Untitled

CoinShares Digital Securities Limited

A

udited financial statements for the year ended 31 December 2023

Doc ID: 00ab86fadb520eed7580398f172ae26ef4884b4d

Audited Financial Statements

For the year ended 31 December 2023

Contents

Page

Company Information

For the year ended 31 December 2023

The Company

Registered Number

Registered Office 2nd Floor

2 Hill Street

St Helier

Jersey

JE2 4UA

Directors Jeri-Lea Brown (resigned 4 March 2024)

Michael Fox (appointed 4 March 2024)

Stuart Pinnington

Kirsty Lawrence

Townsend Lansing Jr.

Company Secretar

y

Independent Auditor Baker Tilly Channel Islands Limited

2nd Floor, Lime Grove House

Green Street

St Helier

Jersey

JE2 4UB

Barclays Bank PLC.

13 Library Place

St Helier

Jersey

JE4 8NE

Komainu Digital

3rd Floor

2 Hill Street

St Helier

Jersey

JE2 4UA

CoinShares Corporate Services (Jersey) Limited

CoinShares Digital Securities Limited

127061

Bank

Custodian

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CoinShares Digital Securities Limited

Directors' Report

For the year ended 31 December 2023

Incorporation

The Company is incorporated, domiciled and tax resident in Jersey, Channel Islands.

Principal activity

Business review and key performance indicators

The closing 2023 Bitcoin price of USD 42,491 marked an increase over the course of 2023 of 157%, the best performing

year for bitcoin since 2020, signalling a potential end to the 2022 “crypto winter”. Bitcoin dominance (measured alongside

all digital assets in circulation) significantly increased over the year, from c.40% to c.50%, which is often seen as a sign of a

recovering market.

After a successful “Merge” upgrade in 2022, Ethereum delivered another important upgrade in 2023, with the

implementation in April of the long-awaited Shanghai update that would unlock validator withdrawals. However important

and successful this milestone was, Ethereum’s on-chain activity remained muted, signalling that the continuous bearish

sentiment from 2022 outweighed the positive developments seen on the network. This translated into an underperformance

of Ethereum compared to Bitcoin, with an increase over the year of 93%, closing at USD 2,299.

The principal activity of the Company is to act as an issuer of exchange traded products ('ETPs'). These ETPs, collectively

referred to as Digital Securities, are non-interest bearing, secured, undated, limited recourse debt securities that are fully

secured by the holdings of the digital assets underlying each ETP. Digital Securities are listed on several stock exchanges

and Multilateral Trading Facilities.

The Company is a Special Purpose Vehicle whose sole business is the issue of asset-backed securities. The Company has

established a programme for the issue of Digital Securities whose return is linked to the performance of underlying Digital

Assets. 2023 was a key period of growth for our physically-backed platform of ETPs, CoinShares Physical.

Digital Securities do not have a fixed maturity. A Digital Security holder can sell the product on the regulated market on

which it is listed, or in accordance with (and subject to) the terms of the Prospectus, may redeem the securities directly with

the Issuer in return for an amount of underlying digital assets equal to the aggregate Coin Entitlement of the Digital

Securities (less relevant fees and costs) or, in certain limited circumstances, for an amount in US dollars equal to the net

proceeds of sale of the aggregate Coin Entitlement (less relevant fees and costs).

The directors present their report and the financial statements of CoinShares Digital Securities Limited (the 'Company') for

the year ended 31 December 2023.

The vast majority of the digital assets held by the Company comprise Bitcoin, Ethereum and Solana, with the remaining

amounts represented by a range of other Digital Assets.

Company Digital Securities performance in 2023

EU Crypto-ETP Market

Over the course of 2023, European net investment into crypto ETPs was around $968mn, largely dominated by inflows into

long Bitcoin ETPs, representing around 87% of all net inflows, followed by Solana at nearly 10%. The space continues to be

dominated by a small number of players that continue to launch products designed to meet the demands of an evolving

investor base which is likely to be further bolstered by the approval of spot bitcoin ETFs in the US garnering much attention,

the incoming 2024 bitcoin halving and the establishment of a path forward in terms of regulation following the adoption of a

regulatory roadmap at a meeting of G20 Finance Ministers and Central Bank Governors in October.

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CoinShares Digital Securities Limited

Directors' Report (continued)

For the year ended 31 December 2023

Business review and key performance indicators (continued)

Digital assets

2023 2022 2023

Number Number £

By Currenc

y

Bitcoin 14,564 10,351 485,633,124

Ethereum 84,787 75,386 153,022,594

Litecoin 77,146 41,455 4,475,987

XRP 33,606,739 16,967,728 16,425,068

Polkadot 615,669 279,238 4,105,730

Tezos 3,000,443 2,355,697 2,427,596

Cardano 23,871,818 8,474,941 11,281,487

Solana 1,499,969 1,139,161 121,089,990

Chainlink 304,300 70,881 3,663,215

Uniswap 226,135 90,209 1,341,196

Cosmos 201,835 104,654 1,725,697

Matic 6,073,837 2,003,812 4,766,272

A

lgorand 37,727,904 17,355,131 6,681,098

Digital asset - COIN10 Multiple Multiple 346,970

Digital asset - COINSMRT Multiple Multiple 151,409

817,137,433

Solana has been one of the biggest winners of 2023. After a tumultuous 2022 where it lost more than 90% of its value,

largely due to FTX’s collapse, Solana was up nearly 1,000% over 2023, from around $10 early 2023 to more than $100 at

the end of the year.

The above price movements and resultant positive trends have also had a comparable impact on the remaining products of

the Group which has driven a significant increase in the AUM represented by the Company’s notes in issue. As at 1

January this figure stood at £244,641,832, and rose 234% in the year to £817,137,433 through a combination of inflows

and price appreciation.

On 27 March 2023, the Company launched two new index ETPs, each of which provides exposure to an index of Digital

Assets. CoinShares Physical Top 10 Crypto Market ETP and 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. The Directors expect the Company to continue issuing new Digital Securities in the future to meet

evolving investor demands.

Changes in existing products in 2023

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 0.0% per annum.

Digital Assets held

1,016,188

2022

£

142,828,745

2,419,356

4,846,955

-

Refer to note 7 Digital assets for further details.

818,359

1,279,145

2,543,340

244,641,832

1,766,299

9,554,260

329,500

385,011

75,435,400

New product launches in 2023

1,419,274

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CoinShares Digital Securities Limited

Directors' Report (continued)

For the year ended 31 December 2023

Future developments

Future outlook

Risks and uncertainties

The Directors and the wider CoinShares Group will continue to assess the needs of the evolving market in order to design,

build and launch products to meet such needs. This will include (but is not limited to) consideration for products referencing

digital assets already included within the CoinShares Digital Securities Prospectus, in addition to ongoing assessment of

the management fees attached to existing products.

It is the opinion of the Directors that 2024 is set to be a landmark year for digital assets, with the recent launch of spot-

based Bitcoin ETFs in the US (potentially followed in the coming months by the approval of a US based spot Ethereum

ETF), the implementation of MiCA in Europe (the EU’s bespoke framework for the regulation of crypto-asset service

providers and stablecoins), and the 2024 bitcoin halving event. Such events have the potential to drive continued interest in

ETPs referencing digital assets, such as the ones issued by the Company.

