How did a frog cartoon end up inside an SEC fund prospectus?
May 2022: Terra Collapses and Erases the Investment/Joke Distinction
The Terra/UST collapse in May 2022 was not a memecoin event. UST was an algorithmic stablecoin and LUNA was the reflexive token that absorbed its volatility. What collapsed was a piece of monetary engineering, not a frog cartoon. But the way the collapse unfolded — roughly forty billion dollars of paper value vaporized inside seven days — did something quietly important to how crypto talked about its own joke assets afterward.
Before Terra, there was a soft consensus inside crypto. "Serious" tokens like LUNA, SOL, AVAX, ATOM belonged in one bucket. Doge, Shiba, and the rest of the meme coins lived in another. The first bucket was for portfolios. The second was for entertainment. After Terra, that separation became harder to defend with a straight face. A staking yield of nineteen percent backed by a self-referential mint mechanism is not more rigorous than a frog on a hat. It is just dressed differently.
This matters for the PEPE ETF question because the strongest argument against a memecoin fund is that memecoins have no fundamentals. The Luna postmortem made that argument structurally weaker. If a top-five token by market cap could disappear because the math underneath it was a circular reference, then the difference between "fundamentals-driven" and "narrative-driven" was at most a difference of how loudly the narrative was insisting it was something else.
PEPE never insisted. That ended up being a compliance advantage.
November 2022: FTX Removes Custody as a Free Variable
The FTX implosion in November 2022 is over-discussed as a fraud story and under-discussed as a custody story. The fraud part is what made the headlines. The custody part is what changed the structure of the industry.
Before FTX, the unspoken assumption inside crypto retail was that holding a token on a top-tier centralized exchange was effectively the same as holding it. The exchange was the wallet. The wallet was the position. After FTX, that assumption broke for everyone who watched user balances stop being withdrawable in real time. Proof of reserves became the new minimum signal. But as anyone who has read a Merkle tree attestation knows, proof of reserves without liabilities is theater. You can prove you hold a hundred million in BTC. You cannot prove you do not owe two hundred million to depositors.
Most exchanges in the current top tier have published reserve attestations since. The data I am working with shows Binance, Bybit, Bitget, and OKX all carrying verified reserve statuses, with last audits clustered around early March 2025. MEXC is the outlier — a partial reserve status and a last audit dated December 2024. Useful numbers. They do not solve the problem the FTX collapse introduced. They document an asset side and leave the liability side unaudited.
For an institution thinking about PEPE specifically, this is decisive. There is no compliant custody path for an asset like PEPE inside a regulated exchange relationship. There is only the ETF wrapper, or there is nothing.
April 2023: PEPE Launches and the Volume Routes Around the Top Five
PEPE launched as an Ethereum ERC-20 token in April 2023. No fundraise, no presale, no team allocation in the conventional sense, no whitepaper. It traded on Uniswap first and then began appearing on centralized venues over the following weeks. The interesting question is not where it ended up. The interesting question is which exchanges listed it fast and which exchanges did not.
Look at the listing depth across the current top five centralized venues. Binance lists roughly 1,850 trading pairs and supports 350 coins. OKX lists 720 pairs and 380 coins. Bybit sits at 970 pairs and 620 coins. Bitget is at 830 pairs and 720 coins. Then MEXC, with 2,400 trading pairs and 2,400 coins listed — more than the next two combined. The volume distribution does not follow this ordering. Binance still does about $18.5 billion in daily spot volume against MEXC's $3.8 billion. But the long-tail asset coverage absolutely does.
PEPE was not the cause of this divergence. It was the most visible symptom. The aggressive listing venues — MEXC, Bitget, and to a lesser extent Bybit — built a business model on getting in front of memecoin liquidity before the conservative venues finished their listing reviews. MEXC's taker fee is two basis points. Binance's is ten. Five times the cost, and the asset is not even there yet. For a retail trader chasing the meme cycle, the choice was made before "prospectus" was a word anyone in the conversation was using.
November 2023: The Binance Settlement Closes the Offshore Door
In November 2023 the United States Department of Justice announced its settlement with Binance. Roughly $4.3 billion in penalties. Changpeng Zhao stepping down as CEO and pleading guilty to violating the Bank Secrecy Act. A monitorship imposed over the exchange. This is the publicly documented record. The reason it matters for the PEPE ETF question is not the dollar amount.
