Exchange-traded products (ETPs) offer retail and institutional investors a convenient, regulated, and low-cost way to gain exposure to a range of underlying investments, including cryptocurrencies.
Since the launch of the first Bitcoin tracking product in Sweden in 2015, crypto ETPs have expanded from Europe to global markets. From just 17 crypto ETPs at the end of 2020, there are now approximately 180 available. As more traditional financial institutions join crypto-native firms in issuing these products, ETPs not only broaden investor access to digital assets but also contribute to the overall acceptance of cryptocurrencies in global financial markets.
This article provides an overview of crypto ETPs, including the types of products available, their operational models, regional developments, and key trends in this rapidly evolving sector.
An Overview of Crypto ETPs
What Are Crypto ETPs?
Exchange-traded products (ETPs) are financial instruments that trade on regulated stock exchanges during normal trading hours, tracking the returns of an underlying benchmark, asset, or portfolio.
ETPs are primarily categorized into three types: exchange-traded funds (ETFs), exchange-traded notes (ETNs), and exchange-traded commodities (ETCs). ETFs are investment funds, while ETNs and ETCs are debt securities. ETCs track physical commodities like gold or oil, and ETNs are used for all other types of financial instruments.
Since the first ETF was created in 1993—thirty years ago—ETPs have evolved from equity market trackers to some of the most innovative investment products available, offering exposure to a diverse array of asset classes.
Note: While "ETP" is the umbrella term for these products, it is sometimes used specifically to refer to debt security-based exchange-traded products.
Over the past two decades, ETPs have experienced sustained growth. According to ETFGI, as of November 2023, there were 11,859 products and 23,931 listings from 718 providers across 81 exchanges in 63 countries. ETFs represent the largest share, with approximately $10.747 trillion in assets, accounting for 98% of the total ETP assets of $10.99 trillion. Oliver Wyman expects ETF growth to accelerate in the coming years, projecting an annual growth rate of 13% to 18% from 2022 to 2027.
The convenience and accessibility of ETPs have made them popular tools for opening new asset classes—including cryptocurrencies—to investors.
The first Bitcoin ETP was launched in 2015 by XBT Provider (later acquired by Coinshares) on Nasdaq Sweden. Market growth remained relatively modest until the second half of 2020, when the number of products began to increase significantly, a trend that continues today. In February 2021, Canada’s Purpose Investments launched the Purpose Bitcoin ETF on the Toronto Stock Exchange, becoming the world's first Bitcoin ETF.
Although debt security-based crypto ETPs still outnumber crypto ETFs in both product count and assets under management (AUM), this is expected to change, especially with the opening of the U.S. spot ETF market.
The number of cryptocurrency products has grown steadily, particularly over the past three years. According to ETFGI, as of November 2023, there were 176 crypto ETFs and ETPs. In the first 11 months of 2023, assets invested in these products grew by 120%, from $5.79 billion at the end of 2022 to $12.73 billion by the end of November 2023.
Why Invest in Crypto ETPs?
The idea of crypto ETPs may seem counterintuitive to those in the native crypto space: ETPs introduce intermediaries, while crypto technology aims to eliminate them. However, as easily understandable and regulated investment products, ETPs provide exposure to cryptocurrencies for a broader investor audience that might otherwise be unable to access the asset class.
For example, retail investors may lack the tools, time, risk tolerance, or expertise to invest directly in cryptocurrencies. ETPs, structured as traditional securities, are accessible to institutional investors who may be limited to investing in these types of instruments or avoid direct crypto holdings due to regulatory, compliance, technical, or other reasons.
Compared to direct cryptocurrency purchases, ETPs also have potential drawbacks. These include higher fees (though competition has driven these down), limited trading hours compared to crypto’s 24/7 markets, counterparty risk, tracking error, and settlement delays.
Note: Examples of geographical restrictions include European crypto ETPs typically not being registered under U.S. securities laws, making them unavailable to American investors. The U.K. FCA has banned the sale of crypto ETPs to retail investors.
Product Structures
Broadly speaking, crypto ETPs fall into two product categories and types: ETFs and ETPs, and physically backed versus synthetic products.
