,522
Other comprehensive loss - (127,804,522) (127,804,522)
Total comprehensive income - - -
At 31 December 2022 - - -
The above should be read in conjunction with the accompanying notes on pages 13 to 31 which form an integral part of these
financial statements.
CoinShares Digital Securities Limited
The Company has issued 1 share valued at £0.01.
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Statement of Cash Flows
For the year ended 31 December 2022
Unaudited
1 January 2022 to 1 January 2021 to
31 December 2022 31 December 2021
Note
££
Cash flows from operating activities
Profit/(loss) for the year 127,804,522 (127,727,886)
Adjustments for:
- (Gain)/loss on ETP liabilities
11
(430,412,939) 127,804,522
- Loss on digital assets 302,608,417 -
- 76,636
Change in working capital:
- Trade and other receivables - 5,000
- Trade and other payables (30) (76,666)
Net cash flow (used in)/provided by operating activities (30) 4,970
Net (decrease)/increase in cash and cash equivalents (30) 4,970
At the beginning of the year 4,970 -
At the end of the year
10
4,940 4,970
Reconciliation of net debt
Non-cash analysis
Cash flows from operating activities
- Trade and other receivables (588,370) (104,288)
- Trade and other payables 588,370 104,288
- Net issuance of ETP liabilities 218,112,690 329,176,838
- Net purchase of digital assets (218,112,690) (329,176,838)
CoinShares Digital Securities Limited
The above should be read in conjunction with the accompanying notes on pages 13 to 31 which form an integral part of
these financial statements.
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Notes to the Financial Statements
For the year ended 31 December 2022
1 General information
2Si
g
nificant accountin
g
policies
2.1 Basis of preparation
2.2 Adoption of new and revised Standards
At the date of authorisation of these financial statements, the Company has not applied the following new and
revised IFRS Standards that have been issued but are not yet effective:
CoinShares Digital Securities Limited
The financial statements have been prepared under the historical cost convention unless otherwise specified
within these accounting policies and in accordance with International Financial Reporting Standards as adopted
by the European Union ('IFRS'), which comprise Standards and Interpretations approved by the International
Accounting Standards Board ('IASB') and the Companies (Jersey) Law 1991, as amended. There were no
material departures from IFRS.
The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise judgement in applying the Company's accounting policies
(see note 2.6).
The following principal accounting policies have been applied:
The Company is a public company limited by shares and is incorporated and domiciled in Jersey. The address of its registered
office is 2nd Floor, 2 Hill Street, St Helier, Jersey JE2 4UA and its company registration number is 127061.
The Company operates in Jersey, Channel Islands. The principal activity of the Company is to act as an issuer of exchange
traded products ('ETPs').
From 1 January 2022, the Company has applied the below amendments to IFRS Standards and Interpretations
issued by the IASB that are effective for annual periods beginning from 1 January 2022:
New and amended IFRS Standards that are effective for the current year
The adoption of these amendments has not had any material impact on the disclosures or on the amounts
reported in these financial statements.
New and revised IFRS Standards in issue but not yet effective
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
effective 1 January 2023
Definition of Accounting Estimates (Amendments to IAS 8) effective 1 January 2023
Disclosure of Accounting policies and Classification of Liabilities as Current or Non-current (Amendments to
IAS 1) effective 1 January 2023
Amendments to IFRS 17 Insurance Contracts effective 1 January 2023
Deferral of IFRS 9 (Amendments to IFRS 4) effective 1 January 2023
There has been no change to the previously audited figures. In 2021, the directors elected to amend the
accounting period end to 31 December in order to align the Company with the rest of the Group (CoinShares
International Limited ('CSIL') and its subsidiaries), as a result certain comparable financial information
presented in these financial statements has not been audited in the format presented.
Annual Improvements to IFRSs 2018-2020 Cycle: Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 -
effective 1 January 2022
Reference to the Conceptual Framework (Amendments to IFRS 3) effective 1 January 2022
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) effective 1 January
2022
Onerous Contracts Cost of Fulfilling a Contract (Amendments to IAS 37) effective 1 January 2022
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
2Si
g
nificant accountin
g
policies
(
continued
)
2.2 Adoption of new and revised Standards
(
continued
)
2.3 Goin
g
concern basis
2.4 Chan
g
es in accountin
g
policies
2.5 Forei
g
n currenc
y
translation
2.6 Jud
g
ements and sources of estimation uncertaint
y
The preparation of the Company's financial statements requires management to make judgements, estimates
and assumptions in applying the Company's accounting policies to determine the reported amounts of assets,
liabilities, income and expenses. The estimates and associated assumptions are based on historical experience
and various factors, including expectations of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are
reviewed on an ongoing basis.
The Company's financial statements are presented in Pound Sterling, which is the functional currency. All
values are rounded to the nearest pound, except when otherwise indicated.
Functional and presentation currency
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at
the dates of the transactions.
Foreign currency assets and liabilities are translated into the functional currency using the exchange rate
prevailing at the reporting date.
The accounting policies have been consistently applied by the Company and are consistent with those used in
the previous financial year.
There is continuing to be increased volatility seen in the price of digital assets. The directors do not consider
the price movements to impact the going concern for the Company as the products are fully hedged.
The directors do not expect that the adoption of the Standards listed above will have a material impact on the
financial statements of the Company in future periods.
