The US Securities and Exchange Commission (SEC) has formally acknowledged NYSE Arca’s filing for a rule change to list and trade shares of the Grayscale Solana ETF.
While the move brings the possibility of a Solana-backed investment vehicle closer to reality for US investors, ETF experts warn that filings may face delays.
According to a February 6 notice of filing, the regulator has initiated a public comment period for the proposed rule change, allowing interested parties to submit feedback. These comments will be reviewed by the SEC before a final decision is made.
The Crypto ETF Boom is Here
Grayscale, the world’s leading digital asset manager, and NYSE Arca first applied to convert the Grayscale Solana Trust (GSOL) into an ETF last December. As of February 6, the trust product, launched in November 2021, had 7,221,835 shares outstanding. It carries a management fee of 2.5% per year.
With the proposed ETF, Grayscale aims to offer investors exposure to the native token of the Solana network. According to CoinGecko data, SOL is currently the fifth-largest cryptocurrency, with a market capitalization of $93,7 billion.
Grayscale has filed applications with the SEC to convert several of its trusts into ETFs, including those tied to prominent assets like XRP, Dogecoin (DOGE), and Litecoin (LTC). These proposals are all pending regulatory review and approval.
Grayscale’s pursuit of ETF conversions, including for its Solana Trust, is likely motivated by its desire to offer investors a product with the structural advantages of an ETF. The company successfully secured the SEC’s nod to convert its Bitcoin Trust into a spot Bitcoin ETF (GBTC) despite facing initial pushback from the regulator.
The SEC approval of the Grayscale Bitcoin ETF, alongside other competing funds, sets a good precedent for companies looking to diversify their cryptocurrency offerings.
And with the imminent transformation in regulatory approach, clearly shifting toward a more pro-crypto stance, and legislative approach, asset managers are increasingly eager to secure approval for new products.
Take Your Pick
Not only Grayscale, several asset management firms like Bitwise, VanEck, 21Shares, and newcomer Canary Capital have also submitted their filings to launch their respective Solana ETFs.
Late last month, CBOE BZX Exchange resubmitted 19b-4 filings on behalf of Bitwise, 21Shares, Canary Capital, and WisdomTree for spot Solana ETFs.
Despite increasing optimism surrounding approval odds, existing Solana ETF proposals may face some delays. James Seyffart, a Bloomberg ETF analyst, has noted that the approval process could be prolonged until next year due to ongoing lawsuits involving Solana being classified as a security.
Specifically, the SEC has claimed, in its separate lawsuit filings against Binance and Coinbase, that SOL and a number of other cryptocurrencies like ADA, are securities. The American top financial watchdog has accused Binance and Coinbase of offering sales of these assets as unregistered securities offerings.
Potential Delays
Experts believe that the SEC is unlikely to approve these ETFs by the initial deadline, but many are optimistic that it’s a matter of “when, not if.”
If approved, the spot Solana ETFs would provide a new avenue for institutional and retail investors to gain exposure to Solana, potentially driving adoption and liquidity for the cryptocurrency.
In addition to Solana, there are ongoing efforts to launch ETFs for XRP, DOGE, LTC and HBAR. But unlike SOL and XRP, ETF analysts see higher odds that a Litecoin ETF will come first, most likely the first crypto ETF after those tied to Bitcoin and Ether.
The projection is based on the fact that the SEC does not publicly label LTC as a security; plus, the Commodity Futures Trading Commission (CFTC) previously deemed LTC a commodity.
To date, Canary Capital, Grayscale, and CoinShares are the two firms seeking to launch a Litecoin ETF in the U.S.
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