Crypto ETF Structures
ETFs are structured as funds, with holdings representing fund shares. Legal separation between the fund and its issuing entity—often through a trust, investment company, or limited partnership—ensures that investor holdings are protected in the event of the parent company’s bankruptcy.
ETFs are subject to additional rules and transparency requirements depending on their jurisdiction. For example, ETFs registered and sold in the European Union must typically comply with UCITS (Undertakings for Collective Investment in Transferable Securities) regulations, which include diversification requirements such as a maximum 10% holding in any single asset.
Most crypto ETFs today are either spot or futures products. Spot ETFs hold direct ownership of the underlying crypto assets, which are custodied by an independent party. For futures ETFs, the issuer does not hold the underlying cryptocurrency but instead purchases futures contracts for the asset. As a result, these products do not directly track the spot price of the underlying asset and are generally considered to introduce greater complexity, cost, and reduced transparency for investors.
Crypto ETP Structures
Crypto ETPs (here referring to products other than ETFs) are structured as debt securities. While their structural requirements are less stringent than those for ETFs, their disclosure requirements are very similar.
Physically backed crypto ETPs are secured debt contracts, 100% backed by holdings of the underlying cryptocurrency they track. The crypto assets are purchased and held in physical form by an independent third-party custodian under the supervision and control of a designated trustee. The trustee holds rights and interests on behalf of ETP holders and is responsible for organizing redemptions if the issuer becomes insolvent.
Synthetic ETPs are unsecured debt contracts, meaning the issuer does not hold the underlying asset the product is tracking but instead uses derivatives and swaps to track the asset (the exact structure and terms may vary). Consequently, synthetic ETPs carry greater counterparty risk, as there is no legal requirement for the product to be fully backed by the underlying physical asset. XBT Provider and Valour are two issuers that offer synthetic products.
Overall, the majority of crypto ETPs on the market are physically backed, as many investors prefer the transparency and reduced counterparty risk this structure provides.
Crypto Product Issuers
Crypto ETPs initially started by tracking single digital assets. Today, the range of crypto ETPs available on the market also includes asset baskets, staking, short, and leveraged products, as well as certain indices designed to manage volatility.
In terms of underlying assets, according to recent data compiled by BitMEX Research, excluding equities and over-the-counter funds, we find that among 162 crypto ETPs, Bitcoin, Ethereum, and basket products account for 58%, with the remaining 42% consisting of long-tail single digital assets, as well as short, volatility, and leveraged products.
Of these 162 products, 121 are ETPs and 41 are ETFs, of which 16 are futures ETFs and 11 are pending U.S. spot Bitcoin ETF launches. Staking products (meaning investors can benefit from the staking yield of the assets) currently total 14: 13 ETPs and 1 ETF.
Largest Products by Assets Under Management (AUM)
The largest crypto ETP by AUM is the ProShares Bitcoin Strategy ETF, a U.S. futures ETF product with $1.68 billion in assets as of January 2, 2024. As shown in the table below, 9 of the top 14 crypto ETPs by asset size track Bitcoin (64%); of the remaining five, three track Ethereum, one tracks Solana, and one tracks BNB.
Among these 14 products, four are registered in Switzerland (all issued by 21Shares), three in Canada, two in Jersey, one in Germany, one in the U.S., and one in Liechtenstein.
Of the top 14 products by asset size, four are ETFs—three spot and one futures. The remaining ten ETPs consist of eight physically backed ETPs and two synthetic ETPs.
Product Innovation
Several constraints influence the launch of new crypto ETPs. These include regulatory and stock exchange requirements and permissions, liquidity requirements, investor demand, and the accessibility of public price data and fiat trading pairs. That said, as more participants enter the market seeking to capture market share and differentiate themselves, and as regulatory bodies, service providers, and investors grow in their understanding and acceptance of this asset class, we see ongoing product innovation from issuers and index providers.
Crypto ETP Operational Models
The process of creating an ETP begins with the issuer—the investment company or trust that will issue the product—drafting a prospectus for regulatory approval. These requirements may vary by jurisdiction, but generally, the documents must include details about the issuer, the identities of directors and financial statements, product and scheme design, an overview of the underlying assets, intended markets and service providers, a comprehensive overview of potential risks, details on asset valuation (NAV) and NAV calculation methods, fees, and redemption processes.
