Alex Thorn, Head of Research at Galaxy Digital, recently provided analysis on the filing of Solana Exchange Traded Products (ETPs) by investment firms VanEck and 21Shares. These letters, made with the US Securities and Exchange Commission (SEC) on June 28, represent an aggressive step to integrate Solana (SOL) into the structured framework of regulated financial markets, similar to those established by Bitcoin and Ethereum.
VanEck’s proposal, as stated in their S-1 filing, aims to launch an asset-backed trust that will directly hold Solana, thereby allowing ETP to closely track the market price of the asset. Unlike other crypto ETPs, this product will not engage in holding assets.
After the announcement, the market reacted positively, with the price of SOL marking an increase of around 8%. However, filing is still in its early stages, lacking detailed operational frameworks such as cashier, cashier, and authorized participants. These aspects are often addressed in later amendments as the product matures to final approval.
Why Spot Solana ETF Chances Are Small
As for the latest updates, VanEck has yet to file the required 19b-4 form, which begins the SEC’s formal review process. According to Bloomberg analyst James Seyffart, the standard review period, once implemented, stretches to 240 days. So, if VanEck files soon, the final decision can be expected around March 15, 2025. This process involves several regulatory checkpoints and regular public comment periods in the approval of the operation of new financial products.
The SEC currently considers Solana an unregistered security, primarily based on ongoing lawsuits against the major cryptocurrency exchange Coinbase. This separation complicates the Solana-based ETP approval process. Given that the Securities & Exchange Commission is currently alleging in its lawsuit against Coinbase that Solana is an unregistered security, absent a major change in position from the SEC, it is likely that this request will be denied,” said Thorn.
Historically, the SEC has adopted a cautious approach towards crypto ETPs. The approval process generally follows a sequential path that begins with regulated futures markets, then ETPs based on those futures, and finally, ETPs based on the US. Bitcoin and Ethereum ETPs have navigated this path with varying degrees of resistance and success.
Notably, the SEC’s previous refusal to approve Bitcoin ETPs was based on concerns about market size and oversight. The change came with a decision by the DC Court of Appeals in August 2023, which upheld the adequacy of future market oversight. This decision facilitates the approval of Bitcoin spot ETPs, which started in January 2024, followed by Ethereum ETPs in May 2024.
Opportunities Can Change Quickly
The recently passed FIT21 law in the US House, which defines the regulatory boundaries between the SEC and the Futures Trading Commission (CFTC), could play an important role in regulating cryptocurrencies in the future. This law specifies which digital assets should be treated as assets and which as securities. Such clarification of the law could pave the way for future approvals of digital currency ETPs, including Solana. “That kind of transparency could also affect or improve the chances of ETP approval for underlying digital currencies beyond Bitcoin and Ether,” Thorn noted.
Overall, the path forward for Solana ETPs is fraught with regulatory hurdles and uncertainties. Alex Thorn of Galaxy Digital summarizes, “VanEck has a history of filing early: in the last round of Bitcoin ETPs, they were the fourth filer (filing one day after BlackRock), and they were the first to file for a local Ethereum ETP. That is admirable – maybe here they are betting on the results of the election.”
At press time, SOL traded at $147.54.
Featured image from ByteTree, chart from TradingView.com
Source link
