Bloomberg Analyst Predicts It Will Take Years for Solana ETF to be Approved
Rachel Wolfson
Last updated:
June 13, 2024 14:28 EDT
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5 min read
The recent approval of spot Bitcoin exchange-traded funds (ETFs) and spot Ethereum ETFs has opened the door for altcoin ETFs in the United States. The success of spot Bitcoin ETFs, which brought in $1.8 billion in inflows last week, highlights the progress in digital asset ETFs.
Experts are now looking towards the possibility of an altcoin ETF being approved in the U.S. next, but Bloomberg Research ETF Analyst James Seyffart suggests that it could be a long wait. Despite Solana (SOL) being a top contender for the next ETF, the SEC’s current classification of SOL as a security poses a hurdle.
Seyffart believes that even if an issuer were to file for an ETF tomorrow, the SEC would not make a decision until March 2025, indicating a lengthy process. He emphasizes that altcoins face challenges meeting the requirements for an ETF in the U.S., particularly the need for clear classification as a commodity or security and a regulated market for surveillance.
The Chicago Mercantile Exchange (CME) futures market, regulated by the Commodity Futures Trading Commission (CFTC), currently only oversees Bitcoin (BTC) and Ethereum (ETH). Without a similar market for other digital assets, Seyffart predicts that it will take years for an altcoin ETF to be approved.
Michael Repetny, a contributor at Marinade on Solana, notes that before a spot ETF for Solana can be approved, a future ETF on the CME must be established to indicate progress towards acceptance. While a futures-based Solana ETF is not yet available in the U.S., products like Grayscale Solana Trust (GSOL) and VanEck Solana provide alternative investment options.
The upcoming 2024 Presidential Election could potentially expedite the approval process for an altcoin ETF, as Seyffart suggests that a pro-crypto administration may prioritize creating a framework for digital assets to become ETFs. Despite recent support for Bitcoin and crypto mining from candidates like Donald Trump and Robert F. Kennedy Jr., Repetny believes that an altcoin ETF approval will still take several months to a few years.
Hermida, Co-Founder of Switchboard, highlights the challenges altcoin ETFs face due to low liquidity, which regulators consider when evaluating approvals. Liquidity is crucial for market stability and efficiency, making altcoin ETF approval for fringe coins like meme coins unlikely in the near term due to potential market manipulation risks.
Solana’s potential as an ETF candidate is acknowledged, but concerns about centralization remain. Efforts to increase decentralization and network resilience demonstrate Solana’s commitment to addressing these issues, making it a strong contender for approval. Despite this, Seyffart remains cautious about Solana’s chances, citing regulatory hurdles and the need for significant changes before an ETF approval can be expected.
