The regulatory atmosphere for digital assets in the United States is currently buzzing, and it’s not just because the newly inaugurated president launched a Solana memecoin right before taking office. These memecoins, among others, are now being considered as potential assets for a fresh batch of cryptocurrency ETFs. In a little over a month, the U.S. crypto market has shifted from a state of significant hindrance to one marked by sheer absurdity.
Though I can hardly picture a financial advisor suggesting, “You’re slightly under-invested in $TRUMP coin,” the truth is that these nascent currencies might qualify as legitimate assets for an ETF. Conversely, some may argue that they are entirely without value.
A broader perspective sees these coins as a type of creative expression. They may not be on par with a Mozart symphony, but coins like $BONK and $PENGU undeniably possess cultural significance. It makes sense that some investors, both retail and institutional, would find interest in an ETF of this nature.
Now let’s turn our attention to Solana, which has recently become the third largest asset by market capitalization and indisputably the most widely utilized in terms of network activity. Bitcoin, originally conceived as a form of digital cash, has evolved into a digital store of value. Meanwhile, Solana has established itself as a smart contract platform, utilizing its distinctive Proof of History to support a wide range of blockchain-based applications. It’s certainly time for a Solana ETF.
Read more: ‘It’s So Early’: How Solana Is Competing With Ethereum for Institutional Interest
The foundation is already laid. It required a decade and legal battles for the Bitcoin ETF to finally gain approval. Following more hurdles, the Ethereum ETF received a green light—with conditions. Every issuer that included staking rewards in their applications had to remove that aspect. In doing so, the SEC effectively communicated that issuers (and investors) would be excluded from participating in the governance of these blockchains but would still be able to invest in them.
This means that investors who have acquired an Ethereum ETF since last May have lost out on potential yields—earnings derived from bolstering the blockchain’s security. Had those investors opted for ETH itself and staked it (for instance, with Coinbase), they could have achieved a return of around 2-4% APY by contributing to network security. Regardless of personal beliefs about cryptocurrencies, this reality places American investors at a disadvantage. Comparatively, European investors benefit from ETPs for other currencies with access to staking rewards as well.
Yet, here in the U.S., we are still waiting for any version of a Solana ETF. Any such ETF will likely exclude staking, as issuers have learned from the Ethereum scenario. I believe Europe’s acceptance of staking ETPs should set a precedent for a staking ETF here in the United States.
Now, as to why the staking ETF should focus on Solana: the president’s release of a memecoin on this blockchain is no mere coincidence. Solana is a robust blockchain capable of accommodating transaction volumes in the billions, even under unexpected conditions. Its scalability and strength will undoubtedly be harnessed for various real-world assets in traditional finance and beyond. Denying investors the chance to engage with this technology through conventional financial accounts is akin to restricting investments in Amazon or Google during their startup phases. This underscores why a Solana ETF should be expedited: to provide broad access to retail and institutional investors for the next significant asset following Bitcoin and Ethereum.
In summary, Solana is long overdue for its own ETF, and I urge the new SEC leadership to move forward with the applications inherited from firms like Grayscale, VanEck, 21Shares, Canary Capital, and Bitwise—and even advocate for the reintegration of staking rewards into their proposals. (Canary’s application has successfully reached a second stage of SEC review, suggesting it could soon receive approval.)
While it’s still early days, the eventual outcome of this administration’s stance on cryptocurrency remains to be seen. However, there is potential for the establishment of a new and improved framework for crypto-asset products, which would certainly be worth the anticipation.