The next wave of US crypto ETFs is in limbo
The prospect of spot solana ETFs has taken a hit, and the agency appears to be taking its time in reviewing planned crypto index funds
Artwork by Crystal Le
While fund issuers continue to float new crypto ETFs in the US after the launch of BTC and ETH funds this year, the Securities and Exchange Commission appears to be in no rush to approve them.
The prospect of spot solana ETFs seeing approval anytime soon, for example, has recently taken a major hit.
Confirming previous reports, a source familiar with the filings told Blockworks the SEC essentially rejected plans filed by stock exchange Cboe on behalf of 21Shares and VanEck.
The agency seems to be “of the position that solana is a security and not a commodity,” the person added.
This differs from ETH, which essentially had its status as a commodity clarified upon the SEC’s approval of spot ether ETFs in May. An SEC spokesperson did not immediately return a request for comment.
Some market observers had previously noted that near-term solana ETF approval was a long shot — noting the SEC wanted to see a regulated futures market for bitcoin and ether. There is currently no such market for SOL.
Read more: Why more US spot crypto ETF approvals may be unlikely in the near term
Perhaps more likely to gain a green light in the near-term are the planned funds looking to hold both BTC and ETH, though it looks like the SEC will take its time with those.
Franklin Templeton filed for such a product last week. The so-called crypto index ETF was similar to one filed by Brazil-based asset manager Hashdex in June.
Because the SEC has already approved spot bitcoin and ether funds this year, it would “not be surprising” if the SEC allowed these funds holding both assets to move forward, a person familiar with the filings said. The agency’s crypto-specific plans, however — as well as the timeframe for potential approval — “remains entirely unclear,” the source added.
The SEC is likely to thoroughly review these products given their unique structure, said Fineqia International analyst Matteo Greco.
“The SEC has yet to approve a basket product in the form of a digital assets ETF,” he told Blockworks. “This could prompt the SEC to ask additional questions and require further clarification from the issuers before granting approval.”
There’s also the fact that issuers have indicated the potential inclusion of additional crypto assets down the line, Greco noted.
Hashdex noted in its June filing that crypto assets meeting certain criteria — such as being listed on a US-regulated platform — could be added to the fund’s index.
The global version of the Nasdaq Crypto Index — tracked by Hashdex ETFs in Europe and Brazil, for example — comprises 11 crypto assets: BTC, ETH, SOL, ripple (XRP), cardano (ADA), chainlink (LINK), litecoin (LTC), polygon (MATIC), avalanche (AVAX), uniswap (UNI) and polkadot (DOT).
The prospect of adding additional crypto assets to the planned funds’ index over time is one “potentially leading to more discussions between issuers and regulators,” Greco said.
Read more: Is the Kamala Harris crypto ‘reset’ coming? Give it time, exec says
As for timeline, the SEC delayed its decision on the Hashdex proposal on Aug. 9, noting it would approve, deny or push its ruling again by Sept. 30. The SEC’s 240-day window to give a final ruling on the product would expire at the end of February.
In terms of the possible demand for such funds, Bitwise research head Ryan Rasmussen previously told Blockworks that crypto index ETFs are likely to play a significant role in crypto investing.
Financial advisers would be among those attracted to these US offerings as it would allow them to offer clients “broad exposure to the fast-growing crypto sector while removing the difficulty of picking and choosing winners.”
The Hashdex Nasdaq Crypto Index ETF — listed on the Bermuda Stock Exchange and available only to institutional clients — has $508 million assets under management.
Though not ETFs, the Bitwise 10 Crypto Index Fund and the Grayscale Digital Large Cap Fund have asset bases totaling about $890 million and $480 million, respectively.
Diversifying exposures by holding more than one asset in a given segment is generally viewed as a positive, Greco noted.
Greco added: “This approach is often favored by traditional finance investors, who aim to reduce risk.”
A modified version of this article first appeared in Tuesday’s On the Margin newsletter. Subscribe here so you don’t miss tomorrow’s edition.
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