21Shares launches the first crypto index ETF based on the 1940 Act, ushering in a new era of digital asset allocation.

In November 2025, asset management company 21Shares officially launched two cryptocurrency index ETFs based on the Investment Company Act of 1940 – the 21Shares FTSE Crypto 10 Index ETF (TTOP) and the 21Shares FTSE Crypto 10 ex-BTC Index ETF (TXBC), with management fees of 0.50% and 0.65% respectively. This innovative product structure allows crypto ETFs to adhere to the same disclosure and governance standards as traditional mutual funds for the first time, providing institutional investors with safer and more diversified digital asset allocation tools, marking a key leap for cryptocurrencies into mainstream financial markets.

Upgrading the Regulatory Framework: The Significance of the 1933 Act to the 1940 Act

The core differences between the Investment Company Act of 1940 and the Securities Act of 1933 lie in the level of regulatory strictness and investor protection mechanisms. The 1933 Act primarily applies to grantor trust structures, focusing on information disclosure related to securities issuance, while the 1940 Act imposes comprehensive requirements on the governance structure, custody arrangements, and ongoing operations of investment companies. The new product from 21Shares adopts the latter, meaning it must comply with stricter asset custody rules, regular audit requirements, and board oversight mechanisms.

This regulatory upgrade is particularly important for institutional investors. Traditional institutions such as pension funds and insurance companies are often restricted by internal regulations and can only invest in products that meet specific regulatory standards. The 1940 Act framework precisely meets these requirements, opening the door for large-scale funds that had previously hesitated due to regulatory concerns. Michael O'Reilly, head of institutional business at Fidelity Investments, pointed out: “This addresses the biggest concerns of institutional investors—custodial safety and regulatory certainty, and is expected to unlock hundreds of billions of dollars in new demand.”

Product Structure Analysis: Diversified Allocation and Thematic Investment Progressing Together

TTOP ETF tracks the FTSE Russell encryption index 10, investing in the top ten Crypto Assets by market capitalization, including BTC, Ethereum, Solana, and Dogecoin. This “basket” strategy allows investors to gain exposure to the entire encryption market with a single transaction, avoiding the risks associated with selecting individual tokens. Historical backtesting shows that the index has achieved an annualized return of 45% over the past three years, with volatility reduced by 30% compared to single assets.

The TXBC ETF provides exposure to pure altcoins excluding Bitcoin, with a slightly higher management fee of 0.65%, focusing on “blockchain networks with real-world applications.” This design allows investors to separately allocate to the “digital gold” narrative of Bitcoin and the technological application narrative of other crypto projects, meeting different investment theme needs. Federico Brokate, Global Business Development Director of 21Shares, emphasized: “Many clients want to access the entire market in a simple, regulated way, rather than choosing individual tokens.”

21Shares Crypto Assets Index ETF Key Information

• TTOP management fee: 0.50% (including BTC)
• TXBC management fee: 0.65% (excluding BTC)
• Regulatory Framework: Investment Company Act of 1940
• Index Provider: FTSE Russell
• Custody Solution: Qualified Custodian Multi-Signature
• Rebalancing frequency: quarterly adjustment

Crypto Assets ETF Market Evolution: From Single Asset to Diversified Strategies

21Shares' new product marks the third phase in the development of crypto ETFs. The Bitcoin spot ETF at the beginning of 2024 opens the first phase, allowing investors to invest in Bitcoin directly through traditional brokerage accounts; the Ethereum ETF in 2025 constitutes the second phase, expanding to the second largest crypto asset; and now the index ETF represents the third phase, offering structured and diversified investment solutions. This evolutionary path is remarkably similar to the historical development of the traditional ETF market—from single-country ETFs to sector ETFs, and then to smart beta strategies.

Market demand data supports this trend. BlackRock's IBIT Bitcoin ETF has accumulated approximately $70 billion in assets under management within a year and a half of its launch, demonstrating strong institutional demand for regulated crypto products. At the same time, surveys show that 65% of financial advisors want to gain diversified crypto exposure rather than just investing in Bitcoin. Bloomberg Intelligence analyst Eric Balchunas predicts: “Crypto index ETFs could attract $300 billion in inflows within three years, becoming one of the fastest-growing ETF categories in history.”

The Competitive Landscape and Market Impact Facing 21Shares

21Shares is not the only company exploring this field. Valkyrie and Bitwise have submitted similar applications to the SEC, while Grayscale is considering converting its flagship product GBTC into an index fund structure. This competition is beneficial for investors, as management fees are continuously decreasing—from the early Bitcoin ETFs' 1.5-2.0% down to the current 0.5-0.65%, approaching traditional index fund levels.

The impact on the structure of the crypto assets market is equally profound. The index rebalancing mechanism will regularly bring systemic capital flows to the constituent tokens, reducing the possibility of manipulation of individual projects. At the same time, the expansion of qualified custody solutions will further enhance the asset security standards of the entire industry. However, critics warn that excessive institutionalization may lead to a deviation of crypto assets from their original decentralized intent, forming a market structure controlled by a few large custodians.

The Perfect Handshake Between Regulatory Compliance and Financial Innovation

21Shares' crypto index ETF based on the 1940 Act has set a new milestone on the road to the integration of digital assets and traditional finance. It marks the maturity and confidence of an industry when crypto assets transition from passive acceptance of regulation to actively leveraging regulatory frameworks to enhance their appeal. This shift not only provides investors with a safer avenue for participation, but also offers a strong argument for the long-term legitimacy of crypto assets as an asset class. In the eternal tug-of-war between financial innovation and investor protection, 21Shares' new product demonstrates that sometimes the most revolutionary breakthroughs are not about evading the rules, but learning to dance within them—and dancing more elegantly than anyone else.