Revolutionizing ETFs with Memecoins
ETF Store president Nate Geraci believes that memecoins are taking “questionable investments packaged into exchange-traded funds (ETFs)” to a whole new level. In a recent Financial Times article, he expressed concerns about the historical trend of memecoins losing value and how offering memecoin ETFs could impact a firm’s reputation on Wall Street.
Recent Developments in Memecoin ETFs
- Rex Shares and Osprey filed for seven different ETFs on Jan. 21, three of which are based on memecoins like Official Trump (TRUMP), Dogecoin (DOGE), and Bonk (BONK).
- Bitwise also filed for a DOGE-based trust on Jan. 22, hinting at a potential ETF creation.
Capitalizing on Regulatory Environment
Bryan Armour, director of passive strategies research at Morningstar, suggested that issuers might be leveraging the changing regulatory landscape under the Trump administration. He mentioned that the lack of established futures markets for memecoins raises uncertainties around SEC approval for memecoin-based products.
Armour highlighted the strategic move by issuers to position themselves favorably in case of SEC approval, despite the uncertainties surrounding it.
Shifting Regulatory Landscape
Bitwise CIO Matt Hougan acknowledged the changing regulatory environment and emphasized the need to adapt to the evolving crypto landscape. He mentioned that the new administration’s stance on crypto has prompted several issuers to explore various ideas for ETFs.
Hougan stressed the seriousness of the SEC as a regulatory agency and the limited impact of political influences on its decision-making processes.
Testing the SEC’s Stance
The meme coin filings could be a way for issuers to gauge the SEC’s openness to the industry under the new administration. The pro-crypto stance of the SEC’s acting and incoming chairs has generated optimism within the crypto industry.
Commissioner Mark Uyeda’s initiative to create a task force for developing a regulatory framework for crypto demonstrates the SEC’s proactive approach to the emerging asset class.
A New Era of Investment
Despite the uncertainties surrounding memecoins, Hougan defended their legitimacy as investment assets, referring to them as “totemic artifacts of the emerging crypto culture.” He compared memecoins to other niche investments like baseball cards, emphasizing that the form of the asset does not diminish its potential value.
Hougan justified the inclusion of Dogecoin in an ETF based on its liquidity and market size, highlighting its significant trading volume in the crypto market.
Debating Legitimacy vs. Speculation
Critics raise concerns that incorporating memecoins into ETFs could add unwarranted legitimacy to speculative assets, potentially attracting uninformed investors. However, Hougan argued that the SEC’s approval history for risky assets like junk bonds and niche commodities justifies considering memecoins for ETF inclusion.
While acknowledging that not all cryptocurrencies are suitable for ETFs, Hougan emphasized the importance of evaluating each token individually for potential inclusion.
