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

The United States is experiencing a significant shift in the regulatory landscape for digital assets. This transformation is underscored by recent developments, particularly with the emergence of an interesting trend: the rise of memecoins and their potential inclusion in new cryptocurrency exchange-traded funds (ETFs). In just over a month, the U.S. crypto market has evolved from a state of regulatory obstruction to one that seems almost willing to embrace the absurdity of the current digital asset craze.

Despite the skepticism surrounding many memecoins, which seem more like cultural phenomena than substantial financial tools, they represent a chapter in the ongoing story of cryptocurrency adoption. Financial advisors may hesitate to recommend a portfolio weighted slightly toward a coin like $TRUMP, but there exists a valid argument for a broader view that includes these coins as potential assets for ETFs. Many see this as creative expression, albeit one more akin to street art than classical symphonies — they carry cultural weight and have captivated a significant swath of retail investors.

This begs a more serious consideration about Solana, currently ranked as the third-largest cryptocurrency by market capitalization and the largest in terms of network usage. While Bitcoin has successfully transitioned into a digital store of value, Solana has emerged as a powerhouse in the world of blockchain smart contracts, primarily due to its innovative Proof of History consensus mechanism. This technological underpinnings provide the foundation for various blockchain applications, suggesting it is high time that Solana secures its own dedicated ETF.

The groundwork for this evolution is already in place. The long, arduous journey for a Bitcoin ETF took a decade, complete with legal hurdles that made its eventual approval a landmark event. Ethereum’s ETF journey followed a similar trajectory but came with its own complications, notably the removal of staking rewards from the final application. The U.S. Securities and Exchange Commission (SEC) has taken a firm stance, essentially barring issuers and investors from participating in the governance of these networks, though allowing them to invest.

Interestingly, this exclusion has deprived U.S. investors in Ethereum ETFs from earning potential staking yields, which can range between 2-4% annually. In contrast, European investors benefit from Exchange-Traded Products (ETPs) that provide similar staking opportunities. This disparity is becoming increasingly hard to justify, particularly as the world of digital assets continues to expand.

Despite the demand, a Solana ETF has yet to materialize in the U.S. market. Historical applications indicate that staking rewards will likely not be part of any forthcoming Solana ETF, as issuers will be cautious following the precedent set by Ethereum. However, with European jurisdictions already approving staking ETPs, the door is open for the SEC to adopt a more progressive approach.

The association of Solana with recent cultural phenomena — including the new president’s introduction of a Solana-based memecoin — is no coincidence. Solana’s technology is robust, capable of handling billions in transaction volume and proving its scalability even under unpredictable circumstances. Denying U.S. investors the ability to participate in this technological evolution would be akin to limiting investment opportunities in major tech companies during their initial public offerings.

The potential launch of a Solana ETF emerges as a critical opportunity for both retail and institutional investors to access what may well be the next substantial asset following Bitcoin and Ethereum. Accelerating the approval process for Solana ETF applications — which include proposals from Grayscale, VanEck, 21Shares, Canary Capital, and Bitwise — is essential. Encouragingly, Canary’s application is already at the second stage of SEC review, hinting at potential progress.

In this evolving landscape, the leadership at the SEC has a unique chance to clarify and enhance regulations governing cryptocurrency products. The anticipated changes might finally allow the U.S. to catch up to its global peers, making the future of digital asset investments brighter and more inclusive.