RIC-Style Crypto ETFs Explained XRP and Memecoins Next?

In response to the recent approval of Bitcoin and Ethereum funds, asset managers are now preparing a new and highly controversial wave of crypto products: RIC-Style Crypto ETFs for assets such as XRP and even baskets of memecoins. These planned funds are reportedly utilizing a decades-old investment structure to navigate the intricate regulatory landscape, sparking a debate on whether this represents a significant advancement in digital asset investing or a clever exploitation of a legal loophole.

This venture into the riskier aspects of the cryptocurrency market is perceived as the next significant battleground between an ambitious financial industry and cautious U.S. regulators. The outcome could fundamentally alter the public’s approach to investing in digital assets.

Key Takeaways

• New Frontier in Crypto: Asset managers are actively developing plans to launch altcoin ETFs, including funds focused on XRP and baskets of popular memecoins, moving far beyond the initial Bitcoin and Ethereum products.
• The RIC Structure: These proposed funds are reportedly being structured as Regulated Investment Companies (RICs). This diversified fund model may offer a pathway to market that bypasses the direct, single-asset approval process overseen by the U.S. Securities and Exchange Commission (SEC).
• Innovation vs. Loophole Debate: The move has ignited a fierce debate. Proponents argue it’s a financial innovation that democratizes access to a wider range of digital assets, while critics contend it’s a regulatory loophole that could expose retail investors to extreme risk.
• Major Test for Regulators: The potential filings for an XRP ETF or a memecoin fund present a direct challenge to the SEC, forcing it to decide whether to permit highly speculative and legally contentious assets into the mainstream investment ecosystem.

RIC-Style Crypto ETFs : A Backdoor for Crypto?

The key to this new strategy lies in the Regulated Investment Company (RIC) structure. According to U.S. tax law, a RIC is a fund, such as an Exchange-Traded Fund (ETF) or a mutual fund, that holds a diversified portfolio of assets. To qualify for favorable tax treatment, it must not be overly concentrated in any single security.

While the U.S. Securities and Exchange Commission (SEC) has direct and stringent authority over ETFs that hold a single commodity or asset it deems a security, its purview over a diversified fund is different. Asset managers are reportedly exploring a thesis that if no single altcoin comprises more than a certain percentage of a fund’s portfolio, and if the fund is sufficiently diversified, it may meet the legal standards for a RIC-compliant ETF, thereby sidestepping a direct SEC judgment on the status of each individual token.

“The industry is probing the edges of the regulatory framework,” a former SEC enforcement attorney told the Financial Times. “The single-asset spot ETF was a direct confrontation. The diversified RIC approach is a more nuanced, legalistic challenge.”

XRP and Memecoins: The Ultimate Test Case

The choice of XRP and memecoins as the next candidates for ETFs is deliberate and highly provocative.

The XRP ETF Challenge

An XRP ETF would be a direct challenge to the SEC, which has engaged in a years-long, high-profile legal battle with Ripple Labs, arguing that XRP is an unregistered security. While Ripple has secured partial court victories, the SEC has not conceded, and the token’s legal status remains contentious. An ETF approval would be a significant symbolic victory for the XRP ecosystem.

The Memecoin Frontier

A fund holding a basket of memecoins, such as Dogecoin, Shiba Inu, and others, is even more daring. These assets are notoriously volatile, often lack clear utility, and are susceptible to extreme speculative fervor. Wrapping them in an ETF, as reported by outlets like Reuters, would push the boundaries of the SEC’s investor protection mandate.

Innovation vs. Investor Risk: The Regulator’s Dilemma

The push for these altcoin ETFs has been framed in two distinct ways. Proponents, including firms like Grayscale and VanEck who have historically pushed for crypto product approvals, argue this is a necessary innovation. They claim it provides investors with a familiar, regulated, and convenient way to gain diversified exposure to the broader digital asset class, complete with the transparency and liquidity of a publicly traded fund.

Conversely, regulators and investor protection advocates are deeply concerned. They warn that packaging highly speculative, and in the case of XRP, legally ambiguous, assets into an ETF gives a false veneer of safety. They argue it could lure unsophisticated retail investors into a volatile market where they could face catastrophic losses, all under the banner of a regulated product.

The SEC now faces a difficult dilemma: block these products and be accused of stifling innovation, or allow them and risk being blamed for the inevitable investor fallout. The path it chooses will set a powerful precedent for the future of crypto in mainstream finance.

Also read, Crypto Debanking Is Real: Are Regulators Quietly Banning It?.

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