On Thursday, July 27, investment firm VanEck took a significant step by submitting an application for a spot ETF Solana to the U.S. Securities and Exchange Commission (SEC). This move sparked market speculation regarding the approval timeline, with VanEck’s application highlighting several notable risks.
Unlike Bitcoin and Ethereum, VanEck’s spot Solana ETF is unique as there is no trading of Solana futures in the U.S. Moreover, VanEck’s documentation points out a specific risk associated with the concentrated ownership of SOL tokens. As of November 2023, the top 100 Solana wallets hold almost one-third of all SOL tokens in circulation. This concentration could lead to significant sales or distributions by these holders, potentially adversely affecting the market price.
The decentralization of tokens is crucial for both investors and regulatory bodies. This concentrated ownership may not sit well with the Securities and Exchange Commission, representing a potential obstacle to the approval of VanEck’s Solana ETF.
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Securities and Exchange Commissioner Caroline Crenshaw had previously expressed similar concerns regarding Bitcoin, where 16% of all circulating BTC is held by the top 107 wallets. By comparison, the top 100 Ethereum wallets hold 19% of the asset’s supply.
Despite these concerns, Matthew Sigel, head of digital research at VanEck, downplayed the issue, stating that the Solana blockchain is decentralized by nature.
VanEck also highlighted risks associated with Solana’s unique consensus mechanism – Proof of History (PoH). Although PoH allows Solana to process transactions faster than a blockchain like Ethereum, it has also led to several prolonged network outages. This issue could be a factor that the SEC considers when deciding on the approval of VanEck’s spot Solana ETF.
