From "almost hopeless" to "can be expected before the end of 2025"
The BZX exchange of the Chicago Board of Trade (Cboe) recently submitted applications for four Solana ETFs.
With the end of the US election day, Trump will take office, and Securities and Exchange Commission (SEC) Chairman Gary Gensler announced that he will resign in January next year. The cryptocurrency ETF regulatory environment is expected to undergo major changes, creating new opportunities for the approval of Solana ETF.
Analysts believe that the SEC will return to a regulatory model based on "enforcement" to "based on information disclosure". If the Solana ETF is approved, it will stimulate huge demand in the crypto ETF market.
Solana is currently the fourth largest cryptocurrency by market capitalization. Although it lacks the support of a mature futures market and faces potential obstacles from being judged as a security, its ETF application process is progressing steadily in anticipation of the new regulatory environment.
Four institutions rushed to apply for Solana ETF, which was once "almost impossible"
On November 22, Cboe BZX exchange documents showed that the exchange proposed to list and trade four Solana ETFs on its platform. These ETFs are sponsored by Bitwise, VanEck, 21Shares and Canary Funds respectively and are classified as “commodity-based trust fund shares” and filed pursuant to Rule 14.11(e)(4). If the SEC formally accepts the application, the final approval deadline is expected to be in early August 2025.
In addition to Bitcoin and Ethereum, the following cryptocurrencies are also awaiting ETF approval:
XRP ETF: Canary Capital, Bitwise and 21Shares have submitted applications.
Solana ETF: Canary Capital, 21Shares, Bitwise and VanEck seeking approval.
Litecoin ETF: Canary Capital has filed.
HBAR ETF: Canary Capital has filed.
ETF Store President Nate Geraci said on November 21 that there was news that at least one issuer had also attempted an ETF application for ADA (Cardano) or AVAX (Avalanche).
At present, some industry insiders believe that the Solana ETF has a higher chance of passing than other ETFs.
However, just three months ago, there were public reports that CBOE had removed the 19b-4 applications for two potential Solana ETFs from the "Pending Rule Changes" page of its website.
At the time, Bloomberg ETF analyst Eric Balchunas commented that there was little chance the Solana ETF would be approved after Cboe removed the Solana ETF’s 19b-4 filing from its website. But now, the new regulatory environment may bring significant changes.
Expected changes in supervision: SEC will return to a supervision model based on information disclosure
After the U.S. election day, President-elect Trump and the Congress that is most supportive of the encryption industry in history are about to take office.
SEC Chairman Gary Gensler, who has criticized the encryption industry, will resign on January 20, 2025, which has brought more optimism to encryption supporters.
Nate Geraci, president of the ETF Store, said he believes there is a good chance the Solana ETF will be approved by the end of next year. “It looks like the SEC is communicating with issuers about this product, which is obviously a positive sign.”
Alexander Blume, CEO of Two Prime Digital Assets, agreed, saying publishers wouldn't waste time and money doing it if they didn't have a high degree of confidence that it would succeed.
Matthew Sigel, head of digital asset research at VanEck, which was the first to apply for the Solana ETF, said, "It is the SEC under Gary Gensler that has broken the long-standing traditional rule-oriented process and implemented supervision through enforcement. The possibility is very high. The possibility is very high." The company has little interest in crypto products other than Bitcoin and Ethereum.
SEC Chairman Gary Gensler will step down in January 2025
Gensler will resign as SEC chairman on January 20 next year, which is also the day Trump takes office. The news has recently boosted the crypto market, with Bitcoin prices continuing to hit all-time highs on the way to the $100,000 mark.
Data show that the SEC set a record in fiscal year 2024, filing 583 enforcement actions and obtaining $8.2 billion in financial compensation orders, the highest amount in SEC history.
This represents a 14% increase in enforcement actions compared to 2023. Among them, cases involving cryptocurrencies, private equity funds and other high-risk financial misconduct are the agency’s priorities. Now, Gensler’s resignation is expected to turn the crypto regulatory landscape around.
Alexander Blume, mentioned above, said: “Through traditional regulated financial channels such as banks and exchanges, institutional and retail investors will be able to access cryptocurrencies through ETFs, which will open up capital pools that did not exist before.