CoinShares Digital Securities Limited
New and revised IFRS Standards in issue but not yet effective (continued)
The Company has net assets of £nil (2021: £nil) at the end of the reporting period. All expenses of the
Company are settled by CoinShares (Jersey) Limited ('CSJL') through the issuance of fees to CSJL to cover
the Company's expenses as agreed in the Service Level Agreement dated 21 May 2021. The directors have
prepared these financial statements on a going concern basis due to CSJL's contractual obligation to cover the
Company's expenses, and ongoing financial support received from other Group entities, inclusive of its parent
company, which will continue to be provided for the foreseeable future.
Foreign exchange gains and losses arising from translation are included in the Statement of Comprehensive
Income.
Transactions and balances
The following are considered to be sources of judgement and estimate:-
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
2Si
g
nificant accountin
g
policies
(
continued
)
2.6 Jud
g
ements and sources of estimation uncertaint
y
(
continued
)
Critical
j
ud
g
ements
Estimates
2.7 Revenue
The Company charges fees to CSJL to cover costs incurred as part of issuing exchange traded products.
Accounting treatment of ETPs: The Company's ETPs, are settled in digital assets and therefore do not meet
the definition of a financial instrument set out in IFRS 9. In all other respects they operate in the same way as
an equivalent contract settled in cash. The Company has determined that the accounting policies for these
contracts are the same as they would be for an equivalent contract settled in cash and meeting the definition of
a financial instrument.
CoinShares Digital Securities Limited
The Company recognises revenue when (a) the amount of revenue can be measured reliably; (b) it is probable
that the Company will receive the consideration due under the contract; (c) the stage of completion of the
transaction at the end of the reporting period can be measured reliably; and (d) the costs incurred for the
transaction and the costs to complete the transaction can be measured reliably.
For Digital Securities with a management fee, the management fee is deducted from the ETP liabilities. The
management fee is aggregated and payable in Digital Assets to CSJL on a monthly basis in consideration for
the provision by CSJL of all management and administration services in relation to the ETP liabilities. As the
entirety of the management fee is paid to CSJL, the Company does not recognise any management fee
revenue or corresponding expense.
Accounting treatment of digital assets: the classification of digital assets as intangible in the financial
statements is a significant judgement, as there is currently no clear accounting standards dealing with digital
assets. Digital assets do not meet the definition of a financial instrument as they do not constitute a contract
that gives rise to another financial asset. Furthermore, the digital assets which are used to collateralise the
Company's ETP liabilities do not meet the definition of inventory as the assets are held for hedging and are not
held for sale in the ordinary course of business.
Revenue is measured at the fair value of the consideration received or receivable and represents the amount
receivable for services rendered, net of discounts and value added taxes.
Sale of services
Digital assets are initially recognised at their fair value as listed on exchanges, and derecognised at the value
derived in the same manner. Subsequent remeasurements are performed using the valuation as formula
defined in the prospectus and final terms. The fair value hierarchy of Digital Assets and the measurement is
disclosed under section 2.10 and 2.11 respectively. Fair value movements on digital assets are recorded in
other comprehensive income. When the valuation is lower than the original cost of the asset, fair value
movements are recognised through profit and loss. This is a critical judgement made by the directors but is
representative of industry standards also applied within the CoinShares group.
Management have not made estimates in the process of applying the Company's accounting policies.
Page 15
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
2Si
g
nificant accountin
g
policies
(
continued
)
2.7 Revenue
(
continued
)
2.8 Expenses
2.9 Cash and cash equivalents
2.10
2.11 Intan
g
ible assets - di
g
ital assets
CoinShares Digital Securities Limited
Sale of services (continued)
Fair value hierarchy
Digital assets are accounted for as an intangible asset under the revaluation model. All digital assets are
treated as one class of asset.
Level 2 Inputs other than quoted prices included in Level 1 that are observable (i.e. developed using market
data) for the asset or liability, either directly or indirectly.
Level 3 Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
Fair value for Digital assets was determined by reference to price quotations in an active market (classified as
level 1 in the fair value hierarchy).
All expenses of the Company are recognised on an accruals basis.
For staked Digital Securities, the Digital Assets are staked with a third party and staking rewards are shared
between Digital Security holders and the Company. There is no management fee payable in relation to the
CoinShares' Staked Digital Securities. As staking rewards are received, a fixed percentage based staking
reward will be retained for Digital Security holders, any surplus staking rewards are aggregated and payable to
CoinShares Capital Markets (Jersey) Limited ('CSCMJL') as the staking agent. As the surplus staking rewards
are paid to CSCMJL, the Company does not recognise any staking reward revenue.
All purchases and sales of digital assets are recognised on the trade date, as the settlement of digital assets is
done instantly, after the trade has taken place.
Level 1 The unadjusted quoted price in an active market for identical assets or liabilities that the entity can
access at the measurement date.
Cash and cash equivalents include cash in hand, deposits held at all with banks, other short-term highly liquid
investments with original maturities of three months or less and bank overdrafts. Bank overdrafts, when
applicable, are shown within borrowings in current liabilities.
Securities are remeasured using reference indices as detailed in the prospectus. Given that the value of ETPs
is measured by reference to the valuation of underlying digital assets, the same remeasurement basis is used
for the valuation of digital assets and the ETPs.
