Markets
Solana ETF Faces Headwinds Under Current Management
VanEck, a leading global investment firm expanding into cryptocurrency, has registered to develop an exchange-traded fund that tracks the price of Solana’s native coin. This move marks the first attempt to create a Solana ETF in the United States, capitalizing on the SEC’s recent authorization of Ethereum-based securities. However, there is pessimism about the approval of a SOL ETF under the current administration.
Haseeb Qureshi, a partner at Dragonfly Capital, said: “There is no way to do this; I suspect it’s buying goodwill and preparing the ground to get the ball rolling. But the SEC has explicitly stated that it believes SOL is a security. This administration will not back down.”
This was echoed by Bloomberg Intelligence ETF analyst James Seyffart, who stated in X that the fund “only has a chance to launch sometime in 2025 if we have a new administration in the White House and the SEC.” Even so, there is no certainty.”
Regulatory obstacles
The SEC’s previous concerns about market manipulation and surveillance in spot cryptocurrency markets have delayed approvals of cryptocurrency ETFs, including Bitcoin and Ethereum. These same concerns pose a major hurdle to the approval of the Solana ETF.
According to blockchain expert Ogle, while Solana may be less decentralized than Ethereum in some ways, the issue is not “binary.” “From a regulator’s perspective, it might come down to where on the spectrum each is (or where each is going) to determine whether they should be viewed equally,” he told me.
Solana developer and Helius co-founder Mert Mumtaz argued that while Ethereum may be more decentralized, Solana is still among the most decentralized networks, ranking in the top 1%. It views SOL as a necessary commodity for prioritizing transactions, obtaining network bandwidth through staking, allocating storage, and paying network fees.
Surveillance concerns
The SEC previously delayed authorizing a spot bitcoin ETF for a decade due to concerns over market surveillance rules in cryptocurrency markets, as ruled by a court, which criticized its reasoning as “arbitrary and capricious.”
Qureshi noted that there was a stronger argument that ETFs based on BTC and ETH met the SEC’s market surveillance standards because these assets traded in developed futures markets. He added: “They will not be able to meet market surveillance standards without the futures market listed.”
Jake Chervinsky, General Counsel at Variant Fund he said“I think the SEC will point to the lack of a futures market to justify the denial.”
VanEck’s Strategic Approach
Columbia Business School’s Austin Campbell doubts VanEck’s application for a bitcoin ETF will be approved, suggesting his goal is to be early in the game. Analysts like Seyffart question whether other companies will quickly follow, as seen after BlackRock’s similar move in mid-2023.
“That seems like a medium-term bet to me, given the time frames on these things,” according to Campbell.
VanEck intends to waive fees for your Ethereum ETF to establish itself as a leading provider of cryptocurrency ETFs. Despite likely legal challenges, many legal experts believe that multiple ETFs will eventually be permitted, which could require a change in management.
Election Issue: The Growing Importance of Cryptography
Cryptocurrency has become a significant election issue, with predictions that Donald Trump’s support for the industry could boost its popularity. A DCG-funded poll shows one in five voters sees encryption as crucial in elections.
The political dimension adds complexity, with crypto becoming an increasingly significant electoral issue. Experts speculate that regulatory changes or changes in administration could impact the ETF approval timeline.
Scott Johnsson of Van Buren Capital suggests VanEck’s filing could hurt President Biden’s standing due to perceptions of his administration’s anti-crypto stance. He sees VanEck’s move as strategic, aimed at challenging the SEC’s crypto regulatory approach, despite the expected denial.
University of Kentucky law professor Brian Frye said: “It appears that the SEC will give final approval to ETH ETFs very soon, so I think final approval of Solana ETFs is inevitable (assuming the market holds up). , because from a regulatory perspective, ETH and Solana are basically identical.”
Brian Frye notes delays in ETF approvals due to slow SEC processes and a lack of leadership enthusiasm toward crypto, despite feeling compelled to approve them eventually.
While the path to approval remains uncertain, stakeholders and industry analysts continue to monitor developments that could reshape regulatory frameworks and open new avenues for cryptocurrency investments in traditional financial markets.
Read too: VanEck seeks Solana ETF in the US and calls SOL a commodity