21Shares Launches First Crypto Index ETFs Under SEC's 1940 Act: A Milestone for Diversified Digital Asset Exposure

21Shares has made history by launching the first cryptocurrency index exchange-traded funds (ETFs) regulated under the Investment Company Act of 1940, offering investors diversified access to top digital assets through a traditional fund structure.

The products—the 21Shares FTSE Crypto 10 Index ETF (ticker: TTOP) and the 21Shares FTSE Crypto 10 ex-BTC Index ETF (ticker: TXBC)—track FTSE Russell’s cryptocurrency indexes, providing exposure to baskets of leading tokens by market capitalization rather than single assets. This shift to the stricter 1940 Act framework emphasizes enhanced investor protections, custody standards, and governance, aligning crypto investments more closely with conventional mutual funds. As of November 14, 2025, these ETFs address growing demand for diversified blockchain exposure amid a maturing regulatory landscape, potentially unlocking billions in institutional inflows similar to Bitcoin ETFs.

What Are 21Shares’ 1940 Act Crypto Index ETFs?

The 21Shares FTSE Crypto 10 Index ETF (TTOP) offers broad exposure to the top 10 cryptocurrencies by market cap, including Bitcoin and Ethereum, while the 21Shares FTSE Crypto 10 ex-BTC Index ETF (TXBC) excludes Bitcoin for those seeking alternatives like Ethereum, Solana, and XRP. Both funds utilize FTSE Russell’s methodology for quarterly rebalancing, ensuring alignment with market dynamics without active management. Regulated under the 1940 Act, these ETFs must adhere to rigorous standards for liquidity, valuation, and risk disclosure, providing a level of oversight comparable to traditional U.S. investment companies. Unlike earlier spot crypto products structured as grantor trusts under the Securities Act of 1933, these funds benefit from diversified holdings, reducing single-asset volatility while maintaining blockchain’s efficiency.

• TTOP Composition: Top 10 cryptos (e.g., BTC 60%, ETH 25%, SOL 5%).
• TXBC Focus: Excludes BTC; emphasizes altcoins for balanced non-Bitcoin exposure.
• Rebalancing: Quarterly, based on free-float market cap.
• Custody: Regulated custodians with segregated assets.
• Launch Date: November 13, 2025, on major U.S. exchanges.

Why the 1940 Act Framework Matters for Crypto ETFs in 2025

The adoption of the 1940 Act for crypto index ETFs represents a pivotal regulatory evolution, moving beyond the 1933 Act’s grantor trust model used for Bitcoin and Ethereum spot ETFs. This framework imposes comprehensive governance, including independent boards, daily NAV calculations, and enhanced investor safeguards against conflicts—addressing SEC concerns over crypto’s volatility and custody risks. Federico Brokate, 21Shares’ global head of business development, highlighted the diversification parallel to traditional markets: “The same principle applies to crypto investing,” noting how index funds mitigate risk in stocks and now extend to digital assets. Amid 2025’s pro-innovation SEC under Chairman Paul Atkins and Commissioner Hester Peirce, this launch signals broader acceptance of diversified crypto products, potentially accelerating adoption as institutional demand surges post-Bitcoin ETF inflows.

• Investor Protections: Daily liquidity, audited valuations, and conflict disclosures.
• Diversification Benefits: Reduces single-token risk; correlates with broader market trends.
• Regulatory Shift: First 1940 Act crypto ETFs; follows Rex-Osprey’s Dogecoin product.
• Market Demand: BlackRock’s IBIT amassed $70 billion AUM in 18 months.
• Broader Impact: Paves way for altcoin baskets amid $150B stablecoin volumes.

How 21Shares’ Crypto Index ETFs Work

These ETFs operate like traditional index funds, holding underlying cryptocurrencies in secure custody while tracking FTSE benchmarks for passive performance. Investors purchase shares through standard brokerage accounts, with creations/redemptions handled in-kind via authorized participants to minimize tracking error. The 1940 Act ensures transparent reporting, including quarterly holdings disclosures and stress tests for liquidity events. For example, TTOP might allocate 60% to Bitcoin for stability, with the remainder in high-growth tokens, rebalanced to reflect market shifts. This structure appeals to retirement accounts and advisors seeking compliant blockchain exposure without direct wallet management.

• Tracking Mechanism: FTSE Russell indexes; minimal deviation via in-kind swaps.
• Fees and Liquidity: Competitive expense ratios; daily trading with market hours.
• Custody Standards: Segregated, insured holdings by qualified custodians.
• Rebalancing Process: Quarterly adjustments to maintain cap-weighted exposure.
• Accessibility: Available in IRAs, 401(k)s, and taxable accounts.

Real-World Applications and Future of Crypto Index ETFs

21Shares’ ETFs enable practical uses like portfolio diversification for institutions hedging against Bitcoin dominance or retail investors accessing altcoin growth via familiar vehicles. For instance, a pension fund could allocate 2-5% to TTOP for balanced crypto exposure, settling trades in traditional dollars while benefiting from XRP’s remittances or Solana’s DeFi yields. Looking to late 2025, approvals for similar products from Bitwise and Grayscale could expand options, integrating with tokenized assets under ISO 20022 standards. These developments promote wallet security and compliant scalability, but users should monitor volatility and regulatory updates.

• Institutional Allocation: 2-5% portfolio tilt for diversified blockchain beta.
• Retail Example: IRA exposure to top cryptos without custody hassles.
• DeFi Synergy: Enhances liquidity for cross-asset strategies.
• Outlook: More 1940 Act filings by Q1 2026.
• Risk Note: Crypto volatility; diversify beyond single funds.

In summary, 21Shares’ launch of the first 1940 Act crypto index ETFs on November 13, 2025—TTOP and TXBC—ushers in a new era of regulated, diversified digital asset investing, building on $70 billion Bitcoin ETF success. This aligns with 2025’s regulatory thaw, emphasizing protections for mass adoption. For deeper insights, review SEC filings, FTSE Russell methodologies, or explore compliant blockchain resources to navigate emerging trends.