Crypto ETFs Vs Digital Asset Treasuries, ETFs Surge While DATCOs Face Regulatory Headwinds

As cryptocurrency markets continue their evolution, exchange-traded funds (ETFs) have emerged as one of the most tangible bridges between digital assets and traditional finance. What was once a niche offering is now a growing roster of regulated products that track major tokens and broaden institutional and retail access. At the same time, a parallel trend has developed with companies increasingly positioning themselves as digital asset treasury companies (DATCOs), essentially corporate proxies for owning native blockchain tokens. While both trends reflect deeper institutional interest in crypto, their structure, regulation and long-term viability diverge sharply.

Crypto ETFs: Institutional Names and What’s Being Approved

After years of anticipation and incremental regulatory progress, the U.S. Securities and Exchange Commission has approved multiple spot cryptocurrency ETFs as well as streamlined new listing standards that shorten approval periods. The first wave of approved products focused on Bitcoin and Ethereum spot ETFs, developed by major issuers such as Bitwise, BlackRock, Fidelity, VanEck, ARK 21Shares, and Grayscale. These products allow investors to gain regulated exposure to the largest digital assets through familiar investment vehicles, without direct custody of the tokens.

More recently, crypto index ETFs have emerged, such as:

• Bitwise 10 Crypto Index ETF (BITW) — tracking a weighted basket of assets including Bitcoin, Ethereum, XRP, Solana, Avalanche, Litecoin and others.
• Grayscale CoinDesk Crypto 5 ETF (GDLC) — holding Bitcoin, Ether, XRP, Solana, and Cardano.
• Franklin Crypto Index ETF (EZPZ) — expanded to include multiple major tokens.
• 21Shares FTSE Crypto 10 Index ETF (TTOP) — diversified exposure through both U.S. and European ETPs, with allocations weighted toward Ether and other layer-1 networks.
• CoinShares Altcoins ETF (DIME) — targeting layer-1 and interoperability protocols. These multi-token ETFs reflect growing institutional appetite for diversified crypto exposure beyond the two largest assets.

Looking ahead, a broader set of spot ETF applications involving altcoins such as Solana (SOL), XRP, Dogecoin (DOGE), Cardano (ADA), Polkadot (DOT), Hedera (HBAR) and TRON (TRX) are under review, with many expected to be decided into 2026. These products have been filed by issuers including Bitwise, Grayscale, 21Shares, Canary Capital, WisdomTree, Franklin Templeton, VanEck and CoinShares. A choice of issuance strategies via spot commodity trusts, index products, and futures-linked funds, reflects a broadening ETF market dynamic.

Digital Asset Treasury Companies are they Proxies or Businesses?

Simultaneously, a number of public companies have been rebranding as digital asset treasury companies (DATCOs). These firms accumulate native tokens (e.g., Bitcoin, Ethereum, Solana, Avalanche, TRON, and emerging networks such as Pecu Novus) on their balance sheets with the intention of generating long-term capital appreciation (or reaping staking/yield) rather than developing or sustaining an operating business. In many ways, these DATCOs act as corporate proxies for the underlying tokens, not unlike how an ETF offers exposure to a basket of assets. But while ETFs are regulated investment products with defined disclosure, custody and liquidity requirements, DATCOs are operating companies that have pivoted their core business identities toward balance-sheet token holdings.

This structural divergence raises fundamental questions for regulators and markets. A public company with a utility business that also holds digital assets may be fundamentally different from a company whose primary “business” is holding crypto, without revenue generation from operations. As a result, traditional index providers and regulators may treat these entities differently. There is growing discussion, particularly in index committee circles, about whether digital asset holdings should count as operational value for inclusion in broad market indices. Some argue that holding crypto tokens alone is not equivalent to operating revenue-generating activities, which could affect index eligibility for these companies if they are deemed primarily investment vehicles rather than ongoing businesses.

