Solana's Hard Path to U.S. ETF Approval

After Ethereum's recent success with the U.S. Securities and Exchange Commission (SEC) in securing its first exchange-traded fund (ETF), opportunities are emerging for other cryptocurrencies to achieve similar milestones. Solana, a rapidly growing altcoin, is now pursuing U.S. ETF approval. However, this path is expected to be challenging, with numerous obstacles ahead.

Recently, Brazil's financial regulator approved the country’s first Solana ETF, a significant milestone for the cryptocurrency. This approval is rare on a global scale for Solana, which was created in 2017 by Anatoly Yakovenko and is managed by the Solana Foundation, a Swiss non-profit. Known for fast transactions and low costs, Solana has grown into one of the largest cryptocurrencies, with a market capitalization of $70 billion.

Brazil’s approval could drive substantial growth for Solana in Latin America. Over the past year, Solana's price has surged due to expectations that it could lead the next wave of altcoin ETFs globally. However, securing approval in the U.S. remains a significant challenge, despite these positive developments.

Following Ethereum's ETF approval, interest in Solana’s U.S. ETF approval increased. In June, VanEck, a leading investment fund in the crypto market, submitted a request to the SEC to launch a Solana ETF. This was soon followed by similar requests from 21Shares and Cboe Global Markets, showing strong institutional support.

Despite this momentum, Solana faces major challenges in gaining SEC approval. One key issue is the lack of regulated trading platforms that the SEC considers appropriate for oversight. Unlike Bitcoin and Ethereum, which had CME futures trading to support their ETF requests, Solana's current exchanges do not meet U.S. regulatory standards, making it difficult for the SEC to ensure proper market surveillance.

The SEC is also concerned about market manipulation with Solana. Its history of network outages raises doubts about its reliability, complicating the approval process further. Additionally, Solana lacks recognition outside the crypto community, making it harder to convince regulators of its stability and value.

Furthermore, the U.S. regulatory framework is unclear on what qualifies as a decentralized asset. This uncertainty about whether Solana is a commodity or a security further complicates its chances of ETF approval. As Bloomberg Intelligence analyst James Seyffart remarked, "Without clarity on the asset, you're not going to get an ETF."

Given the current regulatory environment under President Joe Biden's administration, Solana’s chances of securing ETF approval are slim. However, political changes could influence the SEC's decision. Former President Donald Trump, who is leading in the polls, has expressed support for the crypto sector, dubbing himself a "crypto president." His return to office could potentially provide the political backing needed to advance crypto regulations, including Solana’s ETF approval.

The approval process for Bitcoin’s ETF was long and difficult, involving years of legal battles. The SEC has 240 days to decide on ETF requests. While the approval of a Solana ETF would represent the third wave of cryptocurrency ETFs, it would require perfect alignment of regulatory clarity, market infrastructure, and political support.

In summary, Solana's journey toward U.S. ETF approval is difficult but not impossible. Growing institutional interest and potential political shifts could play a critical role in its success. For now, Solana’s path to becoming a mainstream financial asset remains uncertain and complex.