The goal of the Company amidst such growth is to support the ongoing issuance of transparent and secure products within

the space to benefit from the ongoing evolution of, and interest in, the digital asset industry.

As a result, the principal risks and uncertainties to which the Company is exposed has not materially changed during the

year ended 31 December 2023. There is an inherent risk from the point of view of investors as the values of Digital Assets

and Basket of Digital Assets, and thus the value of the Digital Securities, may vary widely due to, amongst other things,

changing supply and demand for Digital Assets, government and monetary policy or intervention, interest rate levels and

global or regional political, economic or financial events.

From a commercial perspective the Company does not retain any net gains or losses or net risk exposures, as (with the

exception of the impact of the Management Fee and Staking Reward) the gains or losses on the liability represented by the

Digital Securities are matched economically by corresponding losses or gains attributable to the Digital Assets and Basket

of Digital Assets.

Any movements in the value of the Digital Assets and Basket of Digital Assets are wholly attributable to the holders of the

Digital Securities, therefore Company has no residual exposure to movements in the value of the Digital Assets and Basket

of Digital Assets.

Each class of Digital Securities is issued under limited recourse arrangements whereby the holders have recourse only to

the relevant Digital Assets and Basket of Digital Assets held to support the Digital Security and not to the Digital Assets and

Basket of Digital Assets of any other class of Digital Security or the Company.

The Digital Securities provide investors with exposure to Digital Assets or Baskets of Digital Assets. Each Digital Security is

a debt instrument whose redemption price is linked to the value of the relevant underlying.

In early 2024 the Company announced a reduction in the management fees for the CoinShares Physical Bitcoin ETP

product. From 1 February 2024 the fees were reduced from 0.98% per annum to 0.35% per annum.

Additionally, on 1 February 2024 the Company added a 1.25% per annum staking reward to the Ethereum ETP, also

amending its name to CoinShares Physical Staked Ethereum. The management fee remains at 0.0% however staking

rewards will now be earned by CoinShares Capital Markets (Jersey) Limited ('CSCMJL') as the Staking Agent.

The Directors expect the present level of activity to be sustained for the foreseeable future and to continue issuing new

Digital Securities to meet evolving investor demands.

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CoinShares Digital Securities Limited

Directors' Report (continued)

For the year ended 31 December 2023

Risks and uncertainties (continued)

Risk of Liquidity in certain Proof of Stake Protocols: The Issuer may stake coins that are subject to such liquidity

restrictions. As a result, the Issuer may hold coins subject to such restrictions, which in turn may hinder the Issuer in

satisfying redemption requests. The Issuer will agree with the Staking Agent to provide a necessary liquidity bridge to

ensure it can continue to satisfy redemption obligations while its holdings are restricted, but there can be no guarantee that

the Staking Agent can provide such alternative liquidity.

Liquidity risk in the market for Digital Assets: Exchanges for Digital Assets are not only new, but most are also

unregulated. As a result, there is a risk of delay or failure of liquidity in the markets for Digital Assets, market closures or

liquidity failures can affect both the price and tradability of underlying Digital Assets and, by extension, the Digital

Securities. In such an event, the price of Digital Assets may decline or be more volatile and price determination for a Digital

Security may become more difficult. This may in turn reduce the ability of investors to trade the Digital Securities and/or

adversely affect the price of the Digital Securities.

The market price of Digital Securities is a function of supply and demand amongst investors wishing to buy and sell Digital

Securities and the bid or offer spread that the market makers are willing to quote.

The Company has exposure to country and currency risk as the Digital Securities are mainly priced in US Dollars. However,

the Directors do not consider the Company to have a significant net exposure to country and currency risk as the gains or

losses on the liability represented by the Digital Securities are matched economically by corresponding losses or gains

attributable to the Digital Assets and Basket of Digital Assets.

The following sets out a description of the principal risks inherent in the activities of the Company and to an investment in

its products.

Risk of loss of confidence in the Digital Asset protocols and their networks: Digital Assets are dependent on

investors, users and other members of the digital asset maintaining confidence in their underlying protocols. Should Digital

Asset investors, miners or exchanges lose confidence in an underlying protocol, the liquidity and/or value of the associated

Digital Asset may decrease, which in turn would affect the liquidity and/or value of the corresponding Digital Securities.

Risk factors relating to Digital Securities

The value of a Digital Security can change quickly and could even drop to zero: The price of Digital Assets is volatile

and may be affected by a variety of factors. Should demand for a Digital Asset decrease or should it fail to achieve adoption

among the Digital Asset community or should it suffer technological or coding failures or hacks, for example, then its value

could drop sharply and permanently, which in turn would adversely affect the price of the relevant Digital Securities in the

secondary market, as the Digital Securities are designed to track the price of the relevant Digital Asset.

Valuation: Digital Assets do not represent an underlying claim on income or profits, nor do they represent a liability that

must be repaid. Their value is a function of the perspective of the participants within the market place (or specific, given,

market place) and supply and demand. As a result, the value of Digital Assets may be more speculative and more volatile

than traditional assets representing claims on income, or profits or debts.

Risks may differ between various Digital Assets and their underlying protocols: The Company may offer Digital

Securities that reference a wide variety of Digital Assets, and some of those individual Digital Assets may have risks that

are not comparable to risks of other Digital Currencies.

Political risk in the market of Digital Assets: The legal status of Digital Assets varies between different countries and is

very much in transition. There exists a lack of regulatory consensus concerning the regulation of Digital Assets in Europe.

Future regulatory or political developments could adversely affect markets for Digital Assets, their adoption and ultimately

their value.

Risk of loss of confidence in the Digital Asset exchanges and market infrastructure: Digital Assets trade on a number

of exchanges, many of which are unregulated. Disruptions to those exchanges, whether caused by hacks or fraud or

operational issues, could materially impact the ability of digital currencies to trade, which in turn would impact their price.

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CoinShares Digital Securities Limited

Directors' Report (continued)

For the year ended 31 December 2023

Risks and uncertainties (continued)

Interest rate risk: 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. The majority of the Company's financial assets and liabilities are non-interest

bearing 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.

Risk factors relating to the Company

Market Risk: the risk of a loss of value on financial instruments arising from changes in the prevailing parameters of the

market. Digital assets are an extremely volatile asset class, which can respond unexpectedly and adversely to events

outside of the Company's control. This risk is mitigated by ensuring the value of the obligations to security holders is

matched by the value of digital assets held.

The Company consistently monitors its operational risk due to the reliance on third party service providers.

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.

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,

is subject to periodic reviews.

The risk of hacking, and losing Bitcoin/Ethereum and other 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 provide access to a cold storage vault.

Komainu has a SOC 1 Type 2 report, the latest covering the period from 1 December 2022 to 30 November 2023, which

was independently reviewed and authorised for issue on 28 April 2024. Komainu is also ISO27001 certified. In addition to

limiting the exposure to fraud for the Company, cold storage of digital assets with Komainu also reduces the exposure to

hacking of the exchanges.

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 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.

Operational risk: Operational risk is the risk of direct or indirect loss arising from the Company’s processes and

infrastructure, and from external factors other than credit, markets and other price risk and liquidity issues such as those

arising from legal and regulatory requirements and generally accepted standards of corporate behaviour.

