Cboe BZX Proposes Invesco Galaxy Solana ETF
Cboe BZX has taken a significant step towards expanding the regulatory landscape for cryptocurrencies by submitting a proposal to the U.S. Securities and Exchange Commission (SEC) to list the Invesco Galaxy Solana ETF. This endeavor, which aims to integrate the Solana blockchain into the confines of regulated U.S. financial markets, marks a collaboration between Invesco, a leading global asset manager, and Galaxy Digital, a company with a focus on cryptocurrency finance.
ETF Features and Market Integration
This exchange-traded fund (ETF) intends to provide investors with regulated access to Solana’s native token, enabling trading through established securities markets. According to the proposal, the ETF will track the “Lukka Prime Solana Reference Rate,” a benchmark that consolidates Solana prices from major exchanges like Coinbase and Binance, ensuring accurate real-time pricing updates every 15 seconds.
Additionally, the ETF will facilitate both cash and in-kind share creations and redemptions, and it may stake a portion of its SOL assets via trusted providers, a strategy that could yield enhanced returns for investors.
Regulatory Considerations and Risks
The proposal argues that the characteristics of the Solana market support the request without the necessity for a surveillance-sharing agreement with a regulated futures market, simplifying the regulatory path for this product. However, Kadan Stadelmann, the CTO of Komodo Platform, cautions about the inherent risks in proof-of-stake blockchains like Solana. He points out that while such models offer benefits, they also present centralization concerns, as validators acquire their status by posting tokens rather than through computational power.
Stadelmann further highlights the risk of market manipulation due to Solana’s relatively thin trading volume and the concentration of staked SOL among a limited number of validators, potentially raising the specter of collusion.
Future of the Solana ETF Filing
The road ahead for the Solana ETF filing appears complex, as the regulatory environment continues to evolve. The SEC’s recent history of delays and mixed messages regarding cryptocurrency products adds to the uncertainty. For instance, on July 30, the SEC postponed a decision on Invesco Galaxy’s Ethereum ETF proposal, pushing the deadline to September 25 for further evaluation.
Additionally, the agency has stalled decisions on various other crypto initiatives, including pushing back the deadline for the Truth Social Bitcoin ETF to September 18 and Grayscale’s conversion of its Solana Trust to October 10. Recently, the SEC even blocked two staff-approved crypto ETFs from Grayscale and Bitwise, highlighting its cautious stance.
Industry Response
In response to the regulatory landscape, both Cboe BZX and NYSE Arca have put forth separate proposals requesting the SEC to revise its approach to crypto ETF approvals. Their aim is to allow certain cryptocurrency products to be listed without going through the traditional, case-by-case regulatory scrutiny, which would align the treatment of crypto ETFs with that of conventional asset classes.
