VanEck, A leading global investment firm expanding into cryptocurrency, has registered to develop an exchange-traded fund tracking the price of Solana’s native coin. This move marks the first attempt to create a Solana ETF in the United States, capitalizing on recent SEC authorization for 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’s no way this gets done; I suspect it’s buying goodwill and laying the groundwork to get the ball rolling. But SEC has explicitly stated they believe SOL is a security. This administration will not walk this back.”
This was reflected by Bloomberg Intelligence’s ETF analyst James Seyffart, who stated on X that the fund “only has a chance to launch sometime in 2025 if we have a new administration in the White House and SEC.” Even then, no certainty.”
Regulatory Hurdles
The SEC’s previous concerns about market manipulation and surveillance in spot crypto markets have delayed approvals for crypto ETFs, including Bitcoin and Ethereum. These same issues pose a major obstacle for Solana ETF approval.
According to blockchain expert Ogle, while Solana may be less decentralized than Ethereum in some ways, the issue is not a “binary” one. “From a regulator’s POV perhaps it comes down to where on the spectrum they each are (or where they’re each going) to determine whether they should be viewed in the same way,” he told me.
Solana developer and co-founder of Helius, Mert Mumtaz, argued that while Ethereum might be more decentralized, Solana is still among the most decentralized networks, ranking in the top 1%. He views SOL as a commodity necessary 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 worries over market surveillance rules in crypto markets, as directed by a court, which criticized their reasoning as “arbitrary and capricious.”
Qureshi remarked that there was a stronger case that BTC and ETH-based ETFs met the SEC’s market surveillance standards because these assets traded on developed future markets. He added, “They’re not going to be able to get the market surveillance standards met without listed futures market”
Variant Fund Chief Legal Officer Jake Chervinsky said, “I’d guess the SEC will point to the lack of a futures market to justify denial.”
VanEck’s Strategic Approach
Austin Campbell of Columbia Business School doubts VanEck’s filing for a bitcoin ETF will be approved, suggesting their aim is to be early in the game. Analysts like Seyffart question if other firms will quickly follow, as seen after BlackRock’s similar move in mid-2023.
“This seems to me like a medium-term bet given the timelines on these things,” according to Campbell.
VanEck intends to waive fees for its Ethereum ETF to establish itself as a leading provider of cryptocurrency ETFs. Despite probable legal challenges, many legal experts believe that several ETFs will eventually be permitted, which may need a change in administration.
Election Issue: Crypto’s Growing Significance
Crypto has become a significant election issue, with predictions that Donald Trump’s support for the industry could boost his popularity. A DCG-funded survey shows one in five voters sees crypto as crucial in elections.
The political dimension adds complexity, with crypto becoming an increasingly significant election issue. Experts speculate that regulatory shifts or changes in administration could impact the ETF’s approval timeline.
Scott Johnsson from Van Buren Capital suggests VanEck’s filing could harm President Biden’s standing due to perceptions of his administration’s anti-crypto stance. He views VanEck’s move as strategic, aiming to challenge SEC’s crypto regulation approach despite expected denial.
University of Kentucky law professor, Brian Frye, said, “It sounds like the SEC is going to give final approval to ETH ETFs very soon, so I think eventual approval of Solana ETFs is inevitable (assuming the market holds), because from a regulatory perspective, ETH and Solana are basically identical.”
Brian Frye notes delays in ETF approvals due to slow SEC processes and leadership’s lack of enthusiasm towards crypto, despite feeling compelled to approve them eventually.
While the path to approval remains uncertain, industry stakeholders and analysts continue to monitor developments that could reshape regulatory frameworks and open new avenues for cryptocurrency investment in traditional financial markets.
Also Read: VanEck Seeks Solana ETF in US, Calls SOL a Commodity
