Regulators in the U.S. have been steadfast in blocking spot cryptocurrency ETFs domestically despite their prevalence in European exchanges. That hasn’t stopped Swiss crypto ETF issuer 21Shares from hiring Kayle Watson from a nearly eight-year stint at BlackRock to become its new head of sales, or from hiring two more staffers to build out its U.S. presence.
ETF.com caught up with Watson to talk about the firm’s strategy in the U.S. despite the regulatory walls. This interview has been edited for clarity and brevity.
[Editor’s Note: 21Shares is a portfolio company of ETFS Capital, the parent company of ETF.com.]
ETF.com: What enticed you to take this job, to go from the biggest ETF issuer in the world to a relative startup?
Watson: I had a fantastic career there, really enjoyed what I was doing. The reason I was brought in [was that] I looked at the opportunity to go to 21Shares, which in the United States is not known—I would say, yet—but outside the U.S., it’s the largest provider of crypto-backed ETPs. I leapt at the opportunity because of what I saw—the increasing momentum in the United States for traditional investors, and also investors across the landscape, to engage with crypto, to look at crypto as an emerging asset class.
ETF.com: You mention this momentum for crypto in traditional investment vehicles in the U.S. We do have the bitcoin futures ETFs, but at the moment, the SEC seems intent on not allowing any kind of spot cryptocurrency to be used as the basis of an ETF. What’s the strategy right now for 21Shares as it tries to get a foothold in the U.S.?
Watson: I can't speak for the regulators. I've learned over my career never to even go down that path. The great thing is, you see from the momentum of [the recent] announcement with BlackRock [reportedly planning to offer crypto trading through its Aladdin platform], what you've seen from other investors like Ray Dalio of Bridgewater talking about crypto as an emerging asset class. I do think over time we’ll see that momentum continue. It's there for a reason.
On 21Shares' side, [co-founders Ophelia Snyder and Hany Rashwan’s vision] was to have 21Shares be a provider of the most innovative physically backed crypto ETPs and indexes and investment solutions, just like we have in Europe. We can't do that yet in the U.S.
Our client outreach began this week, and the effort is to build our brand, make clients aware of who 21Shares is. We have among the best research products out there, and we’re looking to have maybe some private kind of investments for clients.
We're just going to continue to build the brand, get our name out there. I can't speak for what's going to come down from the regulators, but we're hopeful.
ETF.com: Several issuers from VanEck to Global X to Fidelity are getting in line to try and be the first to market in the U.S. for a spot product. Where do you think that 21Shares falls in that lineup?
Watson: I would put 21Shares up with those for the mere fact of the depth of our research product and the fact that when we talk to clients now, we say we're crypto-native, which means we have an expertise in the cryptocurrency, in the blockchain and we’re research-driven.
I looked at a lot of research out there—there's a lot of good research—but I would put ours, if not at the top, among the top few. Our research has been in crypto for eight years. When we work with clients I like to say we qualify an investor and we expose them and educate them, and eventually investors will allocate. We have the chance to build our brand with that top research.
So I think even as a small startup in the U.S.—with the largest product suite globally—we can get in there and have a product and stand side by side with the big players.
ETF.com: As 21Shares is making this push into the U.S. to create relationships with clients, is the firm considering launching something adjacent to spot crypto ETFs in the U.S. in the coming months, like a bitcoin futures ETF or an equity ETF of companies that are heavily involved in blockchain technology?
Watson: I'm not sure if I'm allowed to talk about the coming products that we're going to launch. I think we’re looking at anything in the space and want to be there when we're allowed to launch products. We could certainly go out and launch an ETF that's an equity-based product; there are a lot of people already doing that. We're going to look at what the options are and be ready to launch products as soon as we can.
Another advantage I think we have, is that we have a strategic partnership with ARK. And in fact, Cathie Wood is a great ally and sits on our board, and I think that's a huge testament that will help us when people are allowed to issue products.