For staked Digital Securities, digital assets received as staking rewards are recognised at the point in which the
Company is entitled to received the staking rewards.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The fair value hierarchy under IFRS is set out as follows:
Page 16
Doc ID: 7a31330eda5310547d43cf10db5370421e2839e0Doc ID: 135a55640838ee5421c2e5617bb37e2221f70e6b
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
2Si
g
nificant accountin
g
policies
(
continued
)
2.11 Intan
g
ible assets - di
g
ital assets
(
continued
)
2.12 ETP liabilities
2.13 Financial instruments
Financial Assets
The decrease in the carrying value of a digital asset as a result of a revaluation shall be recognised in other
comprehensive income to the extent that it reverses previously recognised gains in other comprehensive
income. If a revaluation loss exceeds the accumulated gains recognised in equity in respect of digital assets,
the excess shall be recognised in the profit and loss.
CoinShares Digital Securities Limited
Basic financial assets including trade receivables are non interest-bearing and are recognised initially at fair
value (transaction price), and subsequently amortised using the effective interest rate method, less provision
for impairment.
Loans to related entities are initially recognised at fair value and subsequently carried at amortised cost using
the effective interest method, less accumulated impairment losses.
Digital assets are derecognised when the Company has transferred substantially all risks and rewards of
ownership on disposal. Gains or losses realised on disposal of the digital assets are presented in the statement
of changes in equity as a transfer from the revaluation reserve to retained earnings.
The Company issues securities to holders which have been recognised as liabilties in the Statement of
Financial Position. These liabilities have been classified as Level 1 as per note 2.10.
A liability for an ETP is recognised on the settlement date, being the date of the completion of the trade as per
the prospectus.
Digital assets have been classified as Level 1 as per note 2.10.
For financial assets, the Company applies the simplified approach permitted by IFRS 9, which requires
expected lifetime losses to be recognised from initial recognition, using a lifetime expected loss allowance for
all financial assets. To measure expected credit losses, financial assets have been grouped based on shared
credit risk characteristics and the Company assesses at each year end whether there is objective evidence that
a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when
such evidence exists. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy and default or significant delay in payments are objective evidence that these financial assets are
impaired.
The Company is an issuer of ETPs. The ETPs are described as per the prospectus, publicly available on
coinshares.com.
If the digital assets carrying amount is increased as a result of a revaluation, the increase shall be recognised
in other comprehensive income. However, the increase shall be recognised in the profit and loss to the extent
that it reverses previously recognised revaluation losses in the profit and loss.
ETPs are valued using the coin entitlement calculation defined in the prospectus. For staked Digital Securities,
the coin entitlement is increased in line with the staking rewards attributable to holders. Movements in the value
of the ETPs are recognised through profit and loss.
Page 17
Doc ID: 7a31330eda5310547d43cf10db5370421e2839e0Doc ID: 135a55640838ee5421c2e5617bb37e2221f70e6b
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
2Si
g
nificant accountin
g
policies
(
continued
)
2.13 Financial instruments
(
continued
)
Financial Assets
(
continued
)
Financial liabilities
2.14 Taxation
CoinShares Digital Securities Limited
Financial liabilities (or part thereof) are derecognised when, and only when, the Company's obligations are
discharged, cancelled, or they expire. Any difference between the carrying amount of a financial liability (or part
thereof) that is derecognised and the consideration paid is recognised in profit or loss.
These assets are presented as current assets except for those that are expected to be realised later than 12
months after the year end, which are presented as non-current assets.
Current tax is recognised as the amount expected to be paid to or recovered from the tax authorities, using tax
rates enacted or substantively enacted by the reporting date in the countries where the Company operates and
generates income.
The carrying amount of these assets is reduced through the use of an impairment allowance account which is
calculated as the difference between the carrying amount and the present value of estimated future cash flows,
discounted at the original effective interest rate.
Financial assets, or a part thereof, are derecognised only when the contractual rights to the cash flows from the
asset expire or are settled, or when the Company transfers the financial asset and substantially all the risks and
rewards of ownership to another entity. When there is no reasonable expectation of recovering a financial asset
it is derecognised. The gain or loss on derecognition is recognised in the profit and loss.
Trade and other payables represent liabilities for goods and services provided to the Company prior to the end
of financial year which are unpaid. They are classified as current liabilities if payment is due within one year or
less (or in the normal operating cycle of the business, if longer). Otherwise, they are presented as non-current
liabilities.
Current tax is recognised as income or expense in the Statement of Comprehensive Income, except to the
extent that the tax arises from a transaction which is recognised directly in equity.
Borrowings are presented as current liabilities unless the Company has an unconditional right to defer
settlement for at least 12 months after the reporting date, in which case they are presented as non-current
liabilities.
Borrowings are initially recognised at their fair values (net of transaction costs) and subsequently carried at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is
recognised in profit or loss over the period of the borrowings using the effective interest method.
Trade payables are non interest-bearing and are recognised initially at fair value (transaction price) and
subsequently measured at amortised cost using the effective interest method.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was
recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed
what the carrying amount would have been had the impairment not previously been recognised. The
impairment reversal is recognised in profit and loss.
