Memecoin ETF Proposals Stir Debate in Traditional Investment Circles

The recent wave of memecoin-based exchange-traded fund (ETF) proposals has sparked skepticism among traditional finance experts, with concerns about their viability and impact on issuers’ reputations.

Nate Geraci, president of The ETF Store, argues that incorporating memecoins into ETFs would take “questionable investments” to an entirely new level. He noted that memecoins have a history of significant volatility and losses, making them a risky proposition for firms seeking credibility on Wall Street.

On January 21, asset managers Rex Shares and Osprey submitted filings for seven ETFs, three of which are tied to memecoins Official Trump (TRUMP), Dogecoin (DOGE), and Bonk (BONK). The following day, Bitwise also filed for a DOGE-based trust, signaling potential ETF aspirations.

Morningstar’s director of passive strategies research, Bryan Armour, suggested that issuers may be leveraging a potential shift in regulatory attitudes under a Trump administration. He pointed to campaign promises, expected changes at the Securities and Exchange Commission (SEC), and the possibility of reduced regulatory scrutiny as key motivations behind these filings.

Despite this optimism, Armour emphasized that memecoins lack the established futures markets that facilitated the approval of Bitcoin (BTC) and Ethereum (ETH) spot ETFs. He suggested that issuers may be treating these applications as a speculative bet, positioning themselves ahead of any potential regulatory green light.

Bitwise CIO Matt Hougan acknowledged the evolving regulatory environment, noting that the influx of ETF filings reflects industry confidence in a more favorable climate. However, he stressed that the SEC remains an independent regulatory body with limits to political influence.

These memecoin ETF filings could serve as a litmus test for the SEC’s stance under its new leadership. Acting chair Mark Uyeda, a known crypto advocate, has already launched a task force to develop a clearer regulatory framework for digital assets, further fueling industry optimism.

The Case for Memecoin ETFs

Despite regulatory uncertainties, Hougan defended memecoins as legitimate investment assets, describing them as “totemic artifacts of the emerging crypto culture.” He compared them to niche alternative assets like baseball cards and fine art, arguing that their form does not diminish their potential value.

He also highlighted Dogecoin’s liquidity and market size, noting that it is the sixth-largest cryptocurrency by market capitalization, with daily trading volumes exceeding $1 billion.

Critics warn that introducing memecoin ETFs could lend undue legitimacy to highly speculative assets, potentially exposing uninformed investors to excessive risk. Hougan countered that the SEC operates as a non-merit-based regulator and has previously approved ETFs for risky asset classes such as junk bonds and niche commodities.

While he acknowledged that not all cryptocurrencies are suitable for ETFs, Hougan maintained that each token should be assessed on its individual merits rather than dismissed outright.