The settlement formalized something the industry had been pretending was not happening. An offshore exchange operating at scale inside the US market is no longer a viable structure if anyone of consequence is paying attention. Binance had already been moving toward licensed jurisdictions — it now holds a full license in Dubai under VARA, plus limited registrations in France with the AMF and in Italy with the OAM. Bybit is licensed in Cyprus through CySEC and in Dubai through VARA. Bitget holds full licenses in Lithuania under FCIS and in Poland under KNF. OKX has a provisional VARA license and a full Bahamas SCB license. MEXC, by contrast, carries only a Seychelles offshore license. Tier three by any reasonable categorization.
What this looks like from inside an institutional allocator's compliance desk is straightforward. The exchanges that hold PEPE in real liquidity are the same ones that lack the licenses required to interact with regulated US capital. The exchanges that have the licenses do not list the asset, or list it late, or restrict it geographically. The institutional path to memecoin exposure does not exist on the venues that actually trade memecoins.
This is the gap a fund wrapper is structurally designed to fill.
January 2024: The Spot Bitcoin ETFs Land and the Wrapper Becomes a Template
The Securities and Exchange Commission approved the first spot Bitcoin ETFs in January 2024. Eleven funds began trading effectively simultaneously. The flows that followed were the largest ETF debut in US history by several measures, and the immediate effect on the underlying asset was a sustained bid that did not look like the previous cycles. The slower effect was more interesting. Once the spot Bitcoin wrapper was approved, the regulatory question for every other tradable crypto asset shifted from "is this allowed" to "what are the requirements". The door was open. The remaining work was paperwork.
Spot Ethereum ETFs followed within months. Filings for Solana, XRP, Litecoin, and others piled up through 2024 and into 2025. The Canary Capital filing for a PEPE ETF — which is the actual subject this article was supposed to be about before I spent five sections explaining how we got here — sits inside that broader queue. It is not the only memecoin filing. It is the most rhetorically aggressive.
The question is not whether the SEC will eventually approve a memecoin fund. The question is what the cost stack inside that fund will look like, and whether anyone with a brokerage account that already permits a MEXC withdrawal would actually use it. For retail, the answer is mostly no. For an RIA managing a tax-advantaged account that cannot touch a Seychelles exchange, the answer is unambiguously yes. The "something for both retail and institutions" framing in the original headline is generous to the retail side. The retail case exists. It is thinner than the headline suggests.
What It All Means
Run the cost arithmetic from the data. A retail trader buying PEPE on MEXC pays a taker fee of two basis points. Round trip is four basis points. The bid-ask spread on a thinly traded memecoin pair, with up to 200x leverage available on the futures side, is in practice much wider than the headline fee. But stay with the headline number for now. Four basis points to enter and exit. No expense ratio. No annual drag.
A spot memecoin ETF, assuming it lands at the same expense ratio band as the existing spot Bitcoin funds, would charge somewhere between twenty and one hundred basis points per year. Plus a creation/redemption spread of unknown size. Plus a brokerage commission depending on platform. The retail trader who is willing to open a MEXC account, complete the on-chain bridge step, accept the tier-three Seychelles license, and self-manage the tax accounting on a token that does thirty percent intraday moves is paying less than the ETF holder will. Substantially less. So the retail value of the wrapper is not cost. It is the elimination of the operational overhead of holding the asset directly — the password, the cold wallet, the seed phrase, the spreadsheet, the audit trail at year end. That is a real value. It is not zero. It is also not the headline value the marketing will claim.
The institutional value is the entire game. An RIA cannot send client funds to MEXC. A pension allocator cannot custody PEPE in a hardware wallet. A family office wanting one percent memecoin exposure inside a brokerage statement that the auditor will sign cannot get there through any path that currently exists. The PEPE ETF is not "something for both retail and institutions" in any meaningful symmetry. It is a custody and compliance solution with a retail garnish on top. The frog is the marketing. The plumbing is the product. That is the entire point of the filing, and it is the part the laughing reaction misses.