Page 18
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
2Si
g
nificant accountin
g
policies
(
continued
)
2.14 Taxation
(
continued
)
2.15 Share capital
3 Operatin
g
se
g
ments
31 December 2022
Digital Securities with Staked Digital Central
a Management Fee Securities Costs Total
££ £ £
Digital assets 226,244,967 18,396,865 - 244,641,832
Trade and other receivables - - 676,922 676,922
Digital asset receivables - 50,015 - 50,015
Cash and cash equivalents - - 4,940 4,940
Total assets 226,244,967 18,446,880 681,862 245,373,709
ETP Liabilities 226,140,396 17,903,498 - 244,043,894
Trade and other payables - - 681,862 681,862
Digital asset payables 104,571 543,382 - 647,953
Total liabilities 226,244,967 18,446,880 681,862 245,373,709
Net assets - - - -
Staked Digital Securities; and
Central costs
The Company monitors its assets and liabilities according to three core operating segments, defined by the primary
characteristics of ETPs. The Company deems that it has three reportable operating segments in respect of assets and
liabilities, being:
CoinShares Digital Securities Limited
Digital Securities with a management fee;
The following is an analysis of the Company's assets and liabilities by reportable segment in the year ended 31 December
2022.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
The taxation charge is based on the profit for the year as adjusted for tax purposes. The Company pays tax at
0%, the standard Jersey tax rate.
The Company does not monitor its revenues and expenses split by operating segment.
This is the measure reported to the Board of Directors, being the Company's chief operating decision-maker, for the purposes
of assessing performance and allocating resources.
Page 19
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
3 Operatin
g
se
g
ments
(
continued
)
31 December 2021
Digital Securities with Staked Digital Central
a Management Fee Securities Costs Total
££ £ £
Digital assets 456,981,360 - - 456,981,360
Trade and other receivables - - 99,288 99,288
Digital asset receivables - - - -
Cash and cash equivalents - - 4,970 4,970
Total assets 456,981,360 - 104,258 457,085,618
ETP Liabilities 456,835,433 - - 456,835,433
Trade and other payables - - 104,258 104,258
Digital asset payables 145,927 - - 145,927
Total liabilities 456,981,360 - 104,258 457,085,618
Net assets - - - -
4 Revenue
Unaudited
1 Januar
y
2022 to 1 Januar
y
2021 to
31 December 2022 31 December 2021
££
Fee income 2,101,877 1,220,116
2,101,877 1,220,116
CoinShares Digital Securities Limited
The Company charges fees to the Programme Manager, CSJL, to cover its expenses as agreed in the Service Level
Agreement dated 21 May 2021. These costs consist primarily of professional expenses, custody fees and trading fees.
The following is an analysis of the Company's assets and liabilities by reportable segment in the period ended 31 December
2021.
Revenue on products is recognised in CSJL and CSCMJL as programme manager and staking agent respectively.
Page 20
Doc ID: 7a31330eda5310547d43cf10db5370421e2839e0Doc ID: 135a55640838ee5421c2e5617bb37e2221f70e6b
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
5 Administration expenses b
y
natur
e
Included within administration expenses of £2,094,339 (2021: £1,140,337) (see page 32) are the following amounts:
Unaudited
1 Januar
y
2022 to 1 Januar
y
2021 to
31 December 2022 31 December 2021
££
Audit fees 37,250 72,500
6 Taxation
The Company is subject to tax at the rate of 0% (2021: 0%).
7Di
g
ital assets
31 Decembe
r
31 Decembe
r
31 Decembe
r
31 Decembe
r
2022 2021 2022 2021
Number Number £ £
By Currenc
y
Bitcoin 10,351 8,253 142,828,745 292,798,603
Ethereum 75,386 56,877 75,435,400 158,753,330
Litecoin 41,455 31,105 2,419,356 3,451,251
XRP 16,967,728 3,179,439 4,846,955 1,978,176
Polkadot 279,238 - 1,016,188 -
Tezos 2,355,697 - 1,419,274 -
Cardano 8,474,941 - 1,766,299 -
Solana 1,139,161 - 9,554,260 -
Chainlink 70,881 - 329,500 -
Uniswap 90,209 - 385,011 -
Cosmos 104,654 - 818,359 -
Mati
c
2,003,812 - 1,279,145 -
A
lgorand 17,355,131 - 2,543,340 -
48,968,644 3,275,674 244,641,832 456,981,360
Unaudited
31 Decembe
r
31 Decembe
r
2022 2021
££
Reconciliation of Digital Assets
Digital assets opening balance 456,981,360 -
A
dditions to digital assets 296,699,302 432,281,297
Net staking rewards 2,269,586 -
Disposals of digital assets (79,167,212) (102,234,617)
Management fees paid to CSJL (1,728,265) (869,842)
Fair value loss through profit and loss (302,608,417) -
Fair value (loss)/gain through other comprehensive income (127,804,522) 127,804,522
Digital assets closing balance 244,641,832 456,981,360
CoinShares Digital Securities Limited
Page 21
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
7Di
g
ital assets
(
continued
)
8 Trade and other receivables
31 Decembe
r
31 Decembe
r
2022 2021
££
A
mounts owed by Group undertaking
s
665,022 98,093
Prepayments and sundry debtor
s
11,900 1,195
676,922 99,288
9Di
g
ital asset receivables
31 Decembe
r
31 Decembe
r
31 Decembe
r
31 Decembe
r
2022 2021 2022 2021
Number Number
££
Amounts owed by Group undertakings
CSCMJL - Solana (i)
1,280
-
10,736
-
Amounts owed by third parties
Staking rewards - Algorand (ii)
272,231
-
39,279
-
273,511 - 50,015 -
On 15 September 2022, the Ethereum blockchain transitioned from a Proof-of-Work mechanism to a Proof-of-Stake
mechanism ('the Merge'). Prior to the completion of the Merge a forked version of the Ethereum blockchain that continued
using the Proof-of-Work consensus was created ('ETHW') and distributed to holders of Ethereum. The Company sold the
ETHW received, in exchange for Ethereum, and distributed the additional Ethereum pro rata to holders of the CoinShares
Physical Ethereum Digital Security through an increase to the coin entitlement.
