This new ETF investment product focused on Cryptos may soon be available to global investors.
U.S. securities regulators have requested Wall Street investment Institutions, which are competing to launch Solana Exchange-Traded Funds (i.e., Solana ETF), to modify certain documents, indicating that this ETF investment product focused on new Cryptos may soon be available to global investors.
At least three large asset management firms have been asked to revise their filings submitted to the U.S. Securities and Exchange Commission (SEC) to address two key issues: how the ETF funds will handle large-scale redemptions of cryptocurrencies, and whether they plan to allow investors to earn rewards by staking the next-generation cryptocurrency — Solana tokens, which helps verify blockchain transactions (that is, 'staking').
This move suggests that, after approving ETFs fully linked to the performance of Bitcoin and Ethereum several months ago, U.S. securities regulators may be ready to greenlight the next wave of ETF issuances.
"The SEC has requested issuers to amend their S-1 filings, which sounds like it could be just a few days, or at most a few weeks away from formal approval," said Noelle Acheson, author of 'Crypto is Macro Now'. "This will be a huge change for the spot crypto market."
The documents that issuers need to get approved include the S-1 registration statement, which details the ETF product structure, strategy, and risks, as well as an important document known as 19b-4.
"We have been asked to supplement and submit a revised S-1, which we plan to complete soon," a spokesperson for the well-known investment firm 21Shares AG stated in a release.
Additionally, two other Wall Street investment Institutions planning to launch Solana ETFs have also confirmed that they received similar feedback from the SEC, according to informed sources. Blockworks was the first to report on the SEC's requests.
The complexity of the issuance process lies in how the issuers of Solana ETF products can trade highly speculative and volatile Cryptos while replicating the traditional ETF structure. It remains unclear whether these ETF products are permitted to use Cryptos instead of Cash for share redemption (i.e., 'physical redemption'). In traditional asset classes, this mechanism is relatively straightforward, but it is much more complicated in Cryptos ETF products due to custody, safety, and settlement challenges.
Another focus is on staking—the core function of the so-called 'Proof of Stake' (PoS) blockchains (including Ethereum, Solana, etc.), which can generate returns for holders. The issue raised by staking is whether such tokens should be considered a type of security.
The milestone moment for PoS chains is approaching.
"Any investor who puts money into products without staking is losing their returns," said ETF Analyst James Seyffart from Bloomberg Intelligence. For example, according to Coinbase statistics: Solana staking yields over 5%, while Ethereum just about 2%.
"If physical redemption and staking are allowed, these ETFs will become more attractive as long-term investments," Seyffart said.
Staking has become the biggest point of debate regarding whether Crypto investment products can be quickly established. Staking is the core mechanism on PoS chain tokens (like Solana and Ethereum): investors lock their tokens to validators to maintain network security and receive over 5% annualized returns. Once this function is introduced into ETFs, it immediately involves regulatory and operational challenges such as 'whether staking returns are equivalent to securities dividends' and 'whether tokens can be used instead of Cash upon redemption.' Compared to Bitcoin (PoW mechanism) ETFs, which do not require staking and are widely recognized as a CSI Commodity Equity Index, the approval for Solana ETFs is therefore much more complicated.
Thus, the difficulty in issuing Solana ETFs lies in embedding staking returns and physical redemption into the ETF mechanism while meeting multiple compliance requirements such as custody, liquidity, and securities law. If the SEC ultimately approves staking and physical redemption, Solana ETFs will not only provide investors with higher passive income but will also become among the first 'income-generating' spot Cryptos ETFs within the U.S. regulatory framework, opening the capital markets for the entire PoS ecosystem.
On PoS chains, block packaging rights depend on staking weight rather than "computational power" competition. Holders delegate Solana (SOL) to validators, and the tokens are frozen and participate in the consensus process. If a node performs stably, rewards are earned based on the inflation rate; otherwise, it may face "punishment reduction" (slashing). If the staking related to the Solana ETF receives approval from the SEC, other PoS chains (such as Cardano and Avalanche) might rapidly follow suit.
Statistics from Bloomberg Intelligence indicate that at least seven major ETF issuers are looking to launch a Solana ETF, including Grayscale Investments, Bitwise, VanEck, and Canary Capital.
A previous report from JPMorgan predicted that the total inflow of Altcoin-ETFs could reach as high as 14 billion dollars.
Recently, two proposed staking-type ETFs from REX Financial and Osprey Funds have been officially questioned by the SEC. The issuers stated that after the official listing in mid-June, the U.S. securities regulator inquired whether these fund products met the definition of an investment company under federal law.
However, this situation "could ultimately force the SEC to act," wrote Seyfahrt and Eric Balchunas from Bloomberg Intelligence in their report. "We believe the SEC might address the 19b-4 applications for Solana and staking-type ETF products sooner than originally planned." They added that the probability of approving the Solana ETF this year is as high as 90%.
Since the beginning of this year, the "Solana craze" has swept through the crypto world.
Since Trump returned to the White House in January of this year, cryptocurrency investors have flocked to the native token of the Solana blockchain—Solana. The popularity of Solana this year even briefly surpassed that of Bitcoin, the largest cryptocurrency by market cap, primarily due to U.S. President Trump and his wife Melania launching two so-called "commemorative coins" on its Solana blockchain just before his inauguration—namely, the so-called "Trump Coin" and "Melania Coin."
Trump has repeatedly emphasized the goal of making the U.S. the "capital of cryptocurrency" and a "superpower in Bitcoin," and the support from Trump and new members of the U.S. government cabinet for cryptocurrencies like Bitcoin is driving the growing demand for digital asset funds in the country (such as Bitcoin ETFs and Ethereum ETFs) and cryptocurrency derivative contracts.
Self-proclaimed as the "Ethereum killer", Solana has become the preferred network for decentralized cryptocurrency issuance. Solana has a significant advantage over Ethereum in terms of processing speed and transaction fees due to its innovative PoH and POS hybrid consensus mechanism.
For many cryptocurrency projects, especially applications that require a large number of transactions and microtransactions (such as DeFi, NFTs, gaming, etc.), the low transaction fees and high throughput provided by Solana make it an optimal platform. Although Solana is relatively "young", its ecosystem is also growing rapidly. As the performance advantages of the Solana platform become evident, more and more cryptocurrency projects are choosing to launch on Solana, particularly in the fields of DeFi, NFTs, and Web3, which attracts a large number of developers and innovators in the decentralized crypto space.
Editor/melody
