DeFi Goes Mainstream: How Regulated ETPs Are Unlocking Institutional Access

21Shares AG, a leading provider of crypto and digital assets investment products, has announced the launch of a new exchange-traded product (ETP) tied to the decentralized finance (DeFi) protocol dYdX (DYDX), marking a significant step in bridging the gap between traditional finance and the growing DeFi ecosystem. The ETP, which is available on major European exchanges, offers investors regulated exposure to DYDX, one of the largest decentralized trading platforms operating on the Ethereum and Layer 2 networks. The product is designed to meet growing demand for institutional-grade access to DeFi tokens, while adhering to regulatory standards.

The DYDX ETP is physically backed, meaning that the underlying asset—DYDX tokens—is held in custody with a licensed custodian. This structure provides investors with a transparent and secure investment vehicle, addressing a key challenge in the DeFi space, where custody and regulatory compliance have historically been barriers for institutional participation. The ETP’s structure also ensures that investors are not exposed to the operational risks typically associated with DeFi protocols.

According to 21Shares, the launch of the DYDX ETP follows similar product introductions for other DeFi tokens such as UNI and MKR, indicating a broader strategy to expand the firm’s offering in the DeFi asset class. The firm has emphasized that the ETP is designed for both retail and institutional investors seeking exposure to DeFi without direct token holding or the complexities of interacting with smart contracts. The ETP is also redeemable in-kind, allowing large investors to efficiently manage their positions without disrupting the market.

Market data indicates that DYDX has maintained a strong position among DeFi tokens, driven by its role in decentralized trading and its transition to a fully on-chain governance model. The token’s performance has been positively correlated with broader market sentiment toward DeFi and Ethereum-based assets. Analysts note that the ETP could attract further inflows into the DeFi space, particularly as more investors seek diversified exposure to emerging digital asset categories.

Regulators across the European Union have been increasingly supportive of structured products that provide regulated access to crypto assets, provided they meet transparency and compliance requirements. The DYDX ETP has been cleared for trading in accordance with these standards, which include third-party audits, custody controls, and market-making obligations. This regulatory clarity is expected to attract a wider range of investors who have previously been hesitant to engage directly with the DeFi market.