Solana is growing strongly, but what potential application challenges does it face?
Buoyed by the meme market, Solana’s growth momentum this year has been significant.
Solana's native token SOL surpassed the previous all-time high of $259.96 set at the end of 2021 on November 23, reaching $263.83, with a market capitalization of $121.1 billion, making it the fourth largest cryptocurrency.
What application barriers will Solana ETF encounter? Looking back at the previous Ethereum ETF application, in the Ethereum ETF’s approval statement, the SEC adopted an analytical framework called “Ark Analysis Test”, which was provided by the Ark Fund and adopted by the SEC.
The framework lists several key reasons for the Ethereum ETF to be finally approved: The first is the existence of futures trading: the adoption of spot ETFs must be based on a mature futures trading market, especially an officially recognized exchange, such as CME (Chicago) commodity exchange).
Secondly, the deviation between the price of futures ETFs and the spot price cannot be too large. This proves that the market is not manipulated because of spot ETFs.
In addition, a certain degree of market maturity is also required. Futures ETFs have been operating for some time and have performed stably, which further supports the maturity and stability of the spot market.
Rob Marrocco, CBOE vice president and head of global ETF listings, pointed out that the only feasible way to bring the Solana ETF to the market is to launch the Solana futures ETF first and then pave the way for the spot ETF. He further said that even if the Solana futures ETFs were launched, they would need to trade over a period of time to establish a track record, a process that could be lengthy and could ultimately take a significant amount of time to complete.
While Bitcoin ETFs and Ethereum ETFs have passed, they have one big difference from Solana: Both Bitcoin and Ethereum trade futures on the regulated Chicago Mercantile Exchange (CME), which the SEC can monitor. Solana was listed as one of 19 unregistered securities when the SEC sued Binance and Coinbase Global Inc. in 2023, which also brought legal obstacles to the approval of SolanaETF.
Nonetheless, VanEck’s head of digital asset research Matthew Sigel previously pointed out that VanEck considers Solana (SOL) to be a commodity, similar to Bitcoin (BTC) and Ethereum (ETH). This view is based on an evolving legal perspective, in which courts and regulators have begun to recognize that certain crypto-assets may behave as securities in primary markets but behave more like commodities in secondary markets.
Sigel further mentioned that Solana has made significant progress in decentralization over the past year; the top 100 holders currently control approximately 27% of the supply, which is a significant decrease from a year ago. The top 10 addresses now hold less than 9%. Solana has more than 1,500 verification nodes distributed in 41 countries, operates more than 300 data centers, and has a Satoshi coefficient of 18, surpassing most of the networks it monitors. The upcoming Firedancer client will further enhance decentralization, ensuring that no single entity can dominate the blockchain. He believes that these developments make Solana’s decentralized features more prominent and more similar to digital commodities such as Bitcoin and Ethereum.
Sigel also mentioned a key legal precedent-the 2018 U.S. Commodity Futures Trading Commission (CFTC) v. My Big Coin case. In this case, MBC’s defense argued that the token was not a commodity because there was no futures contract associated with it. However, the U.S. District Court disagreed with this view and held that under the U.S. Commodity Exchange Act (CEA), the definition of goods is very broad and includes all goods, articles and all services, rights and interests related to these goods, and these goods may in the future There will be futures contracts.
Sigel believes that this precedent may apply to Solana, indicating that even if Solana does not have a futures contract, it can still be considered a commodity. This classification was critical to the approval of the Solana ETF because it provides Solana with the legal basis to be considered a commodity, allowing Solana to enter the approval process for commodity ETFs.
From this, he said, an active futures market is not necessarily required for ETF approval. ETFs for shipping, energy and uranium already exist, although trading volumes in the underlying futures markets are modest.
"We believe it can be approved even without a CME futures contract." He said that exchanges could instead pass a market surveillance sharing agreement.
If approved, the next question will be how much demand there will be for the spot Solana ETF. Grayscale Investments already operates the Grayscale Solana Trust, which currently has approximately $70 million in assets under management.
Bloomberg analyst James Seyffart believes that since Solana’s market cap is about 6% of Bitcoin’s, demand for the ETF will grow proportionately, with total demand expected to eventually reach about $3 billion.
This article is reproduced in cooperation with: PANews
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