After obtaining regulatory approval and successfully engaging the necessary service providers, the issuer must apply to list on the desired stock exchange. Rules regarding which types of products and underlying assets are eligible for listing vary by exchange.
The operational model and scope of service providers can vary depending on the product type, jurisdiction, and the issuer’s scheme design. An overview of the typical model is as follows:
In the primary market, the issuer exchanges product shares with authorized participants (APs) in return for the underlying crypto assets ("in-kind") or cash equivalents, and delivers or receives the underlying crypto assets to or from the designated custodian as needed. Depending on the structure, transfer agents and trustees may be involved in clearing collateral and transferring funds.
While APs manage primary market creation and redemption, market makers provide liquidity in the secondary market, ensuring continuous and efficient trading.
Investors buy and sell products on the secondary market, typically placing orders through a bank or broker, which in turn executes the orders on the relevant stock exchange, either directly or through other intermediaries.
Stakeholders and Service Providers
Issuers
The issuer is responsible for the overall design and creation of the ETP, coordinating and managing the relevant intermediaries throughout the product’s lifecycle. Regulation of issuers varies by jurisdiction. Regulators assess issuers during the prospectus approval process, as do exchanges during the listing process, where requirements may include corporate governance, capital requirements, and periodic audits.
Issuers typically establish independent special purpose vehicles (SPVs) to issue products. Initially, most crypto ETP issuers were crypto-native companies, such as Coinshares, 21Shares, 3iQ, Hashdex, and Valour. In recent years, more traditional financial firms have joined, including WisdomTree, Fidelity, Invesco, VanEck, and, pending SEC approval, Franklin Templeton and BlackRock.
Custodians
Custodians hold the underlying cryptocurrencies backing physically supported ETP products. Custodians used by ETP issuers include Coinbase, Fidelity Digital Assets, Komainu, BitGo, Copper, Swissquote, Tetra Trust, Zodia Custody, and Gemini.
Market Makers
Market makers (MMs) are liquidity providers engaged by the issuer to provide necessary liquidity for the ETP by offering two-way quotes on exchanges according to contractually agreed terms. Prominent market makers include Flow Traders and GHCO.
Authorized Participants
Authorized participants (typically banks or brokers) are entitled to create and redeem product shares directly with the issuer on a daily basis. They deliver the underlying assets or cash equivalents to the issuer in exchange for newly created ETP shares or return shares to the issuer in exchange for the underlying assets or cash.
Interest from participants in cryptocurrencies, particularly in assets beyond BTC and ETH, can vary due to factors such as regulatory uncertainty and market conditions. Active authorized participants in crypto ETPs include Flow Traders, GHCO, Virtu Financial, DRW, Bluefin, and Enigma Securities. JPMorgan, Jane Street, and Cantor Fitzgerald & Co. have recently been designated as authorized participants in U.S. spot Bitcoin ETF filings.
Index Providers
Index providers are responsible for creating, designing, calculating, and maintaining the indices and benchmarks that ETPs track, providing transparency and reliability for issuers and investors. In some jurisdictions, index providers are regulated. For example, in the EU, the European Benchmark Regulation (BMR) applies. Index providers active in crypto ETPs include MarketVector Indexes, CF Benchmarks (acquired by Kraken in 2019), Vinter (a crypto-native index provider), Bloomberg, and Compass.
Exchanges and Multilateral Trading Facilities (MTFs)
The willingness of exchanges and MTFs to list crypto ETPs depends first on local regulations and regulatory approval of the issuer's prospectus. Subsequently, it becomes a business decision for the exchange or MTF, based on an evaluation of parameters such as the liquidity of the underlying asset, compliance, public pricing information, and risk mitigation. Rules on which types of products can be listed vary by trading venue. For instance, Germany’s Xetra only lists asset-backed ETPs, while the six Swiss exchanges have specific rules for eligible crypto underlying assets.