(i) Amounts owed by Group undertakings relate to staked products where the reward earned by the noteholder is greater than
the reward being received.
(ii) Staking rewards in respect of the CoinShares Physical Staked Algorand product are received quarterly. At the year-end, the
Company had an outstanding receivable of £39,279 (2021: £nil) in respect of accrued staking rewards.
Fee income of £2,101,877 (2021: £1,220,116) was earned from CSJL, as programme manager, to cover the Company's
expenses as per the Service Level Agreement, of which £665,022 (2021: £98,093) was outstanding at year end.
CoinShares Digital Securities Limited
During the year, the Company launched a CoinShares Physical FTX Token ('CFTT') Digital Security offering investor exposure
to FTX Token ('FTT'), the native token to the FTX digital asset exchange. As a result of FTX entering Chapter 11 bankruptcy in
November 2022 and resultant volatility surrounding FTT, the Company suspended creations in CFTT on 14 November 2022
and suspended all redemptions in CFTT on 18 November 2022. On 19 December 2022 all outstanding CFTT were
compulsorily redeemed for approximately $0.10 each, and distributed to ETP holders. Additionally, the CFTT seed was
redeemed and the resulting FTT was transferred to CSCMJL in full.
Page 22
Doc ID: 7a31330eda5310547d43cf10db5370421e2839e0Doc ID: 135a55640838ee5421c2e5617bb37e2221f70e6b
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
9 Digital asset receivables (continued)
Unaudited
31 Decembe
r
31 Decembe
r
2022 2021
Reconciliation of digital asset receivables £ £
Digital asset receivables opening balance - -
A
dditions 240,660 -
Disposals (39,563) -
Loss on digital asset receivables (151,082) -
50,015 -
10 Cash and cash equivalents
31 Decembe
r
31 Decembe
r
2022 2021
££
Cash at bank 4,940 4,970
4,940 4,970
11 ETP liabilities
31 Decembe
r
31 Decembe
r
31 Decembe
r
31 Decembe
r
2022 2021 2022 2021
Number Number £ £
Securities type
CoinShares Physical Bitcoin
10,448,800
8,278,800
142,773,000
292,704,836
CoinShares Physical Ethereum
2,527,286
1,901,600
75,396,910
158,704,613
CoinShares Physical Litecoin
212,500
156,500
2,416,053
3,449,113
CoinShares Physical XRP
434,800
80,300
4,840,826
1,976,871
CoinShares Physical Staked Polkadot
257,500
-
980,519
-
CoinShares Physical Staked Tezos
453,000
-
1,402,567
-
CoinShares Physical Staked Cardano
8,265,000
-
1,764,189
-
CoinShares FTX Physical Staked Solana
10,928,100
-
9,183,556
-
CoinShares Physical Chainlink
715,000
-
329,077
-
CoinShares Physical Uniswap
910,000
-
384,530
-
CoinShares Physical Staked Cosmos
193,000
-
774,317
-
CoinShares Physical Staked Mati
c
195,000
-
1,277,325
-
CoinShares Physical Staked Algorand
1,745,000
-
2,521,025
-
37,284,986 10,417,200 244,043,894 456,835,433
CoinShares Digital Securities Limited
Page 23
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
11 ETP liabilities (continued)
Unaudited
31 Decembe
r
31 Decembe
r
2022 2021
££
Reconciliation of ETP liabilities
ETP liabilities opening balance 456,835,433 -
Creations of ETPs 296,631,728 432,281,297
Redemptions of ETPs (78,909,345) (103,104,458)
Net movement on staking rewards 287,617 -
Net movement on management fee (1,533,830) (190,997)
Fair value (gain)/loss (429,267,709) 127,849,591
ETP liabilities closing balance 244,043,894 456,835,433
Unaudited
31 Decembe
r
31 Decembe
r
2022 2021
££
Gain/(loss) on ETPs to CSCMJL and Third Parties 287,229,082 (107,375,102)
Gain/(loss) on other ETPs 142,038,627 (20,474,489)
429,267,709 (127,849,591)
Other gain on ETPs 11,089 -
Total gain/(loss) on ETP liabilities 429,278,798 (127,849,591)
12 Trade and other pa
y
ables
31 Decembe
r
31 Decembe
r
2022 2021
££
Trade payables 46,809 57,842
A
mounts payable to parent compan
y
311,766 -
A
ccrued liabilities 323,287 46,416
681,862 104,258
CoinShares Digital Securities Limited
Amounts owed to the ultimate parent company, CSIL, of £311,766 (2021: £nil) consist of expenses settled on behalf of the
Company. These amounts are repayable on demand, bear interest at 0% and are unsecured.
