Solana ETFs May Gain US Approval as Early as May

Summary

• US SEC approval of Solana ETFs is anticipated as early as May, marking a significant shift from previous rejections due to a changed regulatory environment under the Trump administration.

• The expected approval is driven by a change in cryptocurrency classification from securities to commodities, aligning with international regulatory standards and placing crypto assets under the CFTC’s jurisdiction.

• Market demand for Solana ETFs is uncertain, with European crypto ETP data suggesting strong interest, contrasted by underwhelming initial trading volumes for Solana futures on the Chicago Mercantile Exchange (CME).

Just six months prior, the US Securities and Exchange Commission (SEC) declined applications for Solana Exchange Traded Funds (ETFs).

However, a change in the agency’s regulatory direction, spurred by the Trump administration, suggests a reversal. Anticipation is building that several Solana-based funds could receive the green light as soon as May.

Past Rejection and Current Optimism Contrasted

Spot Bitcoin ETFs have been actively trading in the US for just over a year and have amassed nearly $100 billion in assets under management, marking them as highly successful.

Ethereum ETFs, which followed a few months later, experienced a less impressive initial phase.

In contrast, Solana ETFs did not even reach the initial stages due to SEC concerns over Solana’s security classification.

The SEC’s current leadership now holds a different perspective, hinting at imminent approval for Solana ETFs.

Issuer 21Shares confirmed this expectation to CVJ.CH upon request.

Classification of Cryptocurrencies at the Heart of Regulatory Change

The central point of divergence between the SEC’s former and current approaches is the regulatory classification of digital assets.

Under Gary Gensler’s leadership, the SEC categorized the majority of cryptocurrencies as securities.

This classification subjected them to more stringent regulatory frameworks.

Furthermore, clear guidance for crypto projects on security registration remained absent.

Since the Trump administration took over, a shift has occurred towards classifying cryptocurrencies as commodities.

This aligns with the regulatory stance adopted by many other nations and places this asset class under the purview of the Commodity Futures Trading Commission (CFTC).

Numerous Altcoin ETF Applications Under SEC Review

Consequently, numerous applications for exchange-traded funds focused on alternative cryptocurrencies (“altcoins”) have been submitted to the SEC.

Among these, Solana ETFs are generating the most excitement.

Prominent Bitcoin ETF issuers, including firms like Fidelity, Grayscale, and 21Shares, are among the applicants.

In February, the SEC formally acknowledged these applications, starting the formal review process leading to a decision.

While the ultimate deadline for decisions on Solana ETFs is in October of the current year, 21Shares predicts a positive outcome considerably earlier.

Mixed Signals on Potential Demand for Solana ETFs

Assessing the potential market demand for Solana ETFs presents a complex picture. On one hand, looking at the performance of crypto Exchange Traded Products (ETPs) in Europe suggests significant interest.

For instance, at Swiss ETP provider 21Shares, the assets under management for their Solana product, valued at $660 million, closely mirror their Bitcoin ETP assets of $700 million.

Conversely, their Ethereum ETP holds significantly less, accounting for under half of the Solana product’s assets at $250 million.

This substantial asset under management is attributed to both investor demand and the notable price appreciation of Solana over the preceding two years.

On the other hand, the comparatively weak trading activity observed in recently launched Solana futures on the Chicago Mercantile Exchange (CME) injects an element of doubt.

On their debut day, these products at the world’s largest derivatives exchange recorded a modest $12 million in trading volume.

For context, Bitcoin futures reached $480 million, and Ethereum futures achieved $88 million in trading volume on their respective first days of trading.

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