Canada Approves Solana ETFs with Staking While US SEC Delays Ethereum ETF Staking

Summary

• Canada Approves World’s First Spot Solana ETFs with Staking: Canadian regulators have authorized multiple issuers to launch spot Solana ETFs that include staking functionality, a global first for this type of investment product.

• US SEC Postpones Decision on Ethereum ETF Staking: In contrast, the US SEC has delayed the inclusion of staking features in Grayscale’s spot Ethereum ETF, indicating a more cautious approach to staking.

• Canadian Solana ETFs Feature Physical SOL Holdings and TD Bank Staking Services: The approved Solana ETFs in Canada will hold physical Solana tokens and offer staking rewards, potentially enhancing returns for investors, with TD Bank involved in information dissemination related to staking.

• US SEC Concerns over Staking Risks and Regulatory Clarity: The US SEC’s hesitation towards Ethereum ETF staking stems from concerns about investor protection, market manipulation potential, and the ambiguous regulatory classification of staking rewards under US securities laws.

Divergent Regulatory Paths in Canada and US on Crypto ETFs

Canada and the United States are displaying contrasting regulatory philosophies regarding exchange-traded funds (ETFs) linked to cryptocurrencies.

While Canada is reportedly on the verge of launching spot Solana ETFs—including a staking mechanism facilitated by TD—this week, following regulatory approval for numerous issuers, the US Securities and Exchange Commission (SEC) appears more hesitant.

The US SEC recently deferred decisions regarding staking functionalities for Grayscale’s spot Ethereum (ETH) ETF.

Canada Leads with Spot Solana ETFs, Incorporating Staking

According to Eric Balchunas, a Bloomberg senior ETF analyst, the Ontario Securities Commission (OSC) has adopted a pioneering stance by authorizing multiple issuers such as Purpose Investments, Evolve, CI, and 3iQ to introduce spot Solana ETFs in Canada.

These Solana ETFs, anticipated to launch on April 16, 2025, are poised to be a global first for Solana, a blockchain celebrated for its high throughput and minimal transaction costs.

Beyond just approving spot Solana ETFs, the inclusion of staking capabilities makes these financial instruments especially noteworthy.

The design of these ETFs incorporates staking functions, enabling investors to reap rewards through participation in Solana’s proof-of-stake consensus protocol.

In a tweet, Balchunas also noted that the Solana ETFs will invest in physical SOL for long-term holdings.

This implies that they will hold the actual cryptocurrency directly, as opposed to using derivative products such as futures contracts.

In a subsequent clarification, he highlighted that TD Bank’s involvement is limited to disseminating information, not to direct facilitation of the staking process.

Solana staking yields typically range from 5% to 7% annually, potentially increasing the appeal of these forthcoming ETFs to investors seeking yield.

Canada’s forward-leaning approach to ETFs is consistent with its track record of innovation in crypto, as it previously approved Bitcoin and Ethereum ETFs in 2020 and 2021, respectively.

US SEC Expresses Caution on Ethereum ETF Staking

In contrast to Canadian regulators, the US SEC is adopting a more conservative approach regarding crypto ETFs, specifically concerning the integration of staking functionalities.

Reports indicate that the SEC has postponed the staking aspect of Grayscale’s spot ETH ETF, citing worries about investor risks, potential for market manipulation, and unclear regulatory status of staking rewards.

Unlike Solana ETFs, Ethereum staking involves locking up ETH to support transaction validation and earn rewards, generally around 4% to 5% annually.

The SEC views staking as a potentially regulated security offering, which could subject it to more stringent oversight under US securities regulations.

The staking mechanism of Ethereum also presents a complex regulatory landscape. 

Also Read: Canada’s OSFI Updates Bank Crypto Risk Standards as Use Rises

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