Introduction of New Cryptocurrency ETFs
Asset management firm 21Shares has introduced two new cryptocurrency index exchange-traded funds (ETFs), adhering to the regulations set forth by the Investment Company Act of 1940. This legal framework is aimed at improving investor trust by enforcing stringent disclosure and governance standards similar to those applied to more traditional investment funds in the United States.
Details of the New ETFs
Announced on Thursday, the ETFs — the 21Shares FTSE Crypto 10 Index ETF (TTOP) and the 21Shares FTSE Crypto 10 ex-BTC Index ETF (TXBC) — are designed to provide extensive exposure to digital currencies. They function by tracking the FTSE Russell cryptocurrency indexes and include a diversified selection of leading digital assets by market capitalization instead of focusing on individual tokens.
Insights from 21Shares
Federico Brokate, who serves as 21Shares’ global head of business development, highlighted that index funds have historically allowed investors to gain diverse exposure to traditional investment vehicles, especially within the stock market. He noted,
“The same principle applies to crypto investing,”
indicating a shift toward a more structured approach in the cryptocurrency landscape.
Recent Developments and Market Context
In recent developments, 21Shares has been active in the crypto exchange-traded product sector and has been acquired by FalconX, although it will maintain its independent operations within the FalconX framework. This acquisition underscores the growing interest and activity in the cryptocurrency market.
Regulatory Framework and Market Trends
Understanding the significance of the Investment Company Act of 1940, it provides the regulatory guidelines that American mutual funds and the majority of standard ETFs must follow, focusing on custodial practices and protecting investor interests. This contrasts with the Securities Act of 1933, which has been primarily used for trust structures associated with physical commodities — a model that regulators have applied to crypto offerings in the United States until now.
In a recent report from Cointelegraph, it was noted that the Securities and Exchange Commission (SEC) approved a cryptocurrency exchange-traded product (ETP) under the ’33 Act, namely the Rex-Osprey Doge ETF, which commenced operations in September.
Historically, the SEC has favored authorizing spot Bitcoin and Ether products under the ’33 Act. However, with the launch of 21Shares’ fully regulated ETFs under the ’40 Act, there is a notable shift. The demand for cryptocurrency ETFs has surged since the early 2024 introduction of spot Bitcoin funds, with industry leaders such as BlackRock setting the pace. Its IBIT Bitcoin ETF reportedly gathered about $70 billion in assets just within its first year and a half, demonstrating the robust appetite for regulated crypto investment options.