Page 24
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
13 Di
g
ital asset pa
y
ables
31 Decembe
r
31 Decembe
r
31 Decembe
r
31 Decembe
r
2022 2021 2022 2021
Number Number £ £
Amounts payable to Group undertaking
s
CSJL - Bitcoin
4
3
55,745
93,767
CSJL - Ethereum
38
17
38,490
48,717
CSJL - Litecoin
57
19
3,303
2,138
CSJL - XRP
21,455
2,097
6,129
1,305
CSJL - Solana
741
-
6,211
-
CSJL - Chainlink
91
-
423
-
CSJL - Uniswap
113
-
481
-
CSCMJL - Polkado
t
9,801
-
35,669
-
CSCMJL - Tezos
27,730
-
16,707
-
CSCMJL - Cardano
10,126
-
2,110
-
CSCMJL - Cosmos
5,632
-
44,042
-
CSCMJL - Mati
c
2,851
-
1,820
-
CSCMJL - Algorand
287,905
-
41,540
-
Amounts payable to third partie
s
Third parties - Solana
44,739 - 375,229
-
Third parties - Algorand
138,987 - 20,054
-
550,270 2,136 647,953 145,927
Unaudited
31 Decembe
r
31 Decembe
r
2022 2021
££
Reconciliation of digital asset payables
Digital asset payables opening balance 145,927 -
A
dditions 3,652,255 869,843
Disposals (1,865,006) (678,847)
Gain on digital asset payables (1,285,223) (45,069)
647,953 145,927
CoinShares Digital Securities Limited
Amounts owed to the Third Parties relate to fees where seed capital has been provided for products. These amounts are
denominated in the relevant digital asset.
Amounts owed to the Group undertakings relate to either digital assets which are due to be paid to CSJL for the management
fee or CSCMJL for the staking rewards as per the prospectus, or assets provided by CSCMJL to test future digital asset
products. These amounts are denominated in the relevant digital asset.
Page 25
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
14 Share capital
Shares classified as equit
y
31 Decembe
r
31 Decembe
r
31 Decembe
r
31 Decembe
r
2022 2021 2022 2021
Number Number £ £
Ordinary shares of £0.01 each 1 1 - -
1 1 -
15 Risk mana
g
ement
a
)
Market risk
i) Currency ris
k
ii) Interest rate risk
iii) Digital asset price risk
The Company is authorised to issue 10,000 ordinary shares of £0.01 each, they confer on the holder the right to receive
dividends at the Company's discretion. If, at the Company's discretion, there is a return of assets, ordinary shares confer on the
holders thereof the rights in respect of the assets of the Company available for distribution among the shareholders. Ordinary
shares issued and allotted are accounted for as equity.
The Company issues securities which are 100% physically backed and therefore has a liability towards security holders linked
to digital assets, as well as the specific operational risks to holding digital assets.
The Company seeks to mitigate currency risk by only receiving enough fees from CSJL to cover expenses, and not receiving
the management fee directly. On the basis of the above information, the Company believes currency risk is not material.
Interest rate risk is the risk that the value of the Company will be impacted by fluctuations in the prevailing levels of market
interest rates.
-
To mitigate its exposure to changes in prices of digital assets, any exposure to changes in prices on the digital assets held is
matched by the changes in value of the obligations to security holders.
Allotted, called-up and unpaid
The following sets out a description of the principal risks inherent in the activities of the Company along with the action taken to
manage these risks.
CoinShares Digital Securities Limited
The majority of the Company's financial assets and liabilities are either non-interest bearing, or at a fixed interest rate and as a
result, the Company is not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest
rates.
Digital assets are an extremely volatile asset class. Digital asset price risk arises from the uncertainty about future prices of the
digital assets, impacting both the fair value of the digital assets held by the Company and the fair value of the liabilities of the
Company towards security holders.
Page 26
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
15 Risk Mana
g
ement
(
continued
)
a
)
Market risk
(
continued
)
Price change Price change
-50% 100%
££ £
Assets
Bitcoin 142,828,745 71,414,372 285,657,490
Ethereum 75,435,400 37,717,700 150,870,800
Litecoin 2,419,356 1,209,678 4,838,712
XRP 4,846,955 2,423,477 9,693,910
Polkadot 1,016,188 508,094 2,032,376
Tezos 1,419,274 709,637 2,838,548
Cardano 1,766,299 883,150 3,532,598
Solana 9,554,260 4,777,130 19,108,520
Chainlink 329,500 164,750 659,000
Uniswap 385,011 192,506 770,022
Cosmos 818,359 409,180 1,636,718
Mati
c
1,279,145 639,572 2,558,290
A
lgorand 2,543,340 1,271,670 5,086,680
Digital asset receivables 50,015 25,008 100,030
Other assets 681,862 681,862 681,862
Total assets 245,373,709 123,027,786 490,065,556
Liabilities
ETP liability 244,043,894 122,021,947 488,087,788
Digital assets payable 647,953 323,977 1,295,906
Other liabilities 681,862 681,862 681,862
Total liabilities 245,373,709 123,027,786 490,065,556
Net assets - - -
b
)
Credit risk
c
)
Liquidit
y
ris
k
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with
the Company. Digital asset activity has an inherent credit risk due to the nature of the industry, which is non-regulated,
extremely volatile, has low barriers to entry and is vulnerable to bad actors.
Credit risk from balances with custodians, banks, brokers and financial institutions is managed, monitored and controlled by the
finance department in accordance with the Company policy. It is the Company's policy to only enter into transactions with
reputable counterparties, as determined through appropriate due diligence.
The risk of losing Digital Assets in digital wallets due to fraud is reduced through digital assets being kept in cold storage with
Komainu, providing a cold storage vault. The Company does not expect to incur material credit losses in respect of digital
assets.
CoinShares Digital Securities Limited
Carrying amount
as at 31
December 2022
The above analysis shows the impact of both a fifty percent decline and a one hundred percent increase in digital assets
prices. A change in price does not impact the NAV.
Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations associated with financial liabilities, in
particular towards security holders.
