Solana
VanEck’s Solana ETF Advances Despite Regulatory Considerations
Cboe Exchange has confirmed that VanEck intends to launch a Solana-based exchange-traded fund (ETF), following the submission of a 19b-4 filing with the U.S. Securities and Exchange Commission (SEC). While interest in a potential XRP ETF has increased since Ripple’s partial victory over the SEC last year, VanEck has not revealed any plans for such a product. Matthew Sigel, head of digital asset research at VanEck, clarified that the choice of Solana over XRP was driven by technical and regulatory factors.
Decentralization and regulatory compliance
In an interview with Tony Edwards of Thinking Crypto, Sigel explained the reasons that led to the selection of Solana. He noted that the decentralization characteristics and blockchain structure of Ethereum (ETH) and Solana (SOL) are similar. He emphasized that no single entity holds control of 20% of the Solana network or has the ability to shut down the chain, highlighting the importance of decentralization for asset managers, as the SEC has often emphasized this aspect in its evaluations of cryptocurrencies.
ETF Approval Criteria
A recent analysis of a GSR report identified the existence of a federally regulated futures market as a key criterion for an asset to be considered for ETF approval. Currently, only Bitcoin (BTC) and Ethereum (ETH) meet this requirement. Sigel pointed out a discrepancy in this assessment, mentioning that there are several ETFs on the market that do not have a meaningful futures market. He suggested that this precedent could facilitate approval of the first Solana ETF in the United States, although he acknowledged that approval could be easier under a different SEC chair.
Sigel noted that focusing on a regulated market of significant size, such as the futures market, offers a more forgiving outlook. He noted that various ETFs, such as those tied to energy, shipping and uranium markets, exist without a significant futures market, indicating that the futures market is not always crucial to price formation in these markets.
Challenges with XRP
In discussing the potential of an XRP ETF, Sigel identified two main challenges: internal convention and customer demand. These factors make XRP a less likely candidate for consideration. He described the ETF decision-making process as involving multiple stakeholders, including exchanges, market makers, and custodians, who engage in complex deliberations. Following these discussions, the focus shifts to regulatory clarity around the underlying asset.
Future outlook for Solana and other cryptocurrencies
Sigel outlined the steps needed to bring a Solana ETF to market, emphasizing the need for regulatory clarity. He noted that once a SOL ETF is established, issuers could explore ETFs for other proof-of-stake coins. He envisioned a scenario where, over time, the building blocks would be assembled, leading to the development of 5 or 3 initial ETFs.
In conclusion, VanEck’s decision to launch a Solana-based ETF reflects a strategic approach informed by technical and regulatory considerations. A focus on decentralization and the ability to navigate existing regulatory frameworks are at the heart of this initiative. As the cryptocurrency landscape evolves, VanEck’s efforts to introduce a Solana ETF underscore the dynamic nature of the market and the ongoing quest for regulatory clarity. This development highlights the broader trend toward integrating blockchain technology into traditional financial products, paving the way for future ETF innovations.