In an insightful interview with Cryptonews Podcast, Federico Brokate, VP, Head of the US Business at crypto asset manager 21Shares, discusses the convenience of digital asset exchange-traded funds (ETFs) and their bright future.
Brokate explains the three groups of ETF investors, how the company approaches each of them, 21Shares’ success, and adding more custodians than any other player in the space.
Mother Knows Best
Brokate started by explaining that an ETF is a vehicle that allows anyone to add exposure to most asset types, including BTC and ETH, to their portfolios in a simple, convenient, cheap, and efficient manner.
“I spent 10 years at BlackRock and […] became a little bit of an ETF nerd. I absolutely love the vehicle,” he remarked.
But going back to the origins of the 21Shares – which would go on to become one of the biggest crypto ETF players – the VP noted that it was actually the founders’ mothers who inspired the whole thing.
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In the mid-2010s, the mothers of the two co-founders, Hany Rashwan and Ophelia Snyder, came to them, saying they had done research about something called Bitcoin.
The two were interested in investing, saying that the asset has clear use cases.
Upon finding out what it takes to add this coin to their portfolios (before ETFs), the two decided to wait for an easier solution.
This is how 21Shares came to be.
The founders moved from the US to Zurich, Switzerland, intending to establish the company to launch the first spot-backed ETH and BTC products in a country with clear regulations.
They did so in 2018, seeing significant success, “drawn[ing] from these two products all the way up to over 50 ETFs globally across 16 different markets, and most recently entering the US business.”
The Three Big Groups of US Client Landscape
When it comes to the US clients, Brokate said he subdivides them into three big groups.
First is the retail investor.
These have been early adopters of ETFs and a significant source of long-term assets for the company’s products.
The company speaks to these clients in a way that directly meets their needs and that “exemplifies what the value proposition of the product is to them.” This is where marketing comes in.
The second group is the wealth platforms/advisors.
“And this is all about getting face-to-face contact with them,” said the VP, to make sure they understand how these products fit in client portfolios.
“We’ve been working very closely with them,” Brokate told Cryptonews, “and I think it’s a part of the market that is going to start picking up very quickly.”
It hasn’t been even a year since these products became available in January. So, “it’s going to be an evolution, but ultimately past that year mark, I expect it to come online pretty quickly.”
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The third group is institutional investors or asset owners.
These are typically more hesitant to make allocations, but it’s not the same across the board. There is a “divergence.”
Hedge funds have actually been early to the crypto game, using 21Shares’ ETFs for basis trading.
On the other hand, pension funds and endowments are very cautious investors. “We’re only starting to see them dip their toes in the water,” Brokate noted, adding that the company recorded small sub-$10 million trades by a couple of US pension funds.
But “this is really exciting,” he added, “because it shows that they’re all thinking about the space. [This] is also going to be, let’s call it a 3-5-year journey to get some of these bigger asset owners” into the market.
Diversifying Custodian Partners
One thing that sets 21Shares’ products apart is that they offer institutional grid custody and very low fees, Brokate remarked.
“The custody partners that we have on the backend of our products are actually quite different from other ETFs in the industry,” the VP said.
Most ETF providers typically use Coinbase for custody.
21Shares, on the other hand, has three custody partners: besides Coinbase, it recently added Anchorage and BitGo.
Anchorage Digital and BitGo join Coinbase as custodians for 21Shares US spot products, including the ARK 21Shares Bitcoin ETF, ARKB, and the 21Shares Core Ethereum ETF, CETH.
This is one of the first multi-custody benefit offerings available for investors in the market.
Clients appreciate the company diversifying its custodian partners – all with institutional grade custody and operating exclusively out of cold storage, he said.
This provides an additional level of security, simplifying the asset acquiring and owning processes.
Crystal Ball Into the ETF Future
As for what awaits ETFs, Brokate said that 21Shares has “a little bit of a crystal ball.”
Their European business pursuit gave them a great advantage as they saw first-hand how the industry developed over the past five years.
“We’ve seen how this can go from a regulatory perspective, but also from a client adoption and a product innovation perspective too,” Brokate noted.
The VP expects numerous ETFs to be available in the US within three years, such as SOL, XRP, DOT, and many more.
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The company’s European suite currently includes multi-asset products and over 40 products tracking various tokens. “There’s quite a diverse landscape,” he said.
While there will be speed bumps along the road, regulators will open the doors to this type of innovation primarily for one reason: “this is great for clients.”
It gives clients the most choice and access. Europeans can already diversify their digital asset exposures beyond Bitcoin and Ethereum.
“What we hear from clients all the time is how valuable that is to them. And they’re able to express their personal views through these ETFs,” Brokate added.
Furthermore, Brokate expects that 21Shares will stay away from the meme coin world for now due to their strict criteria.
But another issuer might come into the market with an offering, he added.
There is a lot of activity across the ETF industry in general. “The more people are trying to come to market with good offerings, the better,” Brokate said. “We will certainly be participating in some of those product innovations in the near future.”
Finally, “there’s no way to interpret” the client demand and massive inflows coming into digital asset ETFs – which breaks all records from an ETF launch story perspective – “other than crypto is here to stay, and it’s going to play a role in US client portfolios,” Brokate concluded.
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That’s not all.
In this interview, Brokate also discussed:
the role firms like 21Shares play in bringing crypto to the US mainstream;
accessible products and ETFs helping move the industry forward;
21Shares’ Spot Bitcoin ETF (ARKB), Ethereum ETF (CETH), and Future of Crypto Index ETP (FUTR);
taxes in the ETFs space;
adding BTC and ETH to retirement portfolios;
growing up in Colombia, moving to New York, and making his way in the TradFi world;
landing a job at BlackRock, mainly focused on growing the ETF business;
potential impact of the US Presidential elections on the crypto industry.
Federico Brokate is the Head of the US Business VP, Head of the US Business at crypto asset manager 21Shares.
He oversees the growth of the US business, providing investors with the most access, convenience, and quality in the digital asset ETF industry.
Previously, Brokate led the iShares Business Strategy team at BlackRock, where he created and executed strategic initiatives driving organic asset and revenue growth. He also developed go-to-market strategies for new business verticals and managed priority product launches, including successfully launching iShares’ Bitcoin ETF.
This articles is written by : Nermeen Nabil Khear Abdelmalak
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