Published: March 12th, 2025
The US Securities and Exchange Commission (SEC) has announced it will rethink plans to expand the definition of an exchange, and exclude businesses that manage crypto transactions.
On Monday, acting SEC Chair Mark Uyeda told the Institute of International Bankers that the agency had begun to establish clearer rules for alternative trading systems in 2020, issuing guidance targeted mainly at US Treasury market participants.
At the behest of former SEC Chair Gary Gensler, however, a ‘heavy handed’ definition of what constitutes an exchange was in the works. It would have caught numerous protocols used to facilitate crypto asset transactions, requiring otherwise regulation-exempt entities to register with the agency.
‘In my opinion, the agency made an error by linking Treasury market regulation with a dragnet approach to cooling the crypto market,’ Uyeda added.
His comments come as part of an ongoing repudiation of agency decisions made under Gensler, an anti-crypto rulemaker whose approach to regulation drew widespread criticism from industry leaders and some US lawmakers. Despite its very different dynamics, the former SEC Chair wanted crypto markets to follow the same rules as traditional financial markets, and launched a campaign of enforcement actions against allegedly noncompliant crypto firms.
The revised exchange definition proposal had been through several public consultations since its introduction five years ago, the SEC website says. While the guidance has not been enacted, the website refers to it being at the ‘final rule’ phase.
The proposal wording includes fuzzy references to ‘communication protocols that link securities buyers and sellers.’ Without clearly defining what they are, Uyeda said the rule would create scope creep far beyond Treasury backed instruments.
In a blog post published in 2022, Coinbase's chief legal officer criticized the SEC's proposal and accused the agency of going ‘beyond its remit,’ while intentionally leaving parts of the 600-page proposal worded vaguely, ‘allowing it to be targeted at DeFi protocols, for example.’
Crypto traders scored two major wins last year when leading fund managers won their longstanding battles with the SEC to launch spot Bitcoin (and later Ethereum) exchange-traded funds (ETFs). Based on the take up seen since, ETF issuers are keen to test new waters.
Several issuers have proposed new spot ETFs that track the prices of altcoins and meme coins, including DOGE, SOL, XRP, and even Donald Trump's post-election TRUMP offering.
Spot Solana ETFs have emerged as one possible alternative to those based on BTC and ETH, and could launch on leading exchanges as early as this year.
New ETF instruments proposed so far include 21Shares Core Solana ETF, VanEck Solana Trust, Bitwise Solana ETF, and Canary Solana ETF. If approved they would track the price of SOL, currently the fourth-largest crypto by market cap.
And that's only the start. Other issuers have said they have active plans to offer spot Dogecoin ETFs after the Trump/Elon Musk political partnership during the recent US Presidential contest sent the Shiba Inu-inspired meme coin skyrocketing to a three-year-high of USD 0.478 in December 2024.
ETF specialist issuer Rex Shares made an application earlier this month to launch its Rex-Osprey DOGE ETF, the company's SEC filing shows.
Funds based on the price of Ripple's XRP alt coin are also in the offing. Rex has made an application for its Rex-Osprey XRP ETF, as has Canary and 21Shares. Both applications are now being considered by the SEC, with financial watchdogs set to make a decision later in February.
Whether or not ETFs outside the realm of the big two will be approved or not remains to be seen. A raft of recent rule changes at the SEC, however, bode well for a green light from regulators.
Other possible ETFs could include an HBAR ETF, which Canary Capital applied for last November. HBAR is the native coin of the Hedera network.
Bloomberg analysts recency wrote that the odds are in favour of a spot HBAR ETF if it can launch ahead of higher-profile competitors like Solana and DOGE-based ETFs. How much pent-up investor demand there is, however, isn’t clear.
According to Bloomberg, a long list of Litecoin-based ETF applications have been made since pro-crypto President Trump's inauguration last week, as crypto's restrictive US regulatory environment looks set to be loosened.
Asset management firm Grayscale gave TradFi investors risk-reduced exposure to crypto's original meme coin In February when it launched its new Dogecoin Trust.
Best known in crypto circles for its spot Bitcoin and Ethereum exchange traded funds (ETFs), the firm said it believes the meme coin's USD 49.7 billion market cap means its days as a joke coin are behind it.
Grayscale said in a press release that DOGE has transformed itself from a pop culture send-up to a ‘new instrument that can enhance financial inclusion, supporting grassroots political activism while also offering a viable new form of payment.’
On the same day, Grayscale also applied to the US Securities and Exchange Commission (SEC) to convert the Trust into a spot ETF. That mimics the process followed with its BTC and ETH ETFs, which both began life as private placements before being converted into ETFs.
As an apparently pro-crypto SEC leadership gets bedded in under the new Trump administration, a number of asset managers have filed applications for spot ETFs beyond the big two, including meme and altcoins like Dogecoin, XRP, and Litecoin.
‘Because it operates as a faster, more scalable, and lower-fee derivative of Bitcoin, Dogecoin offers people and organizations that have been underserved by traditional banking and finance a chance to fully take part in the financial system,’ Grayscale said in a statement.
Twelve months ago, the idea that a spot ETF based on DOGE price movements could be seen as a viable financial product would have seemed far-fetched. Two days after Grayscale's filing, asset manager Bitwise made its own application for a Dogecoin ETF.
