After the approval of spot exchange-traded funds (ETFs) for Bitcoin and Ethereum in the U.S. this year, many in the crypto industry are now speculating whether Solana could be the next to follow. While Brazil’s recent approval of a Solana Spot ETF offers a test case, the outlook for its approval in the U.S. remains uncertain.
2024: A Landmark Year for ETFs
2024 has been a pivotal year for the crypto ETF market. The U.S. Securities and Exchange Commission (SEC) approved a Bitcoin ETF in January, triggering a historic rally in Bitcoin’s price and multibillion-dollar trades. Shortly after, the SEC approved a spot Ethereum ETF, following similar approvals in other jurisdictions. With these two major cryptocurrencies clearing the regulatory hurdle, the question now is: Which crypto will be next?
Solana, the fifth-largest cryptocurrency by market cap, has emerged as a top candidate. Launched in 2020, Solana offers a proof-of-stake model and smart contract capabilities similar to Ethereum, making it a potential fit for the next spot ETF.
Overcoming Regulatory Hurdles
The primary challenge in getting a crypto ETF approved is the classification of the asset as either a security or a commodity. The SEC has emphasized that a spot ETF must be built around an asset that isn’t subject to corporate manipulation, which is why assets like Bitcoin and Ethereum have been able to secure approval.
Stablecoins like Tether and exchange-controlled coins such as Binance’s BNB are seen as risky due to their central control, which could influence their price. Solana, however, is positioned similarly to Ethereum and has the potential to meet the SEC’s requirements for approval.
Brazil’s approval of a Solana Spot ETF in late August has given the crypto industry hope. The move by Brazil’s securities regulator (CVM) underscores the potential for Solana to be recognized in major markets. However, challenges remain.
Ethereum’s Struggles: A Cautionary Tale
Despite Bitcoin’s ETF success, Ethereum’s has faced challenges, with outflows of $458 million since its launch. This underperformance raises concerns about the viability of a Solana ETF, given that Solana is a smaller, newer asset. The SEC recently rejected a Solana ETF proposal from CBOE, adding to the uncertainty.
Bloomberg ETF analyst Eric Balchunas has expressed skepticism about a Solana ETF being approved in the U.S. under current SEC leadership. He pointed out that the SEC rejected the proposal before the official deadlines had even been reached, signaling strong regulatory resistance.
What’s Next for Solana’s ETF Hopes?
Despite the pessimism, proponents of a Solana ETF are not giving up. CBOE’s ETF proposals were backed by VanEck and 21Shares, and VanEck’s Head of Digital Assets Research, Matthew Sigel, has argued that Solana should qualify for a spot ETF based on its classification as a commodity under a 2018 court precedent.
ETFStore President Nate Geraci suggested that approval of a Solana futures ETF, which faces fewer regulatory barriers than a spot ETF, could be a first step. Alternatively, broader regulatory reform from Congress could open the door for Solana.
While a spot Solana ETF seems unlikely to be approved in the U.S. by the end of 2024, a futures ETF could be a more achievable goal. The Commodity Futures Trading Commission (CFTC), which has lighter regulatory standards than the SEC, could oversee a Solana futures ETF if the asset is classified as a commodity.
Conclusion
While Solana’s ETF prospects face significant challenges in the U.S., Brazil’s approval and the broader interest in the asset suggest it remains a strong contender. Although immediate approval for a Solana spot ETF in the U.S. is unlikely, the path forward could involve a futures ETF or regulatory reforms. Investors should keep a close eye on how the asset performs in international markets and monitor ongoing regulatory developments.
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,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“