More Crypto Deals Are ‘Inevitable’ After FalconX Acquisition of 21Shares

Crypto platforms and ETF providers have historically lived on opposite sides of the fence. That’s quickly changing.

The crypto trading platform FalconX bought UK-based ETF provider 21Shares last week. The deal will allow the firm to launch crypto funds focused on derivatives and structured products, according to a report from The Wall Street Journal. The deal marks an early example of consolidation across both the crypto and asset management industries. “I think it’ll be remembered as one of the early deals of what proves to be a significant trend, not only particularly in the crypto space, but more broadly in the ETF space,” said Ric Edelman, founder of the Digital Assets Council of Financial Professionals. “This really isn’t a crypto conversation. This is a big, broad money conversation [about] corporate America.”

Millennium FalconX

What makes the FalconX acquisition special is that crypto remains a relatively new sector of the marketplace, albeit one with a lot of interest from major industry players and regulators. This makes consolidation in the crypto space a bigger deal relative to other industries, Edelman said. “There are so many ETF providers, and a great many of them simply can’t capture significant market share. Yet they often have good products, so consolidation is inevitable,” Edelman added. 

The regulatory landscape, particularly given the SEC’s recent pledge to fast-track crypto ETF launches, is also driving interest. Add in firms experimenting with tokenization, and that could open the floodgates, said Cindy Zarker, a researcher at FUSE Research Network. “We’ve seen some volatility recently, with Ethereum and Bitcoin. It is still a speculative asset,” she said. “But on the other hand, you’ve got the GENIUS Act, so starting to put together more of an overall regulatory framework in the US … facilitates things as well.”

May The Force Be With UK. The deal is the first of its kind, with the closest analogue being crypto ETF provider Bitwise’s purchase of UK-based ETC Group last year, Zarker added. The deal gave Bitwise a stronger position in Europe, where crypto-focused exchange-traded products have been available for longer, she said. “Definitely expect to see other types of mergers and acquisitions, but partnerships too.”