Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Unlocking Solana: 3iQ and VanEck Apply for Solana ETP/ETFs
Crypto | Jun 27, 2024
Image: Solana price action on Jun 27, 2024 (Coingecko)
In Focus: Solana ETPs in the Spotlight
Solana, a high-speed blockchain platform noted for its low transaction costs and scalability, making it an appealing platform for both developers and users. The network's TVL has increased by more than 160% in recent months, reaching about $860 million, but it remains lower than its peak of $10 billion in November 2021. The latest developments involve 3iQ in Canada and VanEck in the United States, who have applied for approval of Solana-focused Exchange-Traded Products (ETP) and Exchange-Traded Funds (ETF), respectively, aim to broaden the use and adoption of Solana (SOL) among mainstream investors.
See: SEC Approves 19b-4 Forms of First Batch Ethereum ETFs
The introduction of Solana ETP/ETFs comes at a time when the U.S. Securities and Exchange Commission (SEC) has shown increasing openness towards cryptocurrency ETFs. Recent approvals for Bitcoin and Ethereum spot ETFs have set a precedent that could pave the way for other cryptocurrencies, including Solana, to receive similar approvals. Major asset managers like BlackRock and others have already signalled interest in applying for a Solana ETF with BlackRock reportedly submitting their application next month in July.
3iQ's Solana Fund ETP
On June 20, 2024, 3iQ, a Canadian digital asset investment fund manager, announced the introduction of North America's first Solana Exchange-Traded Product (ETP). The Solana Fund (QSOL) has filed a preliminary prospectus with the securities regulatory authorities in all Canadian provinces and territories (except Quebec). The Fund's goal is to give unitholders exposure to the digital currency SOL while also providing the prospect for long-term wealth appreciation via staking. The Fund's Class A units are expected to be listed on the TSX under the symbol "QSOL".
- Type: Exchange-Traded Product (ETP)
- Location: Filed for approval in Canada
- Details: The Solana Fund (QSOL) by 3iQ aims to provide exposure to Solana and its price movements. The Fund plans to list its Class A units on the Toronto Stock Exchange (TSX) under the ticker "QSOL".
- Objective: In addition to providing exposure to Solana's price movements, 3iQ's ETP also seeks to stake the SOL held in its portfolio to earn rewards, which will be reinvested into the Fund
VanEck's Solana ETF
VanEck, a well-known investment management firm in the United States, has been a leader in advocating for Solana ETFs. In 2021, VanEck listed a Solana exchange-traded note (ETN) on the German stock exchange Deutsche Börse, expressing its belief in the company's long-term potential. Building on this, today June 27, 2024, VanEck has filed for a Solana Spot ETF in the United States.
See: Dapper Labs Settles NFT Lawsuit, Signs of Regulation?
If approved, the proposed ETF will be traded on the Cboe BZX Exchange. It aims to replicate Solana's performance by directly backing it with SOL tokens. Analysts at VanEck estimate that Solana will become a top-three blockchain in terms of market capitalization, total value locked (TVL), and active users over the next two years.
- Type: Exchange-Traded Fund (ETF)
- Location: Filed for approval in the United States
- Details: The VanEck Solana ETF seeks to reflect the price performance of Solana by holding SOL tokens. If approved, it will be listed on the Cboe BZX Exchange.
- Objective: To provide direct exposure to the performance of Solana's price movements without generating income from staking
What's the Difference between an ETP and ETF?
Exchange-Traded Products (ETPs)
- Broad Category: Includes a variety of pooled investments traded on exchanges.
- Types: Encompasses Exchange-Traded Funds (ETFs), Exchange-Traded Notes (ETNs), and Exchange-Traded Commodities (ETCs).
- Structure: Can include debt securities (ETNs) or commodity-backed securities (ETCs). ETNs/ETCs can carry credit risk and may have unique fee structures.
See: BlackRock Launches New Fund on Ethereum, Bullish on Tokenization
Exchange-Traded Funds (ETFs)
- Subset of ETPs: Specifically tracks indexes or commodities.
- Structure: Holds a basket of assets like stocks or bonds.
- Trading: Offers intraday trading with continuous pricing. Typically has lower fees, direct asset ownership, and high liquidity.
Outlook
With VanEck's Solana ETF in the United States and 3iQ's Solana ETP in Canada, investors will have easier access to Solana, a blockchain noted for its fast speed and cheap transaction costs. As regulators such as the SEC become more open to crypto ETFs, the approval of these products may create a precedent for future crypto investments, potentially strengthening Solana's market position and adoption.
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