Digital asset manager 21Shares submitted a filing Wednesday to launch an exchange-traded fund tracking Hype, the native token of the Hyperliquid network, marking another addition to the growing queue of cryptocurrency ETF applications awaiting regulatory review at the Securities and Exchange Commission. The filing comes one week after FalconX, a digital assets trading firm, announced plans to acquire 21Shares.
What to Know:
- 21Shares filed for approval to launch a passive ETF tracking the Hype token, which has increased more than 15-fold in value over the past year and ranks as the 11th largest cryptocurrency by market capitalization.
- The SEC removed its final obstacle to dozens of new spot cryptocurrency ETFs in September, but approvals remain stalled as the agency operates with reduced staff during the ongoing government shutdown.
- The Switzerland-based firm, which manages over $11 billion in assets, designated Coinbase and BitGo as custodians for the proposed fund.
Regulatory Backlog Grows Amid Government Disruption
The SEC has received a surge of applications from money managers and institutions seeking to offer cryptocurrency ETFs through traditional investment platforms. The regulatory agency cleared a significant barrier in September that had prevented the launch of spot ETFs tied to assets ranging from Solana to Dogecoin.
Yet dozens of pending applications remain in limbo. The delay stems from the agency's skeletal staffing levels during the current government shutdown, which has slowed the review process to a crawl.
Fund providers view ETFs as a way to attract investors who want exposure to digital assets but prefer to avoid the technical requirements of cryptocurrency wallets and exchanges. The products allow investors to gain price exposure through familiar brokerage accounts.
Token Performance and Fund Structure
Hype serves as the native digital asset for the Hyperliquid network. According to CoinMarketCap data, the token holds the position of 11th largest cryptocurrency by market value. Its price has surged more than 1,500% over the past 12 months.
The proposed 21Shares product would function as a passive ETF. These funds track an index or asset's price by holding it in fixed proportions, without making active trading decisions.
This structure differs from active ETFs, where managers select investments to meet specific return targets.
Passive funds typically charge lower fees than actively managed alternatives. They appeal to investors seeking straightforward exposure to an asset's price movements without paying for portfolio management decisions.
The filing names two custodians for the fund's holdings. Coinbase, the publicly traded cryptocurrency exchange, would serve alongside BitGo, a digital asset custody and security firm. Custodians hold the underlying assets and provide security infrastructure to prevent theft or loss.
Corporate Context and Industry Consolidation
21Shares launched in 2018 and has grown to manage more than $11 billion across dozens of cryptocurrency investment products. The firm operates from Switzerland, a jurisdiction that has established clearer regulatory frameworks for digital assets than many other countries.
FalconX announced its acquisition agreement with 21Shares last week.
The trading firm plans to combine its brokerage platform with 21Shares' expertise in ETF products. The deal represents part of a broader consolidation trend in the cryptocurrency industry as firms seek scale and diversification.
The acquisition would give FalconX immediate access to an established ETF product line and relationships with institutional investors. For 21Shares, the combination provides integration with FalconX's trading infrastructure and client base.
Understanding Exchange-Traded Funds and Digital Asset Custody
Exchange-traded funds allow investors to buy shares that track the performance of an underlying asset or basket of assets. The shares trade on stock exchanges throughout the day, similar to individual stocks. Traditional ETFs track stock indexes, bonds, commodities or other conventional investments.
Cryptocurrency ETFs extend this structure to digital assets. The fund sponsor purchases and holds the cryptocurrency, then issues shares representing fractional ownership. When investors buy ETF shares, they gain exposure to the cryptocurrency's price movements without directly owning the tokens.
Custody arrangements pose unique challenges for cryptocurrency ETFs. Unlike stocks held by traditional custodians, digital assets require specialized security measures including cold storage, multi-signature wallets and cyber insurance. BitGo and Coinbase have developed institutional-grade custody platforms designed to meet regulatory standards for safeguarding client assets.
Looking Ahead
The Hype ETF filing adds to the expanding universe of cryptocurrency investment products seeking regulatory approval. Whether the SEC will greenlight this application, and when, remains uncertain given the current staffing constraints.
Industry observers expect the approval process to resume normal pace once the government shutdown ends and the agency returns to full operations. Until then, applicants face an indefinite wait.