DIGITAL ASSET ETFs

Digital asset ETFs are exchange-traded funds that provide exposure to digital assets such as cryptocurrencies (e.g., Bitcoin, Ethereum), blockchain technologies, and related infrastructure. These ETFs allow investors to gain access to the digital asset space without directly holding the underlying cryptocurrencies, offering a regulated and familiar investment vehicle.

They typically fall into three categories:

• Spot ETFs: Directly track the price of a digital asset such as Bitcoin.
• Futures-based ETFs: Use futures contracts to replicate exposure. 
• Equity-based ETFs: Invest in companies involved in the digital asset ecosystem (e.g., crypto exchanges, blockchain developers).

In recent years, there has been a continuous growth in digital asset adoption, resulting in an asset class worth over US$3 trillion today¹. The introduction of spot exchange-traded products (ETPs) for certain digital assets in the U.S. on January 11, 2024, represented a significant bridge from traditional finance into the realm of digital assets. Prior to this launch, investors primarily accessed digital assets through cryptocurrency exchanges, which often came with operational, tax and custody complexities. The debut of these ETPs coincided with a time where interest in digital assets was accelerating due to geopolitical uncertainty and key mega forces such as demographic divergence, with younger populations and the middle class expanding in many emerging economies.

The development of the digital assets ecosystem infrastructure and regulatory environment has also helped create the right conditions for the success of digital asset ETPs.