21Shares diversifies custodians to reduce ‘single-point failure risk’ in crypto ETFs 21Shares diversifies custodians to reduce ‘single-point failure risk’ in crypto ETFs
21Shares strengthens crypto ETF security with new custodians amid North Korean hacking threats.
2 min read
Updated: Sep. 12, 2024 at 9:06 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Asset manager 21Shares has added Anchorage Digital Bank and BitGo as custodians for its spot crypto exchange-traded funds (ETFs) — the ARK 21Shares Bitcoin ETF (ARKB) and the 21Shares Core Ethereum ETF (CETH).
According to a Sept. 12 statement, Anchorage Digital Bank and BitGo will now work alongside current custodian Coinbase to enhance 21Shares’ spot ETP operations in the US. The firm chose them based on their robust regulatory compliance, security, and reliability records.
This move brings the number of ETFs for which BitGo serves as custodian to four. BitGo already works with two other ETF issuers, including Hashdex and Valkyrie (now Coinshares).
21Shares investment management head Andres Valencia emphasized the importance of custody partners in risk management and operational excellence. He noted that diversification strengthens the safety and security of their offerings.
Anchorage Digital Bank co-founder and CEO Nathan McCauley said the firm’s federal charter — which supersedes state-by-state regulation and qualifies it as an asset custodian — makes it a natural choice for ETP custody diversification.
Meanwhile, BitGo CEO Mike Belshe said:
“BitGo is proud to offer 100% cold storage as the leading independent custodian, serving the industry for over a decade as a trusted partner, and now for ETF issuers too.”
‘Single point of failure’
21Shares’ decision to expand its custodians followed the FBI’s recent warning that North Korea-linked hackers were targeting crypto ETFs in recent months.
The development has renewed focus on Coinbase’s dominance of the ETFs’ custodial services and raised the issue of the need for diversification to other custodial service providers. Coinbase is the primary custodian for eight of the 11 US spot crypto ETFs.
The ETF Store president Nate Geraci recently predicted that more issuers are likely to start diversifying their custodians in “an attempt to minimize single point of failure risk.”
Bloomberg senior ETF analyst Eric Balchunas echoed the sentiment, suggesting increased custodian diversification due to high fees charged to issuers relative to other asset classes. He added that some may leave Coinbase for cheaper alternatives or use more options as leverage to renegotiate fees.
Mentioned in this article
Bitcoin 
Ethereum 
Coinbase 
BitGo 
21shares 
Anchorage Digital 
ARK 21Shares Bitcoin ETF 21Shares Core Ethereum ETF 
Eric Balchunas 
Mike Belshe Author 
Oluwapelumi Adejumo
Oluwapelumi values Bitcoin's potential. He imparts insights on a range of topics like DeFi, hacks, mining and culture, underlining transformative power.
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In this article
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Ethereum
$3,346.26
Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (DApps).
Coinbase
Coinbase is a digital currency exchange and wallet service that allows individuals to buy, sell, and store digital currencies, such as Bitcoin, Ethereum, and Litecoin.
BitGo
BitGo is a market leader in institutional-grade cryptocurrency investment services, providing institutional investors with security, compliance, and custodial solutions for blockchain-based currencies.
21shares
21Shares is a Swiss provider of crypto- currency exchange-traded products (ETPs).
Anchorage Digital
Anchorage Digital is a regulated cryptocurrency platform that offers integrated financial services and infrastructure solutions to institutions.
The ARK 21Shares Bitcoin ETF (ARKB) is a digital asset ETF that seeks to track the performance of bitcoin, as measured by the performance of the CME CF Bitcoin Reference Rate – New York Variant (the “Index”).
The 21Shares Core Ethereum ETF (CETH) is an exchange-traded fund designed to offer investors exposure to the performance of Ether (ETH), the native cryptocurrency of the Ethereum blockchain.
Eric Balchunas is an American author, ETF analyst, and Senior ETF Analyst at Bloomberg Intelligence.
Mike Belshe is a co-founder and CEO at BıtGo, an institutional-grade digital asset financial services company, headquartered in Palo Alto, California that was founded in 2013.