Trustees
Trustees are responsible for safeguarding assets and representing the interests of ETP holders or investors. Their specific roles and responsibilities may vary depending on the ETP’s particular structure and legal arrangement. Trustees active in crypto ETPs include Law Debenture Trust Corporation, Apex Corporate Trust Services, Bankhaus von der Heydt, and Griffin Trust.
Administrators
Administrators support the overall operational management of the ETP. Their services may include accounting, regulatory compliance, financial reporting, and shareholder services. Administrators active in crypto ETPs include State Street, JTC Fund Solutions, CIBC Mellon Global Securities Services, Theorem Fund Services, NAV Consulting, Formidium, and The Bank of New York Mellon.
Other Service Providers
Other service providers that may play a role in the ETP scheme and product lifecycle include, but are not limited to, paying agents (responsible for registering new ETP units and obtaining ISINs from local agencies), transfer agents (which may be used to maintain records of shareholders and other duties), calculation agents (for calculating the NAV of the underlying assets), and registrars (for keeping shareholder records). Depending on the product type, issuer, and jurisdiction, these different roles and responsibilities may overlap or be assumed by different parties.
A Note on Fees
ETPs charge management fees, also known as expense ratios or sponsor fees, to cover the costs of managing and operating the product. This fee is calculated annually as a percentage of holdings and deducted from the NAV on a daily or periodic basis.
Many early crypto ETPs were able to charge fees as high as 2.5%, whereas typical ETP fees range from 0.05% to 0.75%. The fact that crypto ETPs with AUM could charge 2.5% when alternatives were available at 0% illustrates the stickiness and first-mover advantage of these products.
We expect fees to become a key differentiator for new products going forward, as is currently evident with U.S. spot ETFs. The first companies to announce fees were Invesco and Galaxy, waiving fees for the first six months and first $5 billion in assets, and Fidelity offering a 0.39% fee. As of January 8, announcements from other issuers confirmed that a fee war had indeed begun. 👉 Compare top-rated investment platforms for low-cost ETPs
Regional Developments
Europe
Crypto ETPs originated in Europe, with the first Bitcoin product launched in Sweden in 2015—a synthetically backed ETP issued by XBT Provider. In Europe, crypto ETP issuers benefit from the single market, as once an ETP prospectus is approved by one European national regulator, the product can also be listed in other member states (known as a "passporting" prospectus). Sweden’s SFSA remains a popular choice for European crypto ETP prospectus approvals. Germany is another jurisdiction that has approved crypto ETP prospectuses, and crypto ETPs have good accessibility across various trading venues, including leading exchange groups like Deutsche Boerse and Boerse Stuttgart Group.
ETPs remain the dominant product type in Europe, and the lack of true crypto ETFs in Europe is largely due to UCITS regulations. Most European ETFs comply with UCITS rules to benefit from the pan-European passport, which allows these ETFs to be sold to retail investors in other EU member states beyond the country of registration. However, UCITS rules and requirements are currently incompatible with single-asset tracking products like a Bitcoin ETF. For example, UCITS diversification requirements include that no single asset may exceed 10% of the fund, and the underlying assets must be eligible financial instruments.
In June 2023, the European Commission tasked the European Securities and Markets Authority (ESMA) with investigating whether UCITS rules need updating concerning crypto assets. However, the move seems aimed at determining whether more rules and investor protections are needed rather than expanding eligible product types. The deadline for ESMA’s opinion is October 31, 2024.
Switzerland
In 2016, Switzerland became the second jurisdiction after Sweden to approve and list a crypto ETP, with Bank Vontobel launching a Bitcoin-tracking ETP on the SIX Swiss Exchange. Subsequently, the world’s first crypto index product was launched in Switzerland in November 2018—a physically backed basket ETP consisting of Bitcoin, Ethereum, Ripple, and Litecoin, issued by 21Shares.
The SIX Swiss Exchange has specific rules for crypto underlyings, including that "at the time of application for ad-hoc trading permission, the cryptocurrency must be one of the 15 largest cryptocurrencies by USD market capitalization," and based on our research, the cryptocurrency must be widely used as a base asset in products across all global trading venues. The Swiss exchange BX Swiss also allows products with cryptocurrencies as underlying assets, with rules requiring the underlying asset to be among the top 50 cryptocurrencies by market capitalization.
