• VanEck clarifies that Solana (SOL) and Ethereum (ETH) have similar decentralized language and blockchain characteristics, influencing its decision to roll out their related ETF product. 

• For XRP, VanEck believes that it has two major challenges: internal convention and customer demand, making it less likely to consider it for an ETF. 

Cboe Exchange has confirmed that VanEck plans to launch a Solana-based Exchange-Traded Fund (ETF) after submitting a 19b-4 filing with the US Securities and Exchange Commission (SEC). Interestingly, XRP’s potential ETF has also gained traction since Ripple scored a partial win over SEC last year. Unfortunately, VanEck has not yet announced any plan for that. Explaining the reason for choosing Solana over XRP, Head of Digital Assets Research at VanEck Matthew Sigel disclosed that the decision is solely based on technicalities and regulations. 

Speaking in an interview with Tony Edwards of Thinking Crypto, Sigel stated that the language around decentralization and the characteristics of blockchain are fundamentally the same for both ETH and SOL. According to him, no single entity has the power to control over 20% of the Solana network or bring the chain to a complete halt. To him, the decentralization aspect is very important to asset managers as the SEC has on multiple occasions stressed its necessity in crypto assessments.

Sigel Puts the “Lack of Regulated Futures Market for Solana” Argument to Bed

In our recent review of a GSR report, it was established that one of the key features that put an underlying asset in line for an ETF approval is to have a federally-regulated futures market which has existed for a long time. Per the assessment, only Bitcoin (BTC) and Ethereum (ETH) ticked the box. 

Commenting on this, Sigel pointed out the gap in this assessment, stating that there are several ETFs in the market without a Futures market of significant size. According to him, this precedent can pave the way for the first Solana ETF to be approved in the US, though he admitted approval would be easier under a different SEC chair. 

Frankly, we think that the focus on that regulated market of significant size—the Futures Market—is a gentler scope. There are other ETFs in the market without a futures market of significant size like power, shipping, and uranium markets, where the futures market is just immaterial to the price formation in those markets.

Speaking of XRP, Sigel disclosed the encounter of two obstacles – internal convention and customer demand. According to him, this positions XRP as a less likely project to consider. On how the ETF decisions are made, Sigel explained that they have several stakeholders on board such as exchanges, market makers, custodians, etc who deliberate on issues through complex decision-making processes. After that, they wait for regulatory clarity for the underlying asset. 

It is going to require clarity around first and foremost the SOL ETF. Can we get it to the market and then I think issuers will try with the other proof of stake coins and then, you know, the building blocks will be put together and someone will do a top 5 [or]top 3 [ETF].

At press time, Solana (SOL) was trading at $142 after declining by 0.68% in the last 24 hours. 

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