In a landscape where cryptocurrency ETFs are gaining traction, REX and Osprey have chosen an unconventional route, opting not to launch a dogecoin ETF under the newly established SEC rules. Instead, they are leveraging alternative legal provisions to ensure they maintain a competitive edge in this burgeoning market. Analysts predict that these new listing standards will catalyze a wave of crypto ETFs in the United States.
The latest regulations stipulate that any cryptocurrency already listed on trading platforms such as Coinbase Derivatives, which is part of the Intermarket Surveillance Group designed to monitor for fraudulent activity, is automatically eligible for ETF status. This has led to speculation that a flood of various ETFs—whether leveraged, inverse, or purely spot—will soon emerge. As Seyffart articulates, “It’s a spaghetti cannon. They’re going to cook up all these ETFs… and they’re going to frickin shoot this cannon at the wall and see what sticks.”
This influx of ETFs is anticipated as proponents highlight potential benefits, particularly with bitcoin ETFs set for approval in 2024. Advocates argue that these financial instruments provide a regulated avenue for broader investment in digital assets, likening cryptocurrencies to digital gold or hedges against inflation.
However, the case for memecoins—like dogecoin—remains tenuous. Unlike traditional assets, memecoins are often inspired by internet trends or celebrities and lack any intrinsic revenue or cash flow. Instead, their value fluctuates based solely on public sentiment and investor mood. With dogecoin specifically, the periodic dilution of supply complicates its position even further. As Armour points out, “With a memecoin, it would be hard for a financial advisor to feel comfortable buying that for a client.”
The debate surrounding the introduction of memecoin ETFs seems to hinge on individual beliefs about market regulation. Seyffart expresses a libertarian perspective on the SEC’s role, arguing that it shouldn’t serve as a merit regulator but rather a disclosure regulator. He notes that while he personally avoids memecoins, a free market should allow individuals to pursue their investment interests.
Contrasting this viewpoint, Armour emphasizes the collective responsibility of regulators, issuers, and investors to prevent market exposure to assets that could lead to significant financial losses. He questions whether SEC approval for a memecoin ETF would lend these assets a facade of legitimacy that might mislead uninformed investors towards risky, speculative behavior.
King, representing REX and Osprey, maintains that the moral debate on which assets are suitable for ETFs is secondary to the parameters set by regulatory bodies. He emphasizes that investor demand will guide their offerings, asserting, “We just play by the rules… The lines have been drawn… by the administration.” REX and Osprey also filed in January to create ETFs for other cryptocurrencies, including a controversial memecoin associated with Donald Trump, which has faced criticism as a potential unethical scheme.
As the crypto landscape continues to evolve, the balance between regulation, investor protection, and market freedom remains a focal point of discussion.