United Kingdom
In October 2020, the U.K. Financial Conduct Authority (FCA) banned the sale, marketing, and distribution of any crypto derivatives to retail investors. Many crypto ETPs are listed on the U.K.’s Aquis Exchange but are only available for purchase by professional investors.
Canada
Canada was the first country to approve a Bitcoin ETF, with the first product launched by Purpose Investments on the Toronto Stock Exchange (TSX) in February 2021, followed by an Ethereum ETF. In October 2023, 3iQ launched a staked Ethereum ETF, with staking rewards accruing to the fund, a first in North America. Other Canadian crypto ETF issuers include Fidelity Investments Canada, CI Global Asset Management (CI GAM) in partnership with Galaxy, and Evolve Funds.
Brazil
Brazil followed closely behind Canada. The Brazilian Securities Commission (CVM) approved the first Bitcoin ETF in Latin America in March 2021. Brazilian crypto ETF issuers include crypto asset manager Hashdex and QR Capital, as well as Itaú Asset Management in partnership with Galaxy.
United States
To date, only crypto futures ETFs have been approved by the SEC and made available to investors. ProShares launched the first Bitcoin futures ETF on October 19, 2021, which became one of the most heavily traded funds in history, attracting over $1 billion in its first few days of trading.
Two years later, on October 2, 2023, ProShares, VanEck, and Bitwise launched the first Ethereum futures ETFs in the U.S. Futures products generally require more investor understanding and introduce additional costs, tracking error, and the risk of performance drag due to frequent rebalancing. The fact that the underlying futures contracts trade on the Chicago Mercantile Exchange (CME) and are regulated by the Commodity Futures Trading Commission (CFTC) is a commonly cited reason for why futures ETFs were approved before spot products.
The first U.S. spot Bitcoin ETF application was filed by the Winklevoss twins in July 2013, with numerous filings and subsequent rejections over the years. A decade later, on June 15, 2023, BlackRock, the world’s largest asset manager, filed an application for the iShares Bitcoin Trust. The influence of the BlackRock brand and its stellar track record (according to Bloomberg senior ETF analyst Eric Balchunas, BlackRock has been rejected only once out of 575 ETF product launches) changed the game and helped make a U.S. Bitcoin spot ETF one of the most anticipated product launches ever.
On August 29, 2023, the tide turned further when the U.S. Court of Appeals for the D.C. Circuit ruled in favor of Grayscale in its case against the SEC, stating that the SEC’s decision to block Grayscale’s proposed Bitcoin ETF was "arbitrary and capricious."
Fast forward to today, 11 issuers have filed for spot Bitcoin ETFs, and they are undergoing SEC review of their S-1 forms: BlackRock, Grayscale, 21Shares & ARK Invest, Bitwise, VanEck, WisdomTree, Invesco Galaxy, Fidelity, Valkyrie, Hashdex, and Franklin Templeton. In recent weeks, meetings between the SEC and issuers have increased, and the SEC has required all issuers to switch to a "cash create" model, meaning the exchange of assets for the creation and redemption of ETF shares must be done in cash, not in-kind Bitcoin.
Typically, for efficiency reasons, the exchange of assets between authorized participants and ETF issuers for creations and redemptions is done in-kind. While the SEC has not publicly stated its reasons for requiring cash, it is likely that the SEC does not want to be seen as approving authorized participants (often large banks and brokers) to transact in cryptocurrencies.
As of the evening of January 5, 2024, all 11 filers had submitted amended 19b-4s, which propose rule changes enabling the exchanges to trade the products. These must be approved by the SEC.
The final step is for the SEC to sign off on the final S-1 forms. The market currently expects this to happen around January 10, with listing and trading potentially commencing within 24 to 48 hours thereafter.
We will be closely watching flows and trading volumes in the first week of trading to assess the competitive dynamics among the 11 issuers. Larger ETFs are favored by investors for various reasons, including cost efficiency and liquidity. Therefore, the amount of seed capital for an ETF can provide a competitive advantage. Bitwise’s S-1 filing on December 29 indicated potential initial seed capital of up to $200 million, while BlackRock showed seed capital sales of $10 million. Notably, on January 5, rumors suggested BlackRock could have $2 billion ready for the first week of trading. Bloomberg senior ETF analyst Eric Balchunas noted that given seed investments in other funds, this amount would be in line with BlackRock’s brand, though it would far exceed that of any previous ETF launch.
