Original title: (Prospects of Solana ETF Approval: From 'Almost Hopeless' to 'Expected by the End of 2025', What Challenges Remain?)
Original author: Weilin, PANews
Cboe's BZX exchange recently submitted applications for four Solana ETFs. With the U.S. election day concluded and Trump set to take office, SEC Chairman Gary Gensler announced his impending resignation in January, the regulatory environment for cryptocurrency ETFs is expected to undergo significant changes, creating new opportunities for the approval of Solana ETFs.
Analysts believe that the SEC will revert from a 'law enforcement-based' to an 'information disclosure-based' regulatory model. If the Solana ETF is approved, it will stimulate huge demand in the crypto ETF market. As the fourth largest cryptocurrency by market cap, despite lacking support from a mature futures market and facing potential obstacles to being classified as a security, its ETF application process is steadily advancing in anticipation of a new regulatory environment.
Four institutions are vying to apply for a Solana ETF, which was previously considered 'almost impossible'.
On November 22, Cboe BZX exchange documents showed that the exchange proposed to list and trade four types of Solana ETFs on its platform. These ETFs are initiated by Bitwise, VanEck, 21Shares, and Canary Funds, classified as 'commodity-based trust fund shares', submitted according to Rule 14.11(e)(4). If the SEC officially accepts, the final approval deadline is expected to be in early August 2025.
Besides 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 are seeking approval.
• Litecoin ETF: Canary Capital has submitted an application.
• HBAR ETF: Canary Capital has submitted an application.
Nate Geraci, president of ETF Store, stated on November 21 that there are reports that at least one issuer has also attempted to apply for an ETF for ADA (Cardano) or AVAX (Avalanche).
Currently, some industry insiders believe that the chances of the Solana ETF being approved are ahead of other ETFs.
However, just three months ago, there were reports that CBOE had removed two potential Solana ETF's 19b-4 applications from the 'Pending Rule Changes' page on its website. At that time, Bloomberg ETF analyst Eric Balchunas commented that after Cboe removed the Solana ETF's 19b-4 application from its site, the chances of the Solana ETF being approved were almost nonexistent. But now, the new regulatory environment may bring significant changes.
Expected regulatory changes: SEC will revert to an information disclosure-based regulatory model.
After the U.S. election day, the newly elected president Trump and Congress, historically supportive of the crypto industry, are about to take office. Meanwhile, SEC Chairman Gary Gensler, criticized for his stance on the crypto industry, will resign on January 20, 2025, bringing more optimism to crypto supporters.
Nate Geraci, president of ETF Store, expressed his belief that the Solana ETF is very likely to be approved before the end of next year. "It appears that the SEC is communicating with the issuer regarding this product, which is clearly a positive signal."
Alexander Blume, CEO of Two Prime Digital Assets, agrees with this view, stating that if publishers do not have a strong confidence in success, they will not waste time and money on it.
Matthew Sigel, head of digital asset research at VanEck, the first to apply for the Solana ETF, stated, "It is the SEC under Gary Gensler's leadership that has broken the long-standing rules-based traditional process through enforcement. A return to the information disclosure-based conventional system will bring more possibilities for innovation. I believe the chances of launching a Solana ETF before the end of next year are very high."
However, in contrast to VanEck’s optimistic attitude, Robert Mitchnik, head of BlackRock’s digital assets division, which has the largest Bitcoin ETF scale, stated that the company is not very interested in other crypto products besides Bitcoin and Ethereum.
SEC Chairman Gary Gensler will step down in January 2025.
On January 20 next year, Gensler will step down from the position of SEC chairman, which coincides with Trump's inauguration day. Recently, this news has boosted the crypto market, and Bitcoin prices continue to reach historical highs while attempting to break the $100,000 mark.
Data shows that the SEC set a historical record in the fiscal year 2024, filing 583 enforcement actions and obtaining $8.2 billion in financial compensation orders, the highest amount in SEC history. Compared to 2023, this represents a 14% increase in enforcement actions. Cases involving cryptocurrencies, private equity funds, and other high-risk financial misconduct are a priority for the agency. Now, Gensler's resignation is expected to reverse the crypto regulatory environment.