Collateral and proof of reserves: In order to ensure the Company possesses sufficient assets to cover redemptions of

Digital Securities, the Company undertakes a proof of reserves assessment. Proof of reserves is an attestation service via

LedgerLens, a real time reserves attestation solution provided by independent accounting firm, The Network Firm.

This innovative blockchain-enabled solution will offer real time attestation services for the Company's ETPs enabling

investors to independently verify the backing of digital assets through easily accessible and instant attest reports.

The LedgerLens solution, provided by The Network Firm, enhances trust in asset-backed tokens and crypto-collateralized

notes by offering high frequency reporting and insights into assets and liabilities, including historical positions.

This increased transparency facilitates compliance with both international and domestic regulatory requirements, further

solidifying the Company's standing as a reliable leader in the digital asset investment sector.

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CoinShares Digital Securities Limited

Directors' Report (continued)

For the year ended 31 December 2023

Risks and uncertainties (continued)

Digital asset price risk: 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. 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.

Capital risk management: The capital of the Company is nil. The Company's objective is to undertake the issuance and

redemptions of Digital Securities and performing the associated obligations for the Group, in the interest of benefitting the

shareholders of the ultimate parent company. This is achieved through frequent evaluation of the Company's products to

ensure they meet investor demands.

More information on the Group's corporate social responsibility strategy can be found on the CoinShares website.

The Annual Sustainability Report aims to be transparent and relevant, to ensure that stakeholders can easily learn about

the Group's sustainability efforts and gain an understanding of group performance and progress over time in relation to

Environmental, Social and Governance (“ESG”) initiatives.

Liquidity risk: Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations associated with

financial liabilities. 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. Securities holders can

request redemption of their securities which will be settled two business days following a valid redemption notice. The

Company it is required holds the relevant digital asset at all times to be able to meet these redemptions.

Credit risk arising from the ETP creation process is mitigated by the fact that Digital Securities are issued to counterparties

only after the underlying Digital Assets have been received. Management Fees and Staking Rewards recognised by the

Programme Manager and Staking Agent respectively are deducted from amounts held in relation to the ETPs, therefore not

relying on counterparties.

Liquidity risk associated with the payment of suppliers is mitigated through the arrangement whereby expenses of the

Company are settled by CSJL through the issuance of fees as agreed in the Service Level Agreement dated 21 May 2021.

Credit risk: 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.

Sustainability and Corporate Responsibility

Sustainability and corporate responsibility are embedded throughout the business of the CoinShares Group Directors

believe this benefits shareholders and employees of the Group, investors in CoinShares products and services offered as

well as wider society.

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CoinShares Digital Securities Limited

Directors' Report (continued)

For the year ended 31 December 2023

Corporate Governance

The Company’s issued share capital consists of 1 fully-paid share of £0.01, which is held ultimately by CoinShares

International Limited.

No person has a significant direct or indirect holding of securities in the Company. No person has any special rights of

control over the Company’s share capital. There are no restrictions on voting rights. The Company belongs to a group of

companies, the ultimate holding entity of which is CoinShares International Limited, incorporated in Jersey, Channel

The Group Directors acknowledge that climate change and its impact on the global economy is of increasing interest and

focus for stakeholders and that, where relevant, stakeholders will seek information from companies regarding how climate

change is expected to impact the operations of the business and how climate change risk has been considered in the

context of reported results.

Sustainability and Corporate Responsibility (continued)

Board of Directors

The Board meets regularly as required by the operations of the Company, but at least quarterly to review the overall

business of the Company and to consider matters specifically reserved for its review.

The disclosures are structured according to our key sustainability topics. The report has been written with reference to the

Swedish Annual Accounts Act (1995:1554), and is presented in four sections, as follows:

1. Strategy and Current Position

2. Sustainability

3. Environmental Initiatives

4. Social Initiatives

In acknowledging the above, the Directors have considered the Company’s exposure to climate change and determined

that due to the nature of the Company and its operations there are no directly observed impacts of climate change on the

business. As a result, the Directors concluded that there is no basis on which to provide extended information of analysis

relating to climate change, including as part of the basis of accounting or individual accounting policies adopted by the

Company.

The Directors have concluded specifically that climate change, including physical and transition risks, does not have a

material impact on the recognition and separate measurement considerations of the assets and liabilities in these financial

statements as at 31 December 2023.

The liabilities are valued using listed market prices at the period end. These observable inputs and market prices will reflect

wider market sentiment, which inherently includes market perspectives relating to the impactor climate change. The Board

recognises that government and societal responses to climate change risks are still developing and the future impact

cannot be predicted.

Future valuations of assets and liabilities may therefore differ as the market responds to these changing impacts or

assesses the impact of current requirements differently.

Share Capital and voting rights

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CoinShares Digital Securities Limited

Directors' Report (continued)

For the year ended 31 December 2023

Corporate Governance (continued)

In addition, CoinShares International Limited has a number of policy documents and manuals, including the Code of

Conduct, the Corporate Governance Policy, the Insider Policy, and the Information and Communication Policy, as well as

other internal rules and recommendations that include principals and provide guidance in the company’s operations and for

its employees. These governance documents are evaluated and adopted annually by the Board of Directors. The

requirements arising from CoinShares International Limited’s shares being listed for trading on Nasdaq Stockholm include

the compulsory adoption of a corporate governance code. The guidelines of the Code are available on the Swedish

Corporate Governance Board’s website. As at the date of this Corporate Governance Report, the Company has complied

with the Code.

Third Line of Defence: The Group relies upon both the annual financial audit process in addition to more focused

specialised external work, undertaken on particular parts of the business, for example, the work undertaken by The Network

Firm, providing attestation reports on the assets held in support of the Group’s ETPs.

The Second Line of Defence: The Group’s Compliance Team has a number of key responsibilities including anti-money

laundering, countering of terrorism financing, regular testing of the Group’s control framework and liaising with the Group’s

various external regulatory bodies.

First Line of Defence: The client-facing operations teams are responsible for maintaining a strict control environment over

day-to-day operational matters. The first line has a comprehensive control framework, managed and maintained by them;

the framework spans both organisation wide controls and department specific controls.

The Group operates the Three Lines of Defence model, which is considered to be industry best practice and comprises the

following:

Internal Control

During the year the Company did not have any direct employees or subsidiaries. The Company, being a special purpose

company established for the purpose of issuing Digital Securities, has not undertaken any business, save for issuing and

redeeming Digital Securities, entering into the required documents and performing the associated obligations, since its

incorporation.

The Company does not intend to undertake any business other than issuing and redeeming Digital Securities and

performing the associated obligations.

CoinShares International Limited is a Jersey, public limited liability company whose shares are listed for trading on Nasdaq

Stockholm and the ultimate parent company of CoinShares Digital Securities Limited. The Corporate Governance

framework for CoinShares International Limited is grounded in the Company’s Articles of Association, Companies (Jersey)

Law 1991, as amended, the Code, Nasdaq’s Nordic Main Market Rulebook for Issuers of Shares and the Company’s

internal rules and guidelines. The internal rules and guidelines include primarily the Board’s rules of procedure, the CEO’s

instructions, the instructions for financial reporting and internal control, and the finance manual.

