SEC Set to Reject Solana Spot ETF Applications
The United States Securities and Exchange Commission is reportedly set to reject applications for spot Solana exchange-traded funds. The expected move further points to the agency’s continued cautious approach to the regulation of cryptocurrencies under Chairman Gary Gensler.
Among the five asset managers, VanEck, 21Shares, Canary Capital, Bitwise, and Grayscale, various applications have been submitted to establish Solana ETFs starting from June 2023. However, it is difficult for the commission to immediately approve such products due to the unclear status of the regulatory status of cryptocurrencies as securities.
SEC’s Reluctance to Approve Solana ETFs
The SEC has thus acted in favor of its longstanding skepticism towards investment products related to crypto, per Fox Business journalist Eleanor Terrett. Earlier this year, the agency had rejected two applications for a Solana ETF from the Cboe BZX over lingering concerns related to market surveillance, along with the possibility of classification of Solana as a security.
The move reflects broader skepticism by the regulatory body of cryptocurrencies. Solana’s native token, SOL, has been deemed a security in various lawsuits against leading crypto exchanges such as Binance and Coinbase. Other cryptocurrencies have also been labeled as securities, including Cardano’s ADA, Polygon’s MATIC, and Filecoin’s FIL.
History of SEC’s Stringent Crypto Actions
The commission has, under Gary Gensler’s helm, pursued several high-profile enforcement actions:
- February 2023: Terraform Labs was indicted for fraud, and as a result, 16 cryptocurrencies, among which was Terra Luna Classic LUNC, were considered securities.
- June 2023: The SEC filed a lawsuit against Coinbase, claiming that 13 tokens offered on the exchange, including Cosmos ATOM, were securities.
- These moves have marked increasing concerns by the SEC about investor protection and regulatory challenges posed by digital currencies.
Future of Solana ETFs
Despite the existing regulatory roadblocks, there is some hope for change. Gary Gensler will be leaving his position as SEC Chair on January 20, 2024, and he has been nominated to be replaced by Paul Atkins. With Atkins more open to digital assets, he may bring the SEC to a policy path that will be more enabling for innovation and crypto investment products.
Ripple CEO Brad Garlinghouse welcomed the nomination, expressing optimism for a more balanced regulatory approach under Atkins. He called for swift action to end restrictive measures and enable economic growth in the crypto sector.
While the Senate must confirm Atkins’ appointment, his leadership could herald a significant shift in the SEC’s stance on cryptocurrency ETFs.