BlackRock, VanEck, Ark & 21Shares, Fidelity, Hashdex, Invesco & Galaxy, and Grayscale have also filed for Ethereum spot ETFs, with the first SEC decision deadline on May 23, 2024.
Hong Kong
A year after the U.S. SEC approval, the Hong Kong Securities and Futures Commission (SFC) approved crypto futures ETFs in October 2022. Asset manager CSOP launched two funds on December 16, 2022—one Bitcoin and one Ethereum futures ETF. In December 2023, the SFC and the Hong Kong Monetary Authority issued a joint circular outlining guidance for crypto investment products, stating that "in light of the latest market developments," the SFC will now accept applications for crypto spot ETFs. The updated SFC guidance notes that both in-kind and cash creation and redemption models are permitted. Overseas-issued crypto ETPs not specifically approved by the SFC will only be available to professional investors.
The Future of Crypto ETPs
A growing number of investors want exposure to cryptocurrencies in their portfolios, and ETPs offer a familiar, convenient, and regulated pathway to this investment. Driven by this demand, both crypto-native asset managers and traditional asset managers continue to engage with and innovate these products. 👉 Explore more strategies for crypto portfolio diversification
By 2024, the anticipated approval of U.S. spot ETFs could act as a catalyst for further growth globally. As this space continues to evolve, key areas to watch include:
- The impact of increased issuer competition on fees and ETP flows in other regions, and the potential for consolidation or exit of smaller players over the long term.
- A shift in consumer and institutional awareness and acceptance of cryptocurrencies, supported by the marketing power of global leading asset managers like BlackRock.
- An increase in the number of exchanges, asset managers, distributors, and other institutional participants and service providers willing to engage with cryptocurrencies.
- The timeline for the adoption of these products and their integration into advisory models.
- The development of institutional staking, including the growth of staking products available to investors, and the development of liquidity solutions by issuers.
- The growth of on-chain structured products: we believe the future is on-chain, and recent collaborations, such as that between 21.co (parent of 21Shares) and Index Coop, show how ETP issuers are beginning to move in this direction.
Note: Over-the-counter (OTC) closed-ended crypto funds, such as those offered by Grayscale, were not included in this research.
Frequently Asked Questions
What is the main difference between a crypto ETF and a crypto ETP?
A crypto ETF is a type of fund that holds the underlying assets directly. A crypto ETP is often a broader term that includes ETFs but can also refer to debt-based products like ETNs, which are notes backed by the issuer's creditworthiness rather than directly holding the asset.
Why would an investor choose a crypto ETP over buying cryptocurrency directly?
Crypto ETPs offer a regulated, familiar investment vehicle for those who prefer trading on traditional stock exchanges. They can simplify taxes, avoid the complexities of private key management, and are often the only way for certain institutional investors to gain exposure due to internal mandates.
Are crypto ETPs safe?
While no investment is without risk, regulated crypto ETPs from reputable issuers offer layers of investor protection not present in direct ownership, including independent custody, regulatory oversight, and transparency requirements. However, they still carry market risk associated with the volatility of the underlying crypto assets.
What does 'physically backed' mean for a crypto ETP?
A physically backed ETP means the issuer holds the actual cryptocurrency that the product is designed to track. This structure aims to closely mirror the asset's price and reduces counterparty risk compared to synthetic products that use derivatives.
How do I invest in a crypto ETP?
You can invest in a crypto ETP through a standard brokerage account, just like you would with any stock or ETF. Simply search for the product's ticker symbol on your broker's platform to buy and sell shares.
Will the approval of U.S. spot Bitcoin ETFs affect existing crypto ETPs?
Yes, it likely will. Approval is expected to bring massive new attention and capital into the space. It could increase competition, potentially driving down fees globally. It may also lead to greater regulatory clarity and acceptance, benefiting the entire ecosystem of crypto investment products.