Why VanEck's solana ETF application is a win for crypto - even if it's not approved

By Frances Yue

Investment manager VanEck's application for a spot solana exchange-traded fund is unlikely to be approved anytime soon - but the move is still bullish for cryptocurrencies, industry participants said.

VanEck, which had nearly $102 billion in assets under management as of March 31, filed for the first spot solana (SOLUSD) ETF in the U.S. on Thursday. Seen as a competitor to Ethereum (ETHUSD), the Solana blockchain is touted by supporters for its high transaction speed and low costs. Following the news on Thursday, the solana token jumped 8% to around $147.95, according to Dow Jones Market Data. It is up 42% so far this year.

"The broad range of applications and services supported by the Solana ecosystem, from decentralized finance to nonfungible tokens, underscores SOL's utility and value as a digital commodity," Matthew Sigel, head of digital-assets research at VanEck, wrote in a post on X on Thursday.

Still, the chances of a solana ETF being approved by the U.S. Securities and Exchange Commission the end of this year are quite low, said David Tawil, president and co-founder at ProChain Capital.

The SEC has not yet approved any ETFs investing in solana futures, Tawil noted in a phone interview. In contrast, before the SEC cleared spot bitcoin (BTCUSD) ETFs earlier this year, products investing in bitcoin futures had already been trading on the market since 2021.

Similarly, ether futures ETFs were first launched in October of last year before the SEC in May approved filings from several stock exchanges asking for rule changes that would enable them to list spot ether ETFs. Potential spot ether ETF issuers, including VanEck, are still waiting for the SEC to approve their registration statements before the products can be offered to the public.

The Solana blockchain's track record of outages in the past may also be of concern to the SEC, Tawil noted. Regardless, he described VanEck's application for a solana ETF as still a bullish development for the crypto industry.

Before VanEck's application, "you could have made the argument that it doesn't make economic sense to have any ETFs beyond bitcoin and ether," Tawil said. However, VanEck's application shows that "for ETF issuers, there is economic significance to issue ETFs based on many crypto beyond ether and bitcoin."

Crypto-based ETFs allow investors to invest in digital assets through their stock brokerage accounts, bringing in new demand for the asset class. The launch of spot bitcoin ETFs in January was seen as a transformative development for the crypto sector that helped propel bitcoin's price to an all-time high in March.

Peter Eberle, chief investment officer at Castle Funds, said he expects a flood of ETF applications based on other cryptocurrencies if a solana ETF were to be approved.

Representatives at the Solana Foundation, which supports the blockchain, didn't immediately respond to requests seeking comments.

-Frances Yue

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06-27-24 1615ET

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