Memecoin ETF proposals raise eyebrows in serious investment circles

The ETF Store president Nate Geraci believes that memecoins would take “questionable investments packaged into exchange-traded funds (ETFs)” to an entirely new level.

In a Financial Times article, he highlighted the historical trend of memecoins losing value, adding that the optics of offering memecoin ETFs could be detrimental to a firm that wishes to be taken seriously by Wall Street.

On Jan. 21, Rex Shares and Osprey filed for seven different ETFs, three of which are based on the memecoins Official Trump (TRUMP), Dogecoin (DOGE), and Bonk (BONK). Additionally, Bitwise filed for a DOGE-based trust on Jan. 22, suggesting the creation of an ETF.

Bryan Armour, director of passive strategies research at Morningstar, suggested that issuers may capitalize on a shift in the regulatory environment under the President Donald Trump administration.

He said:

“They are taking advantage of Trump’s campaign promises, the changing of the guard at the SEC, and the expectation of less scrutiny from regulators.”

Armour noted that memecoins lack the established futures markets that supported the approval of spot Bitcoin (BTC) and Ethereum (ETH) ETFs, creating uncertainty around whether the US Securities and Exchange Commission (SEC) would approve such products.

As a result, Armour believes that these issuers are “buying a small call option” on the potential approval. They have no idea if the SEC will give the green light but want to be among the first batch in case it does.

Bitwise CIO Matt Hougan recently acknowledged the shifting regulatory landscape and echoed the sentiment. He added:

“There has been a major shift in the regulatory climate in the US and the attitude to crypto with the new administration coming in. We have seen a lot of filings from a lot of issuers with a lot of ideas and I think that will continue.”

Hougan also highlighted that the SEC remains a “very serious agency” with limits to political influence, as the Commissioners can’t completely bend the regulator to their will.

Notably, the meme coin filings could be issuers testing how open the new SEC administration will be toward the industry. The SEC’s acting chair Mark Uyeda and its incoming permanent chair Paul Atkins are both pro-crypto, which has caused heightened optimism in the industry. 

Meanwhile, pro-crypto Commissioner Mark Uyeda is the acting chair. His first move was to create a task force to help develop a regulatory framework for crypto in the US.

Bitcoins A legitimate investment

Despite the uncertainty, Hougan defended the legitimacy of memecoins as investment assets, calling them “totemic artifacts of the emerging crypto culture.” 

He also compared other niche investments, such as baseball cards or high art, emphasizing that the form of the asset does not diminish its potential value.

Moreover, Hougan used Bitwise’s Dogecoin-related filing to argue that its liquidity and market size justify its inclusion in an ETF. 

“Dogecoin is the sixth-largest crypto asset in the world by market cap and trades over $1 billion a day.”

Critics worry that wrapping memecoins in ETFs could lend undue legitimacy to inherently speculative assets, attracting uninformed investors. 

However, Hougan countered that the SEC operates as a non-merit-based regulator and has previously approved ETFs for risky assets such as junk bonds and niche commodities.

While Hougan emphasized that not all cryptocurrencies are suitable for ETFs, he maintained that each token should be assessed individually.

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