The anticipated launch of five cryptocurrency exchange-traded funds (ETFs) developed by REX Shares and Osprey Funds may occur next week, despite having received approval from the Securities and Exchange Commission (SEC). These funds are expected to follow a structure similar to the existing Solana SSK ETF by employing a registered investment company (RIC) framework. Bloomberg ETF analyst James Seyffart emphasized this point in a September 11 post on the social media platform X.
The REX-Osprey ETFs differ from traditional spot crypto ETFs and the earlier iteration of the Solana ETF. Specifically, while spot Bitcoin and Ethereum ETFs function solely as spot products, the Solana ETF began as a C-corporation structure before shifting frameworks. By opting for the RIC approach, REX-Osprey can better navigate regulatory oversight while still maintaining operational flexibility.
This RIC structure enables the funds to primarily hold spot crypto assets, but it also permits the use of derivatives and investments in other ETFs when market conditions are favorable. Operating under established investment company regulations rather than corporate tax structures allows for a unique blend of investment strategies.
The RIC framework confers distinct operational requirements, tax treatment, and regulatory oversight compared to C-corporations. One of the key implications is how the funds distribute returns to investors, striking a balance between offering pure spot exposure and innovative structural adaptations.
Bloomberg senior ETF analyst Eric Balchunas noted the likelihood of the REX-Osprey ETFs making their debut next week, an observation bolstered by the recent delays with the Dogecoin ETF (DOJE). Initially expected to launch on September 12, the DOJE has now been predicted to commence trading mid-next week, paving the way for the REX-Osprey funds associated with Bitcoin, XRP, TRUMP, and BONK to follow suit shortly thereafter.
The SEC’s approval of these ETFs comes during a period of evolution in regulatory frameworks for crypto assets. Currently, the SEC is constructing a standardized listing framework aimed at streamlining the approval process for crypto ETFs. This approach would eliminate the need for individual rule-change requests, which currently bog down the approval timeline for qualifying assets.
In recent actions, the SEC issued stay orders on Bitwise’s $1.68 billion crypto index fund conversion and Grayscale’s Digital Large Cap Fund ETF transition, halting approvals just hours after initially granting them. Seyffart theorized that these delays are a strategic move by the SEC to prevent ETFs from launching before comprehensive digital asset listing standards are established.
Proposed criteria for this framework would allow ETF sponsors to circumvent the usual Form 19b-4 process for underlying tokens that meet specific benchmarks like market capitalization, trading volume on exchanges, and daily liquidity thresholds. Sponsoring entities would simply need to register statements on Form S-1 and undergo standard 75-day review periods prior to listing.
The SEC appears cautious in its approval processes, reluctant to sanction products that could further complicate or establish challenging-to-change precedents for future regulatory frameworks. Given Seyffart’s prior predictions of batch approvals for crypto ETFs in October, it remains uncertain how the hybrid structure of REX-Osprey will fare amidst potential massive altcoin ETF approvals on the horizon.
While the RIC structure offers immediate access to the market, it may carry potential drawbacks related to fees and tax implications when compared to traditional spot products. As the landscape evolves, stakeholders will be keenly watching how these developments play out in the rapidly changing crypto market.
