Solana ETF Approval Faces Hurdles: Concentrated Ownership and Lack of US Futures Market

• The recent filing for a spot Solana ETF by VanEck is stirring conversation in the crypto market due to unique risks associated with the token.
• The proposal highlights several potential concerns that may affect its approval by the U.S. Securities and Exchange Commission (SEC).
• The concentrated ownership of SOL tokens is particularly noteworthy, raising questions about market stability.

Discover the insights and risks that surround VanEck’s recent spot Solana ETF filing, and what it could mean for the future of Solana and cryptocurrency ETFs.

VanEck Files for Spot Solana ETF Amid Ownership Concerns

Investment firm VanEck’s recent move to file for a spot Solana ETF on June 27 has brought considerable attention to the potential risks of concentrated token ownership. Unlike Bitcoin and Ethereum, Solana lacks a futures market in the U.S., adding another layer of complexity to the proposal.

Risk of Concentrated SOL Ownership

The filing emphasizes that as of November 2023, the top 100 Solana wallets held nearly a third of all SOL tokens in circulation. This concentration of ownership poses risks to market stability, as significant sales by these large holders could dramatically affect the token’s price. VanEck’s filing points out that such a scenario could adversely impact market price and stability, a concern that both investors and regulators take seriously.

Referencing similar concerns raised in previous SEC deliberations, the concentrated ownership issue marks a potential roadblock for the ETF’s approval. For instance, concerns over ownership concentration were cited by SEC Commissioner Caroline Crenshaw during discussions on the spot Bitcoin ETF earlier this year.

Challenges of Solana’s Proof of History Mechanism

VanEck has also identified risks related to Solana’s Proof of History (PoH) consensus mechanism. While PoH allows Solana to process transactions faster than many other blockchains, it has also led to several network outages in recent years. These outages could be a significant concern for the SEC as they consider VanEck’s proposal.

Despite these potential issues, the market has reacted favorably to the news of the filing, with Solana’s price experiencing a double-digit increase shortly after the announcement. The token has managed to maintain these levels, indicating a cautious optimism among investors.

Conclusion

VanEck’s spot Solana ETF proposal presents intriguing opportunities and challenges. The concentrated ownership and potential for network outages due to Solana’s Proof of History are significant factors the SEC will likely consider. As the market watches closely, the outcome of this filing could set a precedent for future cryptocurrency ETF approvals. Investors should stay informed and prepared for possible fluctuations as the approval process unfolds.