- Regulatory Hurdles for Altcoin ETFs
- Limited Demand for Altcoin ETFs
- Solana’s Market Presence and Challenges
The quest for creating an ETF for Solana faces significant hurdles both in terms of approval and attracting investor interest, said Katalin Tischhauser, head of investment research at Sygnum Bank.
Regulatory Hurdles for Altcoin ETFs
Solana, Cardano, and other cryptocurrencies are unlikely to secure ETF approval in the U.S. anytime soon, stated Tischhauser in an interview with CoinTelegraph. The primary obstacle is the U.S. Securities and Exchange Commission’s (SEC) stringent requirements for market surveillance. In order to ensure market integrity, the SEC mandates that crypto exchanges be regulated, which most crypto trading platforms do not meet. The SEC's stance on crypto exchanges as “unregulated securities exchanges” complicates the approval process for new crypto ETFs. Until these regulatory hurdles are addressed and exchanges like Coinbase are recognized as viable surveillance markets, the path to ETF approval for altcoins remains obstructed.
Limited Demand for Altcoin ETFs
Even if approval hurdles are overcome, Tischhauser predicts limited demand for altcoin ETFs. She argues that, unlike Bitcoin and Ethereum, altcoins like Solana suffer from low name recognition outside the crypto community. Bitcoin’s dominance is unmatched, and Ethereum’s name recognition, while significant, is only half that of Bitcoin’s. This lack of widespread recognition translates to minimal investor interest. Since their debut, spot Bitcoin ETFs have amassed $17.7 billion in inflows, showcasing clear demand for Bitcoin-focused products. In contrast, spot Ether ETFs have had a slow start, largely due to the Grayscale Ethereum Trust's previous performance issues.
Solana’s Market Presence and Challenges
BlackRock’s recent comments further confirm this skepticism. According to Samara Cohen, BlackRock's chief investment officer, Bitcoin and Ethereum will likely remain the main cryptocurrencies featured in ETFs in the near future, not Solana. BlackRock’s cautious stance is attributed to concerns over technical challenges, liquidity issues, and potential market manipulation associated with altcoins like Solana. While the U.S. ETF market remains skeptical, Europe has seen a variety of crypto exchange-traded products (ETPs), including single coin and basket options. Scott Melker, host of The Wolf of All Streets Podcast, recently discussed the potential for Solana ETFs with Matthew Sigel of VanEck. Sigel believes that regulatory changes in the near future could open doors for more diverse crypto ETFs in the U.S. SEC Commissioner Hester Peirce has suggested that gaining approval for a Solana ETF may require further deliberation. She acknowledged the complex regulatory environment and the need for a case-by-case review.
Overall, the quest for creating an ETF for Solana faces multiple regulatory and market challenges. Despite interest in cryptocurrencies in Europe, the approval of such products in the U.S. will remain a difficult process in the near term.
