Spotlight on Spot ETH ETF: Will Solana Be the Next to Have Spot ETF After BTC and ETH？

Recently, The ETF Store President Nate Geraci boldly predicted, “An ETF issuer will file for combined spot BTC, ETH, and SOL ETF in next few months. We’re quickly heading down the path towards index-based and actively managed crypto ETFs.“

Key Milestones in Solana ETF Development

May 23

On May 23, CNBC discussed the possibility of a Solana spot ETF approval following the approval of an ETH spot ETF. CNBC stated that the approval of the ETH ETF was just the beginning, with the SOL ETF being a potential next candidate.

June 27-28

On June 27-28, asset management giants VanEck and 21Shares announced they had submitted S-1 applications for Solana ETFs to the SEC. Both chose the Cboe BZX Exchange, with Coinbase as the custodian, and ensured that the funds would not participate in validating or staking SOL. VanEck even issued an open letter explaining this move, arguing that the SEC’s current view of SOL as an unregistered security is incorrect and that SOL should be considered a commodity as Bitcoin and Ethereum. This news ignited the Solana ecosystem, with SOL’s price briefly surpassing $150, and leading tokens like WIF and RAY rising more than 10% within an hour.

July 8 On July 8, an official announcement revealed that Cboe had submitted 19b-4 filings for Solana ETFs to the SEC on behalf of VanEck and 21Shares, formally starting the approval process. According to the rules, the SEC has 240 days to decide whether to approve the filings.

July 17 On July 17, SEC Commissioner Hester Peirce told Coinage that the Solana ETF could be approved without the need for an existing CME futures market. Traditionally, crypto ETFs must be based on a mature futures trading market, especially one recognized by official exchanges like CME. This stance means the Solana ETF might not face the same regulatory hurdles as Bitcoin and Ethereum ETFs, freeing it from the stringent requirements of previous approval processes.

Controversy: Is SOL a Commodity or a Security?

Despite the progress, there is still controversy over whether the Solana ETF will be approved.

Pessimists’ View Pessimists argue that the main reason an Ethereum ETF was once deemed unapprovable was the SEC’s view of ETH as a security. However, at that time, this assertion lacked substantial evidence due to the SEC Chairman’s evasive stance. In contrast, SOL has been explicitly classified as a security.

On June 5, 2023, the SEC listed SOL as a security in its lawsuit against Binance. On the next day, SOL was also listed as a security in the case against Coinbase, with the SEC accusing both Binance and Coinbase of unregistered securities dealings. Even in the recent allegations against Kraken in June 2024, the SEC continued to assert that SOL, ADA, and ALGO were securities, reflecting consistent regulatory positioning.

Being classified as a security means adhering to the SEC’s disclosure requirements and regulations, requiring clarity on transparency and KYC, which are challenging to achieve for anonymous cryptocurrencies, creating a key obstacle for the Solana ETF.

Optimists’ View

Optimists’ hope lies in the upcoming U.S. presidential election. By then, current SEC Chairman Gary Gensler will likely step down, and the crypto community may play a crucial role in the election. Additionally, Washington’s regulatory environment is shifting towards a more supportive stance on cryptocurrencies.

Bloomberg senior ETF analyst Eric Balchunas noted that the final deadline for the Solana ETF is mid-March 2025, while the election is in November 2024, meaning the final approval will be decided by a post-election regulatory group. He emphasized that if Biden (replaced by Harris now) wins the election, the Solana ETF is likely to be shelved, but if Trump wins, anything is possible.

Potential Impact if Approved

Currently, there is still significant uncertainty about whether the Solana ETF will be approved. However, if so, it could pave the way for a larger crypto ETF ecosystem in the U.S., requiring an updated regulatory framework. Regardless of market demand for these ETFs, their applications (and potential launch) are of great significance.

Moreover, from the perspective of market demand and ecosystem development, the approval of the Solana ETF will provide institutional investors with more convenient access to Solana, potentially boosting demand and liquidity for the token. It also holds the potential to significantly drive the development and adoption of the Solana ecosystem.

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The post first appeared on HTX Square.