From a regulatory standpoint, ETFs and DATCOs face distinct challenges:

ETFs:

• Must navigate stringent requirements under the Investment Company Act of 1940 and SEC listing standards, including liquidity, custody, anti-fraud protections and investor suitability.
• The SEC’s shift to “universal listing standards” for crypto ETFs, requiring assets to be listed on regulated markets or have regulated futures markets for a minimum period, aims to streamline approvals while maintaining market integrity.
• Despite progress, regulatory review remains cautious, with some applications extended for additional comment on surveillance, custody, and systemic risk.

DATCOs:

• Are subject to securities law if digital assets are determined to be securities, as well as disclosure rules applicable to public companies (e.g., Regulation S-K).
• Face potential SEC scrutiny if their primary business is crypto holding without operational activity; this could trigger questions about whether their securities are fairly represented to investors.
• Index providers may exclude pure DATCOs from broad market benchmarks if holdings are deemed analogous to investment funds rather than core business value.

What Investors Should Watch

1. ETF Expansion and Altcoin Exposure:
The trend toward diversified crypto ETFs is likely to continue, with altcoins beyond Bitcoin and Ethereum expected to gain regulated access via ETFs in 2026. This broadening lineup offers traditional investors regulated pathways into digital asset exposure.

2. Regulatory Definition of Business Activity:
How regulators and index committees define “core business” versus balance-sheet investment will matter. Pure DATCOs may face increased scrutiny or exclusion from mainstream indices, while hybrid companies with operational revenue streams may retain broader market access.

3. Custody and Transparency Standards:
ETF products emphasize regulated custodial arrangements and transparent pricing. As index funds proliferate, products may evolve to adopt real-time transparency innovations, such as Digital Basket Tokens (DBTs) that show holdings publicly and continuously, blurring the lines between traditional ETFs and on-chain native products.

Crypto ETFs and digitally focused public companies both reflect institutionalization of an asset class once regarded as speculative and fringe. ETFs provide a regulated, transparent and investor-protected method for broad market participation. DATCOs, by contrast, challenge traditional definitions of operating business and investment exposure. Regulatory clarity and index treatment will ultimately determine whether digital asset treasuries are regarded as legitimate business value drivers or simply disguised investment proxies. We have witnessed this with a number of failing Nasdaq companies seeking to avoid a downlisting by adopting a DATCO strategy while abandoning their core business. While others have opted to put on a show with a digital asset strategy which entails self-created tokens and an internal issuance of tokens representing their projects or products, in short issuing pseudo securities without proper SEC registration, which could wind up helping those companies fall by the wayside very quickly.

Investors should also exercise heightened caution when evaluating companies that abruptly pivot away from their core operating businesses to reposition themselves primarily as digital asset focused entities. History has shown, particularly in biotech, medical technology, consumer products and other capital-intensive and high-failure-rate sectors, that some issuers rely on repeated reverse stock splits to artificially maintain listing compliance, only to follow with additional share issuances that dilute existing shareholders. This pattern can resemble a one-way value transfer, where legacy investors are continually compressed while new capital is raised with little durable value creation. Importantly, the mere announcement of a digital asset treasury does not mean it is funded, partially funded or even immediately fundable. In many cases, such disclosures reflect intent rather than execution, generating investor hype and market attention ahead of any actual asset acquisition. Companies may then seek to raise capital through equity offerings or convertible debt to eventually fund the treasury, often at the expense of existing shareholders. When a digital asset narrative is layered onto this structure without a clear funding source, operational utility or sustainable business model, it risks becoming more about perception management than fundamentals. For investors, rigorous scrutiny of funding mechanics, dilution risk and execution timelines is essential to avoid value-destructive outcomes masked as innovation.

In the end, 2026 is shaping up to be a pivotal chapter in the integration of digital assets with traditional financial markets, a period where innovation, regulation and investor expectations collide to define the next phase of crypto’s mainstream evolution.