Page 27
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
15 Risk Mana
g
ement
(
continued
)
c
)
Liquidit
y
risk
(
continued
)
On demand
££ £
Current assets
A
mounts owed by related parties 665,022 665,022 -
Digital asset receivables* 50,015 50,015 -
Cash at bank 4,940 4,940 -
Prepayments and sundry debtor
s
11,900 11,900 -
Digital assets* 244,641,832 244,641,832 -
Total current assets 245,373,709 245,373,709 -
Current liabilities
A
ccounts payable 681,862 681,862 -
Digital assets payable* 647,953 647,953 -
ETP liabilities* 244,043,894 244,043,894 -
Total current liabilities 245,373,709 245,373,709 -
Net current assets - - -
d
)
Capital risk mana
g
ement
e
)
Operational risk
CoinShares Digital Securities Limited
Liquidity issues could arise as a result of the redemption of securities. In this case, the Company would be required to have
sufficient liquidity to finance the redemption of the securities. The prospectus and final terms for each security define the
formula at which the securities can be redeemed based on a coin entitlement.
The following maturity analysis shows that liquidity risks are dealt with through matching the maturity of the assets and
liabilities.
Carrying amount
as at 31
December 2022
The main operational risk for the Company would be the inability to redeem a security through either systems failures or
continuity planning issues. The risk is mitigated through the use of a business continuity plan which has been tested, and
demonstrated that the traders can perform their work from anywhere.
Securities holders can request redemption of their securities which will be settled two business days following a valid
redemption notice. The Company ensures that it holds the relevant digital asset at all times to be able to meet these
redemptions. The Directors believe that the risk is adequately mitigated and therefore no sensitivity analysis is required.
* As disclosed in note 2, digital assets and ETP liabilities are not financial instruments however there is an active market and
they are readily realisable on demand.
These are risks relating to losses as a result of operational matters such as having inappropriate or insufficient routines, human
error, systems failures and legal risks.
The capital of the Company is represented by the net assets attributable to ordinary shareholders. The Company's objective
when managing capital is to safeguard the Company's ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain a strong capital base to support the development of the
investment activities of the Company. This is achieved through actively managing the Company's products.
Less than 3
months
Page 28
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
15 Risk Mana
g
ement
(
continued
)
e
)
Operational risk
(
continued
)
16 Related part
y
transactions
CSJL Subsidiary
CSHL Subsidiary
CSUKL Subsidiary
XBTP Subsidiar
y
CSGP2L Subsidiary
CSCo Subsidiary
GTSA Associate
GTLA Subsidiary
CS Cap Subsidiary
CSGPI Subsidiary
CSF Subsidiary
CSTL Subsidiary
Hong Kong
CoinShares Co
FlowB Holding Switzerland
SA
Flowbank Associate 28.31%
08/08/2018
XBT Provider AB (publ)
CoinShares Corporate
Services (Jersey) Limited
CSCSJL
CoinShares (Holdings)
Limited
100% Jersey 19/04/2019
Name Defined as Jurisdiction
25/06/2018
Key Group entities
CoinShares (Jersey) Limited 100% Jersey 26/09/2018
Subsidiary
09/02/2018
Sweden
Other Group entities
25/09/2017
19/04/2017
The risk of hacking, and losing digital assets in digital wallets due to fraud is reduced through the majority of the digital assets
being kept in cold storage with Komainu, who have a SOC 1 Type 2 report. The latest SOC 1 Type 2 Report, covering the
period 1 January 2021 to 30 November 2021, was independently reviewed by PricewaterhouseCoopers CI LLP and authorised
for issue of 19 August 2022. A SOC 1 Type 2 Report covering Komainu's control framework in 2022 is in progress. In addition
to limiting the exposure to fraud for the Company, cold storage of digital assets with Komainu also reduces the Company's
exposure to hacking.
Switzerland
100% Jersey
100%
100% Jersey
CoinShares (UK) Limited 100% UK
Switzerland
CoinShares France 100% France
100%
GABI Trading Limited (Asia)
Subsidiary
23%
100% USA
100%
Jersey
USA
CoinShares Asset
Management
The Group consists of the Company and the following entities held by the ultimate parent company, CSIL:
CoinShares GP II Limited
Gold Token SA
CoinShares Capital, LLC 100% 18/09/2019
CoinShares Employment
Services (Jersey) Limited
CSESJL
02/10/2021
01/07/2018
CoinShares Technologies
Limited
USA
17/12/2021
09/08/2018
12/02/2019
CSAM Subsidiary 100%
CoinShares Capital Markets
(UK) Limited
CSCMUKL Subsidiary 100% UK 30/06/2019
CoinShares GP I LLC
100%
CoinShares Capital Markets
(Jersey) Limited
CSCMJL Subsidiary 100% Jersey 30/06/2019
Investee
Relationship
CSIL's Ownership
%
CoinShares Digital Securities Limited
100%
Date of Acquisition
The cyber risks are mitigated through the use of systems to prevent external attacks (such as, but not limited to, firewalls,
detection of possible phishing emails, encryption using secure keys and strong physical security). Komainu, as custodian, are
subject to periodic reviews. The risk of theft of the Company's custodied coins is considered minimal owing to the strong control
framework built around the storage and transfer of Digital Assets.
20/03/2020
Elwood Asset Management
Services Limited
EAMSL Subsidiary 100% UK 20/07/2021
Elwood Asset Management
LLP
EAMLLP Subsidiary 100% UK 20/07/2021
France 17/12/2021
Jersey 30/06/2019
Page 29
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
16 Related party transactions (continued)
CoinShares
(
Holdin
g
s
)
Limited
(
'CSHL'
)
was dissolved on 10 Januar
y
2023.
