Solana Spot ETF approval is facing new challenges in the U.S., despite global optimism following Brazil’s recent green light for the fund. After the successful launch of Bitcoin and Ethereum Spot ETFs earlier this year, attention has shifted to Solana. However, while international markets are showing support, U.S. regulatory hurdles remain a significant obstacle. The potential approval of a Solana Spot ETF could mark a crucial step in the crypto industry’s evolution, but it faces an uphill battle in the American regulatory environment.
2024 has proven a pivotal year for ETFs, with the Securities and Exchange Commission (SEC) making headlines worldwide by approving the first-ever Bitcoin Spot ETF in January. This landmark decision triggered a historic rally in Bitcoin’s price and set a precedent for future cryptocurrency ETFs. By mid-year, Ethereum followed suit, securing its own Spot ETF approval. With these successes in mind, investors have naturally begun speculating about which cryptocurrency might secure the next coveted approval. Among the front-runners is Solana, a blockchain network boasting a substantial market cap and a robust smart contract platform.
Solana Spot ETF: Brazil Takes the Lead with
While the US continues to scrutinise Solana Spot ETF approval, other global markets have been more proactive. Brazil approved the first Solana Spot ETF in late August, offering a potential test case for Solana’s long-term viability in more stringent markets like the United States.
The approval by Brazil’s securities regulator, Comissão de Valores Mobiliários (CVM), reflects growing confidence in Solana’s stability and market potential. Matthew Sigel, Head of Digital Assets Research at VanEck, sees this as a positive sign for the crypto world, though he tempers expectations for swift US regulatory approval. “Brazil’s move is encouraging,” Sigel said, “but it’s not a guarantee that US regulators will follow suit. The legal and regulatory framework in the US remains much more cautious, especially regarding newer crypto assets like Solana.”
SEC’s Reluctance: A Closer Look
The Solana Spot ETF approval faces considerable challenges within the US, largely due to the SEC’s conservative stance on cryptocurrency regulations. Historically, the SEC has been slow to approve ETFs that don’t meet stringent standards for security and market stability. One of the main issues is whether Solana qualifies as a commodity, like Bitcoin and Ethereum, or whether it falls into the category of securities, which are subject to stricter oversight.
Eric Balchunas, a senior ETF analyst at Bloomberg, is sceptical about the near-term prospects for Solana Spot ETF approval in the US. “I’d say the chance of the SEC approving a Solana Spot ETF right now is extremely slim—practically a snowball’s chance in hell,” Balchunas remarked. “Until there’s a clear shift in leadership at the SEC or Congress steps in to redefine crypto regulation, we won’t see the Solana Spot ETF materialise.”
Adding to the uncertainty, the SEC recently removed the 19b-4 filings from CBOE’s website, signalling that the agency was not prepared to even consider Solana Spot ETF approval before the hard deadlines for review. For those holding out hope, this was a major setback, underscoring the uphill battle Solana faces.
Ethereum’s ETF Struggles: A Warning Sign?
Further complicating the picture for Solana is Ethereum’s lukewarm ETF performance. While Bitcoin’s Spot ETF saw a surge of interest upon launch, Ethereum has struggled to keep pace. Recent reports from Glassnode reveal that Ethereum ETFs have experienced outflows of $458 million since their inception, despite the overall bullish trend in cryptocurrency markets. If Ethereum, with its widespread adoption and robust infrastructure, faces challenges, it raises legitimate concerns about how a Solana Spot ETF approval could fare.
Nate Geraci, President of the ETF Store, offers a cautious take on the situation. “Ethereum’s ETF struggles are a red flag for any future Solana Spot ETF approval,” Geraci noted. “While there’s clear interest in Bitcoin and other large-cap cryptocurrencies, second-tier assets like Solana may have a harder time sustaining the kind of investor interest needed to make an ETF successful.”
Futures ETFs: A Path Forward?
Despite these obstacles, many industry insiders believe that the path forward for Solana might lie in futures ETFs rather than spot ETFs. Futures ETFs are regulated by the Commodity Futures Trading Commission (CFTC), which has historically adopted a more flexible stance towards cryptocurrency regulation compared to the SEC.
VanEck’s Matthew Sigel is one of the proponents of this idea. He argues that Solana could be classified as a commodity, much like Bitcoin, under a 2018 legal precedent from a case involving the now-defunct My Big Coin. If the CFTC were to apply this ruling to Solana, it could open the door for Solana Spot ETF approval, or at least a futures-based alternative, much sooner than expected.
However, even this optimistic scenario comes with caveats. Futures ETFs, while easier to launch, tend to have less market impact than their spot counterparts. Investors often prefer Spot ETFs for their direct exposure to the asset in question, whereas futures ETFs are seen as more speculative.
Solana Spot ETF Approval: Not Dead, Just Delayed
Although the immediate prospects for Solana Spot ETF approval in the US appear dim, the long-term outlook is more hopeful. As political dynamics shift and regulatory frameworks evolve, there’s still a chance that Solana could break through the barriers holding it back. The 2024 US elections may play a key role in determining whether crypto-friendly legislation gains traction, but even then, any significant regulatory reforms will take time.
In the meantime, Brazil’s approval of the Solana Spot ETF provides a valuable proving ground. If Solana can perform well in the Brazilian market, it will strengthen the case for Solana Spot ETF approval in the US and other jurisdictions. As always in the crypto world, patience is key.