Director remuneration

The Directors of the Company who are employees within the CoinShares group do not receive separate remuneration in

their capacity as Directors of the Company. The non-executive director receives separate remuneration for their role which

is paid by CoinShares (Jersey) Limited as the Programme Manager however is recognised as an expense by the Company.

Integration with CoinShares Group governance

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CoinShares Digital Securities Limited

Directors' Report (continued)

For the year ended 31 December 2023

Cor

p

orate Governance

(

continued

)

Results and dividends

Statement of Directors’ responsibilities

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will

continue in business.

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 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;

• 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:

The total comprehensive income for the year, which includes gains/losses on digital assets amounted to £nil (2022: £nil).

The directors do not recommend the payment of a dividend for the year (2022: £nil).

The loss after taxation for the year emounted to £98,335,044 (2022: profit of £127,804,522). This figure does not take into

account all of the movements on the value of di

g

itial assets to collateralise the ETPs in issue.

The Company and several of its service providers are subsidiaries of the CoinShares Group. Service Level Agreements

("SLAs") were signed by the companies from the CoinShares Group. The SLAs govern the relations between the entities as

well as their respective obligations.

Audit Committee

The sole business of the Company relates to the issuing of asset-backed Digital Securities. Given the limited recourse

nature of the Digital Securities issued by the Company, the Board of Directors have concluded that there is currently no

need for the Company to have a separate audit committee in order for the Board to perform effective monitoring and

oversight of the internal control and risk management systems of the Company in relation to the financial reporting process

and the monitoring of the statutory audit and the independence of the statutory auditors.

Service level agreements

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CoinShares Digital Securities Limited

Directors' Report (continued)

For the year ended 31 December 2023

Statement of Directors’ responsibilities (continued)

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.

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.

Directors' interest in shares

The directors holding office at the end of the reporting period had no direct interests in the share capital of the Company but

certain directors did have an interest in the ultimate parent company, CoinShares International Limited ('CSIL').

Going concern

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.

The Company has net assets of £nil (2022: £nil) at the end of the reporting period. All expenses of the Company are settled

by 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 the financial

health of CSJL and its 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 at least 12 months from the

date of this report.

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.

Corporate Governance Statement

The Company is wholly owned by CSIL, a Jersey, public limited liability company whose shares are listed for trading on

Nasdaq Stockholm. The Corporate Governance framework for CoinShares International Limited is grounded in the

Company’s Articles of Association, Companies (Jersey) Law 1991, as amended, the Code, Nasdaq Rulebook for Issuers of

Shares (the “Main Market Rulebook”), and the Company’s internal rules and guidelines. Further details regarding Corporate

Governance applied to the Company can be found on the CoinShares International Limited website.

Inde

pendent Auditor

Baker Tilly Channel Islands Limited has expressed its willingness to continue in office.

The report was approved by the board of directors on 30 April 2024 and signed on its behalf by:

..........................................................

CoinShares Corporate Services (Jersey) Limited

Company Secretary

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CoinShares Digital Securities Limited

Global Statement for the Financial Statements

For the year ended 31 December 2023

Global Statement for the Financial Statements

Townsend Lansing Jr.

Director

Date: 30 April 2024

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.

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Independent auditor’s report

T

o 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 2023, 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 material accounting policy information.

In our opinion, the accompanying financial statements:

• give a true and fair view of the financial position of the Company as at 31 December 2023, and

of i

ts financial performance and its cash flows for the year then ended in accordance with IFRS

Accounting 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; £817,137,433

(2022: 244,641,832)

• 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.

• We understood and

evaluated the procedures

relating to the process of

assessing the reliability of

the custodian both at take

on and throughout the

relationship.

• Test of detail on a sample

of additions and disposals,

which we agreed to

appropriate supporting

documents.

We have no findings to

report.

Our Application of Materiality

Materiality for the financial statements as a whole was set at £28,000 (2022: £31,000), determined with

reference to a benchmark of total expenses, of which it represents 1.5% (2022: 1.5%).

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% (2022: 60%) of materiality for the financial statements as a

whole, which equates to £16,800 (2022: £18,600). We applied this percentage in our determination of

performance materiality because we deem the digital asset activities undertaken by the entity to be

high risk.

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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 board of directors on 03 December 2020 to audit the financial statements. Our

total uninterrupted period of engagement is 4 years (audits of 5 financial reporting periods).

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.

Our audit opinion is consistent with the additional report to the audit committee in accordance with

ISAs.

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.

Ewan Spraggon

For and on behalf of Baker Tilly Channel Islands Limited

Chartered Accountants

St Helier, Jersey

Date: 30 April 2024

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CoinShares Digital Securities Limited

Statement of Comprehensive Income

For the year ended 31 December 2023

2023 2022

Note

££

Revenue 4 1,883,311

2,101,877

Gross profit

1,883,311 2,101,877

Administration expenses 5 (1,883,219)

(2,094,339)

Fair value gain/(loss) on digital assets

7 302,608,417 (302,608,417)

Loss on digital asset receivables

9 -

(151,082)

(Loss)/gain on ETP liabilities

11 (393,428,803)

429,278,798

(Loss)/gain on digital asset payables

13 (7,514,658)

1,285,223

Loss on foreign exchange (92)

(7,538)

Operating (loss)/profit

(98,335,044)

127,804,522

(Loss)/profit before taxation

(98,335,044)

127,804,522

Taxation on (loss)/profit

6 -

-

(Loss)/profit after taxation

(98,335,044)

127,804,522

7 98,335,044 (127,804,522)

Other comprehensive income/(loss)

98,335,044 (127,804,522)

Total comprehensive income

-

Fair value gain/(loss) on digital assets

All results are derived from continuing operations.

The

above should be read in conjunction with the accompanying notes on pages 21 to 40 which form an integral part of these

financial statements.

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Statement of Financial Position

As at 31 December 2023

2023 2022

Note

££

ASSETS

Current assets

Digital assets 7 817,137,433 244,641,832

Trade and other receivables 8 662,066 676,922

Digital asset receivables 9 44,606 50,015

Cash and cash equivalents 10 4,910 4,940

Total assets 817,849,015 245,373,709

LIABILITIES

Current liabilities

ETP liabilities 11 807,441,130 244,043,894

Trade and other payables 12 666,976 681,862

Digital asset payables 13 9,740,909 647,953

Total liabilities 817,849,015 245,373,709

Net assets - -

EQUITY

Share capital 14 - -

Retained earnings - -

Total equity - -

CoinShares Digital Securities Limited

The financial statements on pages 17 to 40 were approved and authorised for issue by the Board of Directors of the Company

and signed on its behalf by:

Kirsty Lawrence

Director

Date: 30 April 2024

The above should be read in conjunction with the accompanying notes on pages 21 to 40 which form

an integral part of these

financial statements.

