In a significant development, the Chicago Board of Options Exchange (Cboe) has filed paperwork with the Securities and Exchange Commission (SEC) to list two new exchange-traded funds (ETFs) based on Solana – Van Eyck Solana Foundation and 21shares Core Solana ETF.
The move by Cboe comes on the heels of the SEC’s approval of a bitcoin ETF in January 2023 and the expected launch of an Ethereum ETF in the coming weeks. The Solana ETF filings represent the industry’s efforts to provide investors with access to the third-largest cryptocurrency by market cap, after bitcoin and ethereum.
Despite regulatory challenges, both VanEck and 21Shares have filed the necessary S-1 registration statements with the Securities and Exchange Commission, indicating their intent to launch Solana-based ETFs. The filings represent the first step in this process, providing regulators with the information they need about the proposed products.
According to industry analysts, Solana ETF applications are seen as a “bet” on the outcome of the 2024 US presidential election. If Donald Trump, who has been increasingly bullish on cryptocurrencies, wins the election, the chances of Solana ETF approval could increase. Conversely, if President Joe Biden, whose administration has been more skeptical of the crypto industry, is re-elected, the chances of Solana ETF approval could face greater challenges.
Related reading: 21Shares Apply for Solana ETF Amid Crypto ETF Rally
Cboe Solana ETF Files
Cboe Global Markets, the popular exchange operator, has filed 19b-4 filings with the Securities and Exchange Commission, seeking approval to list the VanEck Solana Trust and the 21Shares Core Solana ETF. These filings notify the SEC of proposed rule changes by the self-regulatory organization (SRO), which in this case is Cboe’s exchange.
Once the SEC acknowledges receipt of the filings, the regulator will have a 240-day window to approve or reject the products. That timeline means the SEC’s decision on the Solana ETF could come as early as mid-March 2025.
Rob Marrocco, head of exchange-traded product listings at Cboe Global Markets, emphasized the exchange’s efforts to address “the growing interest from investors in Solana – one of the most traded cryptocurrencies after Bitcoin and Ethereum.”
The importance of Solana in the crypto world
Solana, the blockchain token for smart contracts, has emerged as the fifth-largest digital asset by market cap, behind Bitcoin, Ethereum, Tether, and Binance Coin. With a market cap of over $65 billion, Solana has seen a meteoric rise, rising nearly seven-fold in the past year.
Solana’s growing popularity and trading volume have made it an attractive proposition for asset managers and investors seeking exposure to the rapidly evolving cryptocurrency ecosystem. A successful launch of a Solana ETF could drive further mainstream adoption and provide a more accessible investment vehicle for those interested in the Solana network and its native token.
Regulatory hurdles and approval prospects
While filing with the Chicago Stock Exchange represents a significant step toward the potential listing of Solana’s ETFs, the regulatory landscape poses some challenges. The SEC has set a de facto precedent by requiring an organized futures market for the underlying asset, along with a link between the spot and futures markets, as a prerequisite for ETF approval.
Bitcoin and Ethereum, the two largest cryptocurrencies, have already met this requirement, with CME Group launching Bitcoin futures in 2017 and Ethereum futures in 2021. However, Solana and subsequent cryptocurrencies currently do not have such regulated futures markets, which could pose an obstacle to SEC approval of Solana ETFs.
Possible strategies to overcome regulatory obstacles
To address the SEC’s requirements for a regulated futures market, VanEck is reportedly working on a legal case to argue that Solana’s ETFs shouldn’t have to bear that burden. According to an unnamed source, the asset manager is “working on that right now — it’s being drafted and discussed.”
Additionally, Matthew Siegel, head of digital asset research at VanEck, expressed optimism about the chances of Solana ETF approval, noting that the SEC has “diminished” its hostility toward proof-of-stake coins, as evidenced by the approval of Ethereum ETFs.
Siegel also believes that the changing climate on Capitol Hill, with the perceived decline of influence of anti-crypto figures like Senator Elizabeth Warren, could boost the chances of a Solana ETF being approved, regardless of the outcome of the presidential election.
Potential impact on Solana’s ecosystem
The successful launch of Solana ETFs could have significant implications for the broader Solana ecosystem. By providing a regulated and accessible investment vehicle, Solana ETFs could attract a new wave of institutional and retail investors, potentially increasing demand and liquidity for the Solana token.
Additionally, the availability of Solana ETFs could further integrate the cryptocurrency into the mainstream financial system, facilitating greater adoption and usage of the Solana blockchain and its decentralized applications (dApps).
Cboe’s Position on Cryptocurrency ETFs
Cboe has established itself as a leading exchange for cryptocurrency-based ETFs, having already listed six Bitcoin-based ETFs, including products from Fidelity, ARK/21Shares, and VanEck. The exchange has also received SEC approval to file rules for listing Ethereum-based ETFs, which are expected to debut in the coming weeks.
Adding Solana ETFs to Cboe’s offerings would cement the exchange’s position as a premier destination for investors seeking exposure to the rapidly evolving crypto asset class. It could also position Cboe as a major player in the ongoing competition among exchanges to list innovative crypto-based investment products.
Potential impacts on the broader cryptocurrency market
The approval of Solana ETFs and their subsequent listing on the Cboe exchange could have broader implications for the cryptocurrency market as a whole. The availability of a regulated investment vehicle for Solana could attract increased institutional capital, potentially increasing demand for the Solana token and its price.
Furthermore, the successful launch of the Solana ETF could pave the way for the SEC to consider and approve ETFs based on other prominent cryptocurrencies, expanding the scope of investment options for institutional and individual investors alike. This could lead to greater adoption of cryptocurrencies and their integration into the traditional financial system.
Regulatory uncertainty and the role of presidential elections
The fate of Solana ETF applications remains closely tied to the outcome of the 2024 U.S. presidential election. If President Biden, whose administration has been more skeptical of cryptocurrencies, is re-elected, Solana ETF applications could face significant challenges in securing SEC approval.
Conversely, if former President Trump, who has been increasingly bullish on cryptocurrencies, wins the election, the Solana ETF’s chances of approval could improve significantly. This political factor has led industry analysts to view the Solana ETF filing as a “bet” on the election outcome.
Current developments and the need for investor vigilance
As the Solana ETF applications progress through the regulatory review process, investors and market participants should closely monitor developments and remain vigilant. The SEC’s final decision, which is expected by mid-March 2025, will have far-reaching implications for the Solana ecosystem and the broader cryptocurrency market.
Investors should also stay abreast of the evolving regulatory landscape and the potential impact of political factors on the approval of cryptocurrency-based investment products. A thorough analysis and comprehensive understanding of the risks and opportunities associated with Solana ETFs will be critical to making informed investment decisions.
Conclusion
The CME’s filing for Solana ETFs represents a significant milestone in the ongoing integration of cryptocurrencies into the mainstream financial system. The potential launch of Solana ETFs could provide investors with a regulated and easily accessible investment vehicle, potentially increasing the adoption and liquidity of the Solana token.
However, the regulatory landscape poses challenges, with the SEC’s requirement for a regulated futures market for the underlying asset a potential hurdle. The outcome of the 2024 U.S. presidential election could also play a pivotal role in the prospects for Solana’s ETF approval.
As the industry and regulators grapple with these complex issues, investors and market participants need to remain vigilant and informed to take advantage of the evolving opportunities in the crypto space. The successful launch of Solana’s ETFs could have far-reaching implications for the Solana ecosystem and the broader crypto market.