CoinShares Technolo
g
ies Limited
(
'CSTL'
)
(
formerl
y
GABI Ca
p
ital Limited
)
was dissolved on 11 Januar
y
2023.
31 Decembe
r
31 Decembe
r
31 Decembe
r
2022 2022 2022
Digital assets Securities issued £
Seeded by CSCMJL
Bitcoin 5,500 5,500,000 75,892,363
Ethereum 39,643 1,315,000 39,668,958
Solana 17,394 170,000 145,886
115,707,207
31 Decembe
r
31 Decembe
r
31 Decembe
r
2021 2021 2021
Digital assets Securities issued £
Seeded by CSCMJL
Bitcoin 5,500 5,500,000 195,137,596
Ethereum 39,450 1,315,000 110,111,789
Litecoin 12,000 60,000 1,331,443
306,580,828
Napoleon Crypto SAS and Napoleon Software SAS were absorbed into Napoleon Group SAS on 11 May 2022 and 31 May
2022 respectively. Napoleon Group SAS was subsequently renamed to CoinShares France on 7 August 2022.
Following an internal restructuring, Napoleon Asset Management SAS was acquired on 4 July 2022 as a component of the
CoinShares France acquisition that occurred at the end of 2021. It was subsequently renamed CoinShares Asset Management
on 7 August 2022.
CSIL is the Company's ultimate parent company. CSIL has settled costs of £311,766 (2021: £91,844), and at year end, there is
an outstanding payable of £311,766 (2021: £nil).
Komainu Holdings Limited is an investment of CSIL, and is the parent company to Komainu (Jersey) Limited ('KJL'). KJL
provides custody services to the Company. During the year, KJL charged custody fees of £529,137 (2021: £526,916), of which
£31,127 (2021: £56,476) remains outstanding at the year end.
CSCMJL is the provider and staking agent for the programme and earns staking rewards through staked products. CSCMJL is
also a subsidiary of CSIL. CSCMJL has seeded digital assets to the Company as detailed in the following tables. The Company
also holds the staking rewards in digital assets on behalf of CSCMJL before it gets paid. At the period end, the Company also
has receivables and payables with CSCMJL as detailed in notes 9 and 13.
CSJL is the programme manager for the programme and is also a subsidiary of CSIL. CSJL pays for the costs of the Company
through a fee. CSJL has settled expenditure directly of £1,534,948 (2021: £898,695) and has been charged fees of £2,101,877
(2021: £1,220,116). As at the year end, the Company has an outstanding receivable of £665,022 (2021: £98,093). The
Company also holds the management fee in digital assets on behalf of CSJL before it gets paid. At the year end, the Company
holds digitals assets as payables to CSJL as detailed in note 13.
Elwood Asset Management Services Limited and Elwood Asset Management LLP were dissolved on 28 March 2023.
CSHL was previously the Company's immediate parent company. CSHL has settled costs of £nil (2021: £126,485).
CoinShares Digital Securities Limited
Page 30
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Notes to the Financial Statements (continued)
For the year ended 31 December 2022
17 Events after the reportin
g
date
18 Ultimate controllin
g
part
y
On 1 February 2023, the Company announced that a fee holiday had been agreed for the CoinShares Physical Ethereum
product, reducing the management fees from 1.25% per annum to 0% per annum.
CoinShares Digital Securities Limited
On 27 March 2023, the Company launched two new index ETPs CoinShares Physical Top 10 Crypto Market ETP &
CoinShares Physical Smart Contract Platform ETP. These two products are listed on German's main market Xetra. These
products have both had their management fees reduced to 0.0% per annum.
In the period following the financial year end, digital asset prices have shown strong price recovery. As at 11 April 2023 Bitcoin
stands at $30.1k, and Ethereum at $1.9k, having increased 82% and 60% respectively since 31 December 2022.
The Company's parent company is CSIL, a company incorporated in Jersey, Channel Islands at 2nd Floor, 2 Hill Street, St
Helier, Jersey, JE2 4UA. CSIL is considered to be the ultimate controlling party.
Audited financial statements for the ultimate controlling party are available at the Company's website:
www.coinshares.com/investor-relations
Page 31
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Unaudited Unaudited
1 January 2022 to 1 January 2021 to
31 Decembe
r
31 Decembe
r
2022 2021
££
Administration expenses
A
udit and accountancy fees 37,250 72,500
Custody fees 529,137 526,916
Directors salaries 15,000 8,750
General expenses 44,539 12,000
Legal fees 116,626 31,548
Marketing expenses 12,626 -
Professional fees 822,607 412,268
Trading expenses 516,554 76,355
2,094,339 1,140,337
CoinShares Digital Securities Limited
Appendix 1: Detailed administration expenses for the year ended 31 December 2022 (unaudited)
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(klawrence@coinshares.com) and Townsend Lansing
(tlansing@coinshares.com) from
sbrownoakesoconnor@coinshares.com
IP: 212.9.28.248
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Doc ID: 135a55640838ee5421c2e5617bb37e2221f70e6b
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Signed by Jeri-Lea Brown (jbrown@coinshares.com)
IP: 185.48.63.40
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Signed by Townsend Lansing (tlansing@coinshares.com)
IP: 86.188.207.170
The document has been completed.14 / 04 / 2023
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2022-12-31-CoinShares-Digital-Securities-Limited-Final
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