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Statement of Changes in Equit

y

For the year ended 31 December 2023

Ordinary Retained

Shares Earnings Total equity

£££

At 1 January 2022 -

-

Profit for the year

-

127,804,522

Other comprehensive loss

-

(127,804,522)

Total comprehensive income

-

At 31 December 2022

-

At 1 January 2023

-

Loss for the year

-

(98,335,044)

Other comprehensive income

-

98,335,044

Total comprehensive income

-

At 31 December 2023

-

The

above should be read in conjunction with the accompanying notes on pages 21 to 40 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 2023

2023 2022

Note

££

Cash flows from operating activities

(Loss)/profit for the year (98,335,044)

127,804,522

Adjustments for:

- Loss/(gain) on ETP liabilities

11

393,428,803 (429,278,798)

- Loss/(gain) on digital asset payables

7,514,658 (1,285,223)

- (Gain)/loss on digital assets

(302,608,417) 302,608,417

- Loss on digital asset receivables

9

-

151,082

-

Change in working capital:

- Trade and other payables (30) (30)

Net cash flow used in operating activities (30) (30)

Net decrease in cash and cash equivalents

(30)

At the beginning of the year

4,940 4,970

At the end of the year

10

4,910 4,940

Reconciliation of net debt

Non-cash analysis

Cash flows from operating activities

- Trade and other receivables 14,856

(588,370)

- Trade and other payables

(14,856)

588,370

- Net issuance of ETP liabilities 171,586,010

218,112,690

- Net purchase of digital assets

(171,586,010)

(218,112,690)

The

above should be read in conjunction with the accompanying notes on pages 21 to 40 which form an integral part of these

financial statements.

CoinShares Digital Securities Limited

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Notes to the Financial Statements

For the year ended 31 December 2023

1 General information

2 Significant accounting policies

2.1 Basis of preparation

2.2 Adoption of new and revised Standards

• IFRS 17 Insurance Contracts

• Definition of Accounting Estimates - amendments to IAS 8

• International Tax Reform - Pillar Two Model Rules - amendments to IAS 12

• Deferred Tax related to Assets and Liabilities arising from a Single Transaction - amendments to IAS 12

• Disclosure of Accounting Policies - amendments to IAS 1 and IFRS Practice Statement 2

New and revised IFRS Standards in issue but not yet effective

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 amended IFRS Standards that are effective for the current year

Certain amendments to accounting standards have been published that are not mandatory for 31 December

2023 reporting periods and have not been early adopted by the group. These amendments are not expected

to have a material impact on the entity in the current or future reporting periods and on foreseeable future

transactions.

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').

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 2023:

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.

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

2 Significant accounting policies (continued)

2.3 Going concern basis

2.4 Changes in accounting policies

2.5 Foreign currency translation

2.6 Judgements and sources of estimation uncertainty

Foreign exchange gains and losses arising from translation are included in the Statement of Comprehensive

Income.

Transactions and balances

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 Company has net assets of £nil (2022: £nil) at the end of the reporting period. All expenses of the

Company are settled by 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 the financial health of CSJL and its 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 at least 12 months from the date of this report.

The following are considered to be sources of judgement and estimate:

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.

CoinShares Digital Securities Limited

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

2 Significant accounting policies (continued)

2.6 Judgements and sources of estimation uncertainty (continued)

Critical judgements

Estimates

2.7 Revenue

The Company charges fees to CSJL to cover costs incurred as part of issuing exchange traded products.

Any management fees and staking rewards that are due from the Digital Securities are due to CSJL and

CSCMJL as the programme manager and staking agent respectively, and therefore is not recognised as

revenue in the Company.

Sale of services

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.

Management have not made any significant estimates in the process of applying the Company's accounting

policies.

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 accounting policies 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 which are also applied within the CoinShares group.

CoinShares Digital Securities Limited

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.

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 'Financial Instruments'. 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 therefore treats these as financial instruments.

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.

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

2 Significant accounting policies (continued)

2.8 Expenses

2.9 Cash and cash equivalents

2.10

2.11 Intangible assets - digital assets

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.

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:

Level 3 – Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.

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.

For staked Digital Securities and Index Digital Securities, digital assets received as staking rewards are

recognised at the point in which the Company is entitled to received the staking rewards. Staking rewards not

yet received at the year end are recognised as receivables.

All expenses of the Company are recognised on an accruals basis.

All Digital assets held by the Company 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.

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).

CoinShares Digital Securities Limited

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.

Fair value hierarchy

Digital assets have been classified as Level 1 as per note 2.10.

If a digital asset’s 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.

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

2 Significant accounting policies (continued)

2.11 Intangible assets - digital assets (continued)

2.12 ETP liabilities

2.13 Financial instruments

Financial Assets

The Company is an issuer of ETPs. The ETPs are described as per the prospectuses, publicly available on

coinshares.com.

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.

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.

CoinShares Digital Securities Limited

ETPs are valued using the coin entitlement calculation defined in the prospectuses. 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.

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 prospectuses.

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

2 Significant accounting policies (continued)

2.13 Financial instruments (continued)

Financial Assets (continued)

Financial liabilities

2.14 Taxation

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.

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.

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.

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.

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.

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 year of the borrowings using the effective interest method.

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.

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.

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.

Page 26

Doc ID: 00ab86fadb520eed7580398f172ae26ef4884b4d

Notes to the Financial Statements (continued)

For the year ended 31 December 2023

2 Significant accounting policies (continued)

2.14 Taxation (continued)

2.15 Share capital

3 Operating segments

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.

• Index Digital Securities; and

• Digital Securities with a management fee;

• Staked Digital Securities;

• Central costs

The Company monitors its assets and liabilities according to four core operating segments, defined by the primary characteristics

of ETPs. The Company deems that it has four reportable operating segments in respect of assets and liabilities, being:

Prior to 2023, the Directors deemed that the Company had a single operating segment on which to report revenues and

expenses. Prior period comparatives for revenues and expenses split by operating segment have, therefore, not been disclosed

in these financial statements.

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.

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.

CoinShares Digital Securities Limited

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

3 Operating segments (continued)

2023

Digital Securities with Staked Digital Index Digital Central

a Management Fee Securities Securities Costs Total

£ ££££

Revenue 839,249 507,625 129,064 407,373 1,883,311

Gross profit 839,249 507,625 129,064 407,373 1,883,311

Administration expenses (839,249) (507,625) (129,064) (407,281) (1,883,219)

Gain on digital assets 220,349,758 82,258,659 - - 302,608,417

Loss on ETP liabilities (291,710,705) (101,486,227) (231,871) - (393,428,803)

Loss on digital asset payables (74,641) (7,440,017) - - (7,514,658)

Loss on foreign exchange - - - (92) (92)

Operating loss (71,435,588) (26,667,585) (231,871) - (98,335,044)

Loss before taxation (71,435,588) (26,667,585) (231,871) - (98,335,044)

Taxation on loss - - - - -

Loss after taxation (71,435,588) (26,667,585) (231,871) - (98,335,044)

71,435,588 26,667,585 231,871 - 98,335,044

Other comprehensive income 71,435,588 26,667,585 231,871 -

98,335,044

Total comprehensive income - - - - -

CoinShares Digital Securities Limited

The following is an analysis of the Company's revenues and expense by reportable segment for the year ended 31 December

2023. Any management fees and staking rewards that are due from the Digital Securities are due to CSJL and CSCMJL as the

programme manager and staking agent respectively, and therefore is not recognised as revenue in the Company.

