Two months ago, ETF issuers VanEck and 21Shares submitted applications to the US Securities and Exchange Commission (SEC) for a spot fund based on Solana (SOL). However, unlike entering into the lengthy approval processes as seen with bitcoin (BTC) and ethereum (ETH), the SEC blocked the Solana ETFs completely.
Spot-based bitcoin ETFs have been trading in the US for just over six months. These ETFs have been very successful, as covered by CVJ.CH. Reportedly an inflow of over $17.5 billion into these products since January. In contrast, the newly launched Ethereum ETFs had a disappointing start. Solana didn't even make it to the starting line as its applications were rejected. The main reason for the decision was concerns that the cryptocurrency qualifies as a security. The Swiss applicant, 21Shares, confirmed the rejection when contacted by CVJ.CH.
Subscribe to our newsletter
The best articles of the week, directly delivered into your mailbox.
Significant interest in Solana (SOL)
The motivation behind the Solana ETF applications is clear. Similar to Ethereum, Solana is a platform that supports self-executing contracts, known as smart contracts. However, instead of paying high fees, users can execute instant transactions for a fraction of a cent. This advantage has made Solana particularly popular in the Memecoin space, where it's the leader in user numbers and trading volume. This fundamental growth is also reflected in the token's price.
Over the past twelve months, Solana has experienced a remarkable rally, far outperforming Ethereum. While some of this performance can be attributed to a rebound from the severe price drop caused by FTX, 21Shares Head of Research Adrian Fritz noted that strong investor demand cannot be overlooked. In fact, assets under management (AuM) for the Swiss ETP issuer's Solana products exceed $800 million. This dwarfs its bitcoin ETP at $640 million, and Ethereum ETP which is only about half that size.
ETF Prospects under a Trump Administration?
Despite the significant interest in the product, the rejection of the Solana ETFs did not surprise industry insiders. The current SEC, led by former investment banker Gary Gensler, has long held that most cryptocurrencies should be classified as unregistered securities. Bitcoin (BTC) and Ethereum (ETH) are exceptions due to their decentralized nature. Solana (SOL), in particular, has been cited by the SEC in several lawsuits against crypto exchanges such as Coinbase and Binance as an example of a "crypto-asset security."
As CVJ.CH reported, the prospect of a US Solana ETF seems unlikely without major personnel changes at the SEC. A potential Trump administration after the upcoming November elections could bring such changes. At a bitcoin conference in Nashville, the Republican presidential candidate received loud applause when he said he would fire Gensler on his first day in office. On the other hand, Democratic candidate Kamala Harris is considering appointing the current SEC chairman as Secretary of the Treasury.
