The U.S. Deserves Better Crypto ETFs. Let’s Start With Solana

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“Solana: The Memecoin Messiah?”

The U.S. Deserves Better Crypto ETFs. Let’s Start With Solana

As the regulatory gauntlet is flung open for digital assets in the United States, one cannot help but wonder if the incoming president’s Solana memecoin was merely a clever ruse to distract us from the impending absurdity. And what an absurdity it is! In the span of a month, the U.S. crypto market has transformed from a bastion of obstruction to a hotbed of… well, let’s just say, “creative expression”.

One can almost envision a financial advisor, with a straight face, saying, “You’re slightly under-allocated in $TRUMP coin.” But, alas, these new currencies may just be valid assets for an ETF. Or, on the other hand, completely useless. 🤷‍♂️

And then, of course, there’s the more generous view: these coins, $BONK and $PENGU, are a form of artistic expression. Not, perhaps, a symphony by Mozart, but they do have some cultural value. One can see why some investors, retail and otherwise, might be interested in an ETF of this kind.

Which brings us to Solana, the blockchain that has emerged as the 3rd largest asset in terms of market cap, and by far the largest in terms of network usage. Bitcoin, once envisioned as a digital cash, has evolved into a digital store of value. And Solana? Ah, Solana has taken the mantle of a blockchain smart contract, with its unique Proof of History having the potential to power all manner of blockchain-based applications. It’s high time for a Solana ETF, don’t you think? 🤔

The groundwork is there, my friends. It took 10 long years and a lawsuit for the Bitcoin ETF to be approved. And after more challenges, an Ethereum ETF was also approved – with an asterisk, of course. Every issuer that included providing “staking” rewards in their applications had to strike it from their proposals. By doing so, the SEC effectively said that the issuers (and the investors) couldn’t participate in the governance of these blockchains, but could invest in them. 🤑

As a result, every investor who has bought into an Ethereum ETF since last May has missed the opportunity to earn yield on their asset – yield that comes directly from supporting the security of the blockchain itself. If, instead of ETF shares, these investors bought the same amount of Ethereum and staked it (for example, with Coinbase), they could earn, say, 2-4% APY, in return for letting their ETH be used to keep the blockchain secure. Whatever your politics, and however you feel about cryptocurrencies, the truth is that this puts American investors at a disadvantage. European investors already have ETPs for other currencies, and they also have access to staking rewards through them, too.

And yet, in the U.S., we are still waiting for a Solana ETF of any kind. And it certainly will not include staking to begin with, as the issuers learned from the Ethereum case not to include it. In my view, Europe’s approval of the staking ETPs should set the precedent for a staking ETF in the United States.

As for why that staking ETF should be for Solana, well – the fact that the president’s memecoin was released on Solana is no accident. It is a popular blockchain that can handle billions in transaction volume, even when it is unexpected. Its scalability and power will inevitably be applied to real-world assets in tradfi, and any other number of real-world use cases. Not giving investors access to invest in this technology through their traditional financial accounts is like if we limited investors to invest in Amazon or Google during their initial offerings. This is why a Solana ETF should be quickly approved: to give the broad retail and institutional investors access to the next biggest asset after Bitcoin and Ethereum.

In short: Solana is overdue for an ETF of its own, and I urge the new leadership at the SEC to approve the applications they have inherited from those including Grayscale, VanEck, 21Shares, Canary Capital, and Bitwise – and even encourage them to reintegrate staking rewards into their proposals. (Canary’s application has reached a second stage of SEC review, indicating it could be approved in due course.)

It’s still early days, so we are yet to see the long-term impacts of this administration’s approach to cryptocurrency. But it’s possible that it could push through a new, better framework for crypto-asset products. That would be worth the hype.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

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2025-03-17 18:59