Fair value gain on digital assets

Page 28

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

3 Operating segments (continued)

2023

Digital Securities with Staked Digital Index Digital Central

a Management Fee Securities Securities Costs Total

£ ££££

Digital assets 664,561,184 152,077,870 498,379 - 817,137,433

Trade and other receivables - - - 662,066 662,066

Digital asset receivables - 44,606 - - 44,606

Cash and cash equivalents - - - 4,910 4,910

Total assets 664,561,184 152,122,476 498,379 666,976 817,849,015

ETP Liabilities 664,275,904 142,666,847 498,379 - 807,441,130

Trade and other payables - - - 666,976 666,976

Digital asset payables 285,280 9,455,629 - - 9,740,909

Total liabilities 664,561,184 152,122,476 498,379 666,976 817,849,015

Net assets - - - - -

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 - - - -

Prior to 2023, the Directors did not deem Index Digital Securities to be an operating segment on which to report assets and

liabilities. Prior period comparatives for the Index Digital Securities operating segment have, therefore, not been disclosed in

these financial statements.

CoinShares Digital Securities Limited

The following is an analysis of the Company's assets and liabilities by reportable segment as at 31 December 2023.

The following is an analysis of the Company's assets and liabilities by reportable segment as at 31 December 2022.

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

4 Revenue

2023 2022

££

Fee income 1,883,311 2,101,877

1,883,311 2,101,877

5 Administration expenses by nature

2023 2022

££

A

udit fees 58,000 37,250

Director's fees 15,000 15,000

73,000 52,250

6 Taxation

The Company is subject to tax at the rate of 0% (2022: 0%).

7 Digital assets

2023 2022 2023

2022

Number Number £ £

By Currenc

y

Bitcoin 14,564 10,351 485,633,124 142,828,745

Ethereum 84,787 75,386 153,022,594 75,435,400

Litecoin 77,146 41,455 4,475,987 2,419,356

XRP 33,606,739 16,967,728 16,425,068 4,846,955

Polkadot 615,669 279,238 4,105,730 1,016,188

Tezos 3,000,443 2,355,697 2,427,596 1,419,274

Cardano 23,871,818 8,474,941 11,281,487 1,766,299

Solana 1,499,969 1,139,161 121,089,990 9,554,260

Chainlink 304,300 70,881 3,663,215 329,500

Uniswap 226,135 90,209 1,341,196 385,011

Cosmos 201,835 104,654 1,725,697 818,359

Mati

c

6,073,837 2,003,812 4,766,272 1,279,145

A

lgorand 37,727,904 17,355,131 6,681,098 2,543,340

Digital asset - COIN10* 346,970 -

Digital asset - COINSMRT* 151,409 -

817,137,433 244,641,832

Included within administration expenses of £1,883,219 (2022: £2,094,339) (see page 41) are the following amounts:

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.

Revenue on products is recognised in CSJL and CSCMJL as programme manager and staking agent respectively.

Page 30

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

7 Digital assets (continued)

2023 2022 2023

2022

Number Number £ £

COIN10

Bitcoin 3 - 112,213 -

Ethereum 62 - 111,791 -

Litecoin 89 - 5,186 -

XRP 62,692 - 30,640 -

Tron 100,649 - 8,471 -

Cardano 42,292 - 19,987 -

Polkadot 1,642 - 10,950 -

Chainlink 636 - 7,660 -

Solana 389 - 31,402 -

Mati

c

11,048 - 8,669 -

346,970

-

COINSMRT

Ethereum 20 - 36,278 -

Tron 107,623 - 9,058 -

Stellar Lumens 36,572 - 3,747 -

Cardano 45,220 - 21,370 -

Near Protocol 1,331 - 3,883 -

Chainlink 680 - 8,183 -

Mati

c

11,813 - 9,270 -

Solana 416 - 33,578 -

A

valanche 462 - 14,333 -

Polkadot 1,756 - 11,708 -

151,409

-

498,379 -

2023

2022

££

Reconciliation of Digital Assets

Opening balance 244,641,832 456,981,360

A

dditions to digital assets 305,277,023 296,699,302

Net staking rewards 2,298,178 2,269,586

Disposals of digital assets (134,196,245) (79,167,212)

Management fees paid to CSJL (1,826,816) (1,728,265)

Fair value gain/(loss) through profit and loss 302,608,417 (302,608,417)

Fair value profit/(loss) through other comprehensive income 98,335,044 (127,804,522)

Digital assets closing balance 817,137,433 244,641,832

On 27 March 2023, the Company launched two new index ETPs, CoinShares Physical Top 10 Crypto Market ETP ('COIN10')

and CoinShares Physical Smart Contract Platform ETP ('COINSMRT'). 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.

CoinShares Digital Securities Limited

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.

Inde

x

products comprise a numbe

r

of underlying Digital

A

ssets in each product.

A

s at yea

r

end the balance of the inde

x

ETP

products comprised the following:

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

8 Trade and other receivables

2023

2022

££

A

mounts owed by Group undertaking

s

660,295 665,022

Prepayments and sundry debtor

s

1,771 11,900

662,066 676,922

Expected credit losses

9 Digital asset receivables

2023 2022 2023

2022

Number Number

££

Amounts owed by Group undertakings

CSCMJL - Solana (i)

-

1,280 - 10,736

Amounts owed by third parties

Staking rewards - Algorand (ii)

251,890

272,231 44,606 39,279

44,606 50,015

2023 2022

Reconciliation of digital asset receivables £ £

Opening balance 50,015 -

A

dditions 44,606 240,660

Disposals (50,015) (39,563)

Loss on digital asset receivables - (151,082)

Digital assets receivables closing balance 44,606 50,015

10 Cash and cash equivalents

2023 2022

££

Cash at bank 4,910 4,940

4,910 4,940

Management has undertaken a review of the credit loss and calculated that the risk of credit loss to be clearly trivial.

Amounts owed by Group undertakings relate to the outstanding fee income from CSJL as per note 4.

(i) Amounts owed by Group undertakings relate to staked products where the reward payable to 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 £44,606 (2021: £39,279) in respect of accrued staking rewards.

CoinShares Digital Securities Limited

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

11 ETP liabilities

2023 2022 2023 2022

Number Number £ £

Securities type

CoinShares Physical Bitcoin

14,839,130

10,448,800

485,390,408

142,773,000

CoinShares Physical Ethereum

2,853,953

2,527,286

153,022,594

75,396,910

CoinShares Physical Litecoin

401,500

212,500

4,470,073

2,416,053

CoinShares Physical XRP

874,300

434,800

16,404,468

4,840,826

CoinShares Physical Staked Polkadot

557,500

257,500

4,084,656

980,519

CoinShares Physical Staked Tezos

564,000

453,000

2,415,298

1,402,567

CoinShares Physical Staked Cardano

22,705,000

8,265,000

11,272,945

1,764,189

CoinShares Physical Staked Solana

13,652,100

10,928,100

111,799,509

9,183,556

CoinShares Physical Chainlink

3,111,000

715,000

3,652,266

329,077

CoinShares Physical Uniswap

2,310,000

910,000

1,336,096

384,530

CoinShares Physical Staked Cosmos

374,500

193,000

1,724,979

774,317

CoinShares Physical Staked Mati

c

568,500

195,000

4,758,310

1,277,325

CoinShares Physical Staked Algorand

3,661,000

1,745,000

6,611,149

2,521,025

CoinShares Physical Top 10 Crypto Marke

t

25,000 -

346,970

-

CoinShares Physical Smart Contract Platform 10,000 -

151,409

-

66,507,483 37,284,986 807,441,130 244,043,894

££

Reconciliation of ETP liabilities

Opening balance 244,043,894 456,835,433

Creations of ETPs 305,284,459 296,631,728

Redemptions of ETPs (134,196,313) (78,909,345)

