Solana ETF Race Heats Up as 21Shares Vies for SEC Approval

• The SEC has had increasing pressure to approve a Solana-based ETF.
• The filings have offered a glimpse into how a Solana ETF might function.
• The approval process hinges on how US regulators will classify Solana.

The competition for a Solana -based ETF in the US market intensified as 21Shares filed a registration statement with the Securities and Exchange Commission (SEC) for a spot Solana ETF. This move follows VanEck’s similar filing just days earlier, reflecting the growing demand for investment products tied to Solana, the fifth-largest cryptocurrency by market cap.

21Shares Solana ETF Seeks SEC Approval

The 21Shares ETF aims to provide investors with a convenient and cost-effective way to gain exposure to Solana without directly buying the cryptocurrency itself. Shares of the ETF will track Solana’s performance, adjusted for the trust’s expenses and liabilities, and trade on the Cboe BZX Exchange.

However, there’s a crucial caveat. The court filing hinges on the regulatory classification of Solana. If the SEC deems SOL a security in the future, and the sponsors choose not to comply with the necessary regulations, the ETF will be terminated. This uncertainty arises from the SEC’s historically cautious approach toward approving crypto-related products.

Despite the regulatory hurdle, the structure of the ETF offers a glimpse into how it would function. The trust, sponsored by 21Shares US LLC, will not actively trade Solana except for creating and redeeming ETF shares. Authorized participants, typically large financial institutions, will handle these transactions.

Coinbase Custody to Hold Solana for ETFs

When investors want to buy shares, they will deposit cash into the trust’s account. This cash will then be used to purchase Solana tokens, which will be held securely by Coinbase Custody Trust Company. Conversely, when shares are redeemed, the Solana holdings will be sold, and the proceeds will be returned to the authorized participants.

The filing highlights the trust’s strategic decision to offer its shares continuously. However, it avoids including additional securities or post-effective amendments, providing flexibility to adjust to any regulatory changes before the upcoming Presidential election. 

With both 21Shares and VanEck vying for SEC approval, the race for the first US-listed Solana ETF heats up. While the regulatory uncertainty surrounding Solana’s classification presents a challenge, these filings signal a growing confidence in the future of Solana and the potential for wider institutional adoption of the cryptocurrency.

On the Flipside

• Compared to Bitcoin and Ethereum, Solana is a younger cryptocurrency with a shorter track record.
• Even with SEC approval, the ETF hinges on Solana’s classification as a non-security. A change in this stance could result in its termination.

Why This Matters

The battle between 21Shares and VanEck for the first US-listed Solana ETF signifies a maturing crypto market with institutional interest in Solana. If approved, such an ETF could open the door for broader Solana adoption and increase accessibility for investors seeking exposure without directly owning the cryptocurrency.

If you’re interested in the impact of the 2024 US election on cryptocurrency regulation, this article discusses an application by VanEck to create a Solana ETF:
VanEck’s Solana EFT Bets on Trump’s Win: Bloomberg Analyst

This article discusses the first filing for a Solana ETF. You might find it interesting if you’re following the approval process for cryptocurrency ETFs:
First Solana ETF Filing Goes to SEC as Frenzy Mounts