In a significant development, the Chicago Board Options Exchange (Cboe) has filed paperwork with the Securities and Exchange Commission (SEC) to list two new Solana-based exchange-traded funds (ETFs) – the VanEck Solana Trust and the 21Shares Core Solana ETF.
This move by Cboe comes on the heels of the SEC’s approval of Bitcoin ETFs in January 2023 and the anticipated launch of Ethereum ETFs 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 capitalization, after Bitcoin and Ethereum.
Despite the regulatory challenges, both VanEck and 21Shares have filed the necessary S-1 registration statements with the SEC, indicating their intention to launch Solana-based ETFs. These filings are the first step in the process, as they provide the regulator with the required information about the proposed products.
According to industry analysts, the Solana ETF applications are viewed as a “bet” on the outcome of the 2024 U.S. presidential election. If Donald Trump, who has been increasingly bullish on cryptocurrency, wins the election, the chances of Solana ETF approval may increase. Conversely, if President Joe Biden, whose administration has been more skeptical of the crypto industry, is re-elected, the prospects for Solana ETF approval may face greater challenges.
Related Read: 21Shares Applies For Solana ETF Amidst Crypto ETF Surge
Cboe’s Solana ETF Filings
Cboe Global Markets, the renowned exchange operator, has submitted 19b-4 filings with the SEC, seeking approval to list the VanEck Solana Trust and the 21Shares Core Solana ETF. These filings inform the SEC of the proposed rule changes by the self-regulatory organization (SRO), which in this case is the Cboe exchange.
Once the SEC acknowledges receipt of the filings, a 240-day window opens for the regulator to approve or deny the products. This timeline means that the SEC’s decision on the Solana ETFs could come as early as mid-March 2025.
Rob Marrocco, the global head of ETP listings at Cboe Global Markets, emphasized the exchange’s efforts to address the “increasing investor interest in Solana – one of the most actively traded cryptocurrencies after Bitcoin and Ether.”
Solana’s Prominence in the Crypto Landscape
Solana, the token of the Solana smart contracts blockchain, has emerged as the fifth-largest digital asset by market capitalization, trailing only Bitcoin, Ethereum, Tether, and the Binance token. With a market cap of over $65 billion, Solana has experienced a torrid bull run, surging nearly sevenfold in the past year.
The growing popularity and trading volume of Solana have made it an attractive proposition for asset managers and investors seeking exposure to the rapidly evolving cryptocurrency ecosystem. The successful launch of Solana ETFs could further drive 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 the Cboe filings represent a significant step towards the potential listing of Solana ETFs, the regulatory landscape poses some challenges. The SEC has set a de facto precedent of requiring a regulated futures market for the underlying asset, along with a correlation 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 the CME Group launching Bitcoin futures in 2017 and Ethereum futures in 2021. However, Solana and subsequent cryptocurrencies do not currently have such regulated futures markets, which may pose a hurdle for the SEC’s approval of Solana ETFs.
Potential Strategies for Overcoming Regulatory Hurdles
To address the SEC’s requirement for a regulated futures market, VanEck is reportedly constructing a legal case to demonstrate why this burden should not be necessary for Solana ETFs. The asset manager is “working on that now – it’s being formulated and brainstormed,” according to an unnamed source.
Additionally, Matthew Sigel, the head of digital assets research at VanEck, expressed optimism about the chances of Solana ETF approval, citing the SEC’s “whittling away” of its hostility towards proof-of-stake coins, as evidenced by the approval of Ethereum ETFs.
Sigel also believes that the changing atmosphere on Capitol Hill, with a perceived decline in the influence of anti-crypto figures like Senator Elizabeth Warren, could further bolster the prospects for Solana ETF approval, regardless of the presidential election outcome.
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 driving increased 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 Positioning in the Crypto ETF Space
Cboe has established itself as a leading exchange for cryptocurrency-based ETFs, having already listed six of the 10 existing spot Bitcoin ETFs, including products issued by Fidelity, ARK/21Shares, and VanEck. The exchange has also secured SEC approval for its rule filings to list spot Ethereum ETFs, which are expected to debut in the coming weeks.
The addition of Solana ETFs to Cboe’s offerings would further solidify the exchange’s position as a premier destination for investors seeking exposure to the rapidly evolving crypto asset class. This could also position Cboe as a key player in the ongoing competition among exchanges to list innovative crypto-based investment products.
Potential Implications for the Broader Crypto Market
The approval and subsequent listing of Solana ETFs on Cboe 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 driving up the demand and price of the Solana token.
Moreover, the successful launch of Solana ETFs could pave the way for the SEC’s consideration and approval of ETFs based on other prominent cryptocurrencies, further expanding the range of investment options for both institutional and retail investors. This could lead to greater mainstream adoption and integration of cryptocurrencies into the traditional financial system.
Regulatory Uncertainties and the Role of the Presidential Election
The fate of the 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, the Solana ETF applications may face significant challenges in securing SEC approval.
Conversely, if former President Trump, who has been increasingly bullish on crypto, wins the election, the prospects for Solana ETF approval could improve significantly. This political factor has led industry analysts to view the Solana ETF filings as a “bet” on the election outcome.
Ongoing 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 the developments and remain vigilant. The final decision by the SEC, 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 informed about the evolving regulatory landscape and the potential impact of political factors on the approval of crypto-based investment products. Careful analysis and a thorough understanding of the risks and opportunities associated with Solana ETFs will be crucial for making informed investment decisions.
Conclusion
The Cboe’s filings for Solana ETFs represent 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 accessible investment vehicle, potentially driving increased adoption and liquidity for the Solana token.
However, the regulatory landscape poses challenges, with the SEC’s requirement for a regulated futures market for the underlying asset serving as a potential hurdle. The outcome of the 2024 U.S. presidential election could also play a pivotal role in the approval prospects for Solana ETFs.
As the industry and regulators navigate these complex issues, investors and market participants must remain vigilant and informed to capitalize on the evolving opportunities in the cryptocurrency space. The successful launch of Solana ETFs could have far-reaching implications for the Solana ecosystem and the broader crypto market.