Net movement on staking rewards 572,910 287,617

Net movement on management fee (1,692,623) (1,533,830)

Fair value loss/(gain) 393,428,803 (429,267,709)

ETP liabilities closing balance 807,441,130 244,043,894

2023 2022

££

(Loss)/gain on ETPs to CSCMJL and Third Parties (209,778,522) 287,229,082

(Lloss)/gain on other ETP liabilities (183,650,281) 142,038,627

(393,428,803) 429,267,709

Other gain on ETPs - 11,089

Total gain/(loss) on ETP liabilities (393,428,803) 429,278,798

12 Trade and other payables

2023 2022

£

Trade payables 114,763 46,809

A

mounts payable to parent compan

y

- 311,766

A

ccrued liabilities 552,213 323,287

666,976 681,862

CoinShares Digital Securities Limited

Amounts owed to the ultimate parent company, CSIL, typically consist of expenses settled on behalf of the Company. These

amounts are repayable on demand, bear interest at 0% and are unsecured.

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

13 Digital asset payables

2023 2022 2023 2022

Number Number £ £

Amounts payable to Group undertaking

s

CSJL - Bitcoin

7

4

242,717

55,745

CSJL - Ethereum

-

38

-

38,490

CSJL - Litecoin

102

57

5,914

3,303

CSJL - XRP

42,149

21,455

20,600

6,129

CSJL - Solana

1,321

741

106,640

6,211

CSJL - Chainlink

910

91

10,949

423

CSJL - Uniswap

860

113

5,100

481

CSCMJL - Polkado

t

3,160

9,801

21,073

35,669

CSCMJL - Tezos

15,200

27,730

12,298

16,707

CSCMJL - Cardano

18,076

10,126

8,542

2,110

CSCMJL - Cosmos

84

5,632

718

44,042

CSCMJL - Solana

2,314

-

186,773

-

CSCMJL - Mati

c

10,146

2,851

7,962

1,820

CSCMJL - Algorand

205,117

287,905

36,324

41,540

665,610 252,670

Amounts payable to third partie

s

Third parties - Solana

111,449

44,739

8,997,068

375,229

Third parties - Algorand

441,767

138,987

78,231

20,054

9,075,299 395,283

9,740,909 647,953

2023 2022

££

Reconciliation of digital asset payables

Opening balance 647,953 145,927

A

dditions 4,618,278 3,652,255

Disposals (3,039,980) (1,865,006)

Loss/(gain) on digital asset payables 7,514,658 (1,285,223)

Digital asset payables closing balance 9,740,909 647,953

CoinShares Digital Securities Limited

Amounts owed to 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.

Amounts owed to third parties relate to fees where seed capital has been provided for products. These amounts are

denominated in the relevant digital asset.

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

14 Share capital

Shares classified as equit

y

2023 2022 2023 2022

Number Number £ £

Ordinary shares of £0.01 each 1 1 - -

1 1 -

15 Risk management

a) Market risk

i) Interest rate risk

ii) Digital asset price risk

iii) Currency ris

k

GBP is the functional currency of the Company. From time to time the Company may incur operational expenses which are billed

in foreign currencies, such as USD and EUR. All expenses of the Company are settled by CSJL through the issuance of fees,

the Company therefore has limited exposure to currency risk.

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 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

Allotted, called-up and unpaid

-

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.

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.

The majority of the Company's financial assets and liabilities are either non-interest bearing 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.

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.

Page 35

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

15 Risk Management (continued)

a) Market risk (continued)

Price change Price change

-50% 100%

£££

Assets

Bitcoin 485,633,124 242,816,562 971,266,248

Ethereum 153,022,594 76,511,297 306,045,188

Litecoin 4,475,987 2,237,994 8,951,974

XRP 16,425,068 8,212,534 32,850,136

Polkadot 4,105,730 2,052,865 8,211,460

Tezos 2,427,596 1,213,798 4,855,192

Cardano 11,281,487 5,640,744 22,562,974

Solana 121,089,990 60,544,995 242,179,980

Chainlink 3,663,215 1,831,608 7,326,430

Uniswap 1,341,196 670,598 2,682,392

Cosmos 1,725,697 862,849 3,451,394

Mati

c

4,766,272 2,383,136 9,532,544

A

lgorand 6,681,098 3,340,549 13,362,196

Digital asset - COIN10* 346,970 173,485 693,940

Digital asset - COINSMRT* 151,409 75,705 302,818

Other assets 711,582 689,279 756,188

Total assets 817,849,015 409,257,996 1,635,031,054

Liabilities

ETP liability 807,441,130 403,720,565 1,614,882,260

Digital assets payable 9,740,909 4,870,455 19,481,818

Other liabilities 666,976 666,976 666,976

Total liabilities 817,849,015 409,257,996 1,635,031,054

Net assets - - -

b) Credit risk

CoinShares Digital Securities Limited

In order for customers to purchase Digital Asecurities, Digital Assets are required to be deposited with the Company prior to the

issuance of the Digital Securities. The risk of losing Digital Assets in digital wallets due to fraud is reduced through digital assets

being kept in cold storage with Komainu, who provide a cold storage vault. The Company does not expect to incur material credit

losses in respect of digital assets.

Carrying amount

as at 31

December 2023

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.

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 Company's primary banking relationship is with

Barclays Bank PLC, which holds a credit rating of 'A' with Fitch Ratings.

Page 36

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

15 Risk Management (continued)

b) Credit risk (continued)

c) Liquidity risk

d) Capital risk management

e) Operational risk

The capital of the Company is nil. The Company's objective is to undertake the issuance and redemptions of Digital Securities

and performing the associated obligations for the Group, in the interest of benefitting the shareholders of the ultimate parent

company. This is achieved through frequent evaluation of the Company's products to ensure they meet investor demands.

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 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.

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.

The risk of hacking, and losing Bitcoin/Ethereum and other 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 provide access to a cold storage vault. Komainu has a

SOC 1 Type 2 report, the latest covering the period from 1 December 2022 to 30 November 2023, which was independently

reviewed and authorised for issue on 28 April 2024. Komainu is also ISO27001 certified. In addition to limiting the exposure to

fraud for the Company, cold storage of digital assets with Komainu also reduces the exposure to hacking of the exchanges.

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. 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.

Liquidity risk associated with the payment of suppliers is mitigated through the arrangement whereby expenses of the Company

are settled by CSJL through the issuance of fees as agreed in the Service Level Agreement dated 21 May 2021.

Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations associated with financial liabilities, in

particular towards security holders. Digital assets and ETP liabilities are not financial instruments however there is an active

market and they are readily realisable on demand.

Credit risk arising from the ETP creation process is mitigated by the fact that Digital Securities are issued to counterparties only

after the underlying Digital Assets have been received. Management Fees and Staking Rewards recognised by the Programme

Manager and Staking Agent respectively are deducted from amounts held in relation to the ETPs, therefore not relying on

counterparties.