The aforementioned Alexander Blume stated: "Through regulated traditional financial channels such as banks and exchanges, institutional and retail investors can access cryptocurrencies through ETFs, which will open up previously non-existent pools of capital. It is like replacing a (small) pool hose with a (large) fire hose, meaning potential market momentum is enhanced, and speculative trading may have a greater impact."
Solana's growth momentum is strong, but what potential application challenges does it face?
Boosted by meme sentiments, Solana's growth momentum this year is significant. Solana’s native token SOL broke the previous all-time high of $259.96 set at the end of 2021 on November 23, reaching $263.83, with a market cap of $121.1 billion, making it the fourth largest cryptocurrency.
What application obstacles will Solana ETF encounter? Looking back at previous Ethereum ETF applications, the SEC adopted an analysis framework called 'Ark Analysis Test' in its approval statements for Ethereum ETFs, which was provided by Ark Fund. This framework outlined several key reasons that led to the eventual approval of the Ethereum ETF: First, the existence of futures trading: the approval of spot ETFs must be based on a mature futures trading market, particularly recognized exchanges such as CME (Chicago Mercantile Exchange). Second, the deviation between the futures ETF price and the spot price cannot be too large; this proves that the market will not be manipulated by the spot ETF. Additionally, a certain level of market maturity is required. Futures ETFs have been operating for a period and have shown stability, further supporting the maturity and stability of the spot market.
Rob Marrocco, Vice President and Head of Global ETF Listings at CBOE, pointed out that the only viable way to bring the Solana ETF to market is to first launch a Solana futures ETF, which would then pave the way for a spot ETF. He further stated that even if the Solana futures ETF is launched, it would need to trade for a period of time to establish a performance record, a process that could take a long time and ultimately require significant time to complete.
Although Bitcoin ETFs and Ethereum ETFs have already been approved, they have a significant difference from Solana: Bitcoin and Ethereum trade futures on the regulated Chicago Mercantile Exchange (CME), which the SEC can monitor. Solana was listed as one of the 19 unregistered securities when the SEC sued Binance and Coinbase Global Inc. in 2023, which also posed legal obstacles to the approval of the Solana ETF.
Nevertheless, previously, Matthew Sigel 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, as courts and regulators have begun to recognize that certain crypto assets may behave as securities in the primary market but more like commodities in the secondary market.
Sigel further mentioned that in the past year, Solana has made significant progress in decentralization; currently, the top 100 holders control about 27% of the supply, a substantial decrease from a year ago. The top 10 addresses now hold less than 9%. Solana has over 1,500 validator nodes distributed across 41 countries, operating over 300 data centers, and its Boncoin coefficient is 18, surpassing most networks it monitors. The upcoming Firedancer client will further enhance decentralization, ensuring that no single entity can dominate the blockchain. He believes these advancements make Solana's decentralized characteristics more pronounced, resembling digital commodities like Bitcoin and Ethereum.
Sigel also mentioned a key legal precedent — the 2018 CFTC vs. My Big Coin case. In this case, the defense argued that the token was not a commodity because there were no futures contracts associated with it. However, the U.S. District Court disagreed, stating that the definition of commodity under the Commodity Exchange Act (CEA) is very broad, encompassing all goods, items, and all services, rights, and interests related to those goods, which may have futures contracts in the future.
Sigel believes this precedent could apply to Solana, indicating that even if Solana does not have futures contracts, it can still be considered a commodity. This classification is crucial for the approval of the Solana ETF, as it provides legal grounds for Solana to be recognized as a commodity, allowing it to enter the approval process for commodity ETFs.
Thus, he stated that ETF approval does not necessarily require an active futures market. Although the trading volume in the related futures market is not large, ETFs for shipping, energy, and uranium already exist. "We believe it can be approved even without CME futures contracts," he said, indicating that exchanges can use market monitoring sharing agreements as a substitute.
If approved, the next question is how much demand there will be for the spot Solana ETF. Grayscale Investments currently operates the Grayscale Solana Trust, managing approximately $70 million in assets. Bloomberg analyst James Seyffart believes that since Solana's market cap is about 6% of Bitcoin's, the demand for this ETF will grow proportionately, with total demand expected to reach around $3 billion.
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