CoinShares Digital Securities Limited

Page 37

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Notes to the Financial Statements (continued)

For the year ended 31 December 2023

16 Related party transactions

CoinShares (UK) Limited CSUKL 100%

XBT Provider AB (publ) XBTP 100%

CoinShares GP II Limited CSGP2L 100%

CoinShares Co CSCo 100%

Gold Token SA GTSA 23%

CoinShares (Jersey) Limited CSJL 100%

GABI Trading Limited (Asia) GTLA 100%

CSCMUKL

CoinShares Capital, LLC CS Cap 100%

CoinShares GP I LLC CSGPI 100%

FlowB Holding Switzerland SA Flowbank 28%

CoinShares France CSF 100%

CoinShares Asset Management CSAM 100%

CoinShares Switzerland AG CSSAG 100%

CoinShares Ethereum US

Feeder Fund, LP

EIS US

Feeder

Subsidiary 100% USA 05/06/2023

CoinShares Relative Value

Opportunities US Feeder Fund,

LP

RVO US

Feeder

Subsidiary 100% USA 27/07/2023

Subsidiary Switzerland 24/05/2023

CoinShares Bitcoin US Feeder

Fund, LP

BIS US

Feeder

Subsidiary 100% USA 05/06/2023

CoinShares Relative Value

Opportunities Master Fund

Limited

RVO Master Subsidiary 100% Jersey 06/04/2023

CoinShares Relative Value

Opportunities Feeder Fund

Limited

RVO

Feeder

Subsidiary 100% Jersey 06/04/2023

CoinShares Ethereum

Integrated Strategies Master

Fund Limited

EIS Master Subsidiary 100% Jersey 06/04/2023

CoinShares Ethereum

Integrated Strategies Feeder

Fund Limited

EIS Feeder Subsidiary 100% Jersey 06/04/2023

CoinShares Bitcoin Integrated

Strategies Master Fund Limited

BIS Master Subsidiary 100% Jersey 27/02/2023

CoinShares Bitcoin Integrated

Strategies Feeder Fund Limited

BIS Feeder Subsidiary 100% Jersey 27/02/2023

Subsidiary Jersey 26/09/2018

Subsidiary France 17/12/2021

Larks Leaf Asset Management

(Jersey) Limited

LLAMJL Subsidiary 100% Jersey 27/02/2023

17/12/2021

CoinShares Capital Markets

(UK) Limited

Subsidiary Hong Kong

CoinShares Capital Markets

(Jersey) Limited

CSCMJL Subsidiary 100% Jersey

18/09/2019

Subsidiary USA

CoinShares Employment

Services (Jersey) Limited

CSESJL Subsidiary 100% Jersey 09/08/2018

01/07/2018

Associate

CoinShares Corporate Services

(Jersey) Limited

08/08/2018

Subsidiary

Name Defined as

France

Subsidiary USA

Subsidiary Jersey 09/02/2018

20/03/2020

Subsidiary UK 19/04/2017

Switzerland 02/10/2021

Subsidiary 100% UK 30/06/2019

30/06/2019

12/02/2019

Associate

CoinShares Digital Securities Limited

Subsidiary USA

Jurisdiction

CSCSJL Subsidiary 100% Jersey

Switzerland

25/06/2018

Subsidiary Sweden 25/09/2017

The Group consists of the Company and the following entities held by the ultimate parent company, CSIL:

Investee

Relationship

CSIL's

Ownership %

Date of Acquisition

Page 38

Doc ID: 00ab86fadb520eed7580398f172ae26ef4884b4d

Notes to the Financial Statements (continued)

For the year ended 31 December 2023

16 Related party transactions (continued)

CoinShares Bitcoin GP Limited CS BGPL 100%

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.

Larks Leaf Data Analytics (UK) Limited was dissolved on 31 October 2023.

2023 2023 2023

Digital assets Securities issued £

Seeded by CSCMJL

Bitcoin 5,500 5,500,000 183,392,145

Ethereum 34,216 1,135,000 61,753,289

A

lgorand 86,472 - 15,313

245,160,747

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

As at 31 December 2023, CoinShares (UK) Limited and Larks Leaf Asset Management (Jersey) Limited were in the process of

being dissolved.

Name Defined as

Investee

Relationship

CSIL's

Ownership %

Jurisdiction Date of Acquisition

CoinShares Relative Value

Opportunities GP Limited

CS

RVOGPL

Subsidiary 100% Jersey 29/11/2023

Subsidiary Jersey

29/11/2023

CoinShares Ethereum GP

Limited

CS EGPL Subsidiary 100% Jersey 29/11/2023

CSIL is the Company's ultimate parent company. CSIL has settled costs of £216,644 (2022: £311,766), and at year end, there is

an outstanding payable of £nil (2022: £311,766).

CoinShares Digital Securities Limited

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 £1,318,878 (2022: £1,534,948) and has been charged fees of

£1,883,311 (2022: £2,101,877). As at the year end, the Company has an outstanding receivable of £660,295 (2022: £655,022).

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.

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 year end, the Company also has

receivables and payables with CSCMJL as detailed in notes 9 and 13.

Elwood Asset Management Services Limited and Elwood Asset Management LLP were dissolved on 28 March 2023.

Page 39

Doc ID: 00ab86fadb520eed7580398f172ae26ef4884b4d

Notes to the Financial Statements (continued)

For the year ended 31 December 2023

16 Related party transactions (continued)

17 Events after the reporting date

18 Ultimate controlling party

During the year, Director's charged fees of £15,000 (2022: £15,000), of which £nil (2022: £nil) remains outstanding at year end.

Director's fees of £1,250 (2022: £1,250) have been accrued at year-end.

On 25 January 2024 the Company announced a reduction in the management fees for the CoinShares Physical Bitcoin ETP

product. From 1 February 2024 the fees were reduced from 0.98% per annum to 0.35% per annum.

On 1 February 2024 the Company added a 1.25% per annum staking reward to the Ethereum ETP, also amending its name to

CoinShares Physical Staked Ethereum. The management fee remains at 0.0% however staking rewards will now be earned by

CSCMJL.

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 £589,198 (2022: £529,137), of which

£75,788 (2022: £31,127) remains outstanding at the year end. Custody fees of £118,949 have been accrued at year-end.

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 annual financial statements for the ultimate controlling party are available at the Company's website:

www.coinshares.com/investor-relations

Twinstake act as a staking validator for the Company. During the year, a reduced validator fee was negotiated with Twinstake

and as part of this arrangement the Company receives a monthly rebate in Digital Assets. In January 2024, 878 SOL were

received from Twinstake for 2023 rebates.

CoinShares Digital Securities Limited

Page 40

Doc ID: 00ab86fadb520eed7580398f172ae26ef4884b4d

2023 2022

££

Administration expenses

A

udit and accountancy fees 58,000 37,250

Custody fees 589,198 529,137

Director's salaries 15,000 15,000

General expenses 29,779 44,539

Legal fees 163,946 116,626

Marketing expenses 113,574 12,626

Professional fees 401,850 822,607

Trading expenses 511,872 516,554

1,883,219 2,094,339

Appendix 1: Detailed administration expenses for the year ended 31 December 202

3

CoinShares Digital Securities Limited

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