Will the third cryptocurrency through an ETF be SOL?

Author: Jian Shu

Last Friday, a poll was initiated asking, "After $BTC and $ETH, which token do you think will be the next to hype an ETF?" The result showed that 63.6% of people chose SOL.
After the ETH ETF approval, there is indeed a high demand for SOL in the market ⤵️
🔸 Geoffrey Kendrick, Head of FX and Digital Assets Research at Standard Chartered Bank: Cryptocurrencies like SOL and XRP may see ETF approvals by 2025.
🔸 Anthony Scaramucci, Founder and Managing Partner of SkyBridge Capital: We are preparing for a SOL ETF.
🔸 BKCM CEO Brian Kelly stated on CNBC: Solana could be the next cryptocurrency ETF.

Why do so many people choose SOL?

It is obvious that it has "consensus support."
The manifestation of consensus, simply put, is market capitalization. Analyzing from this dimension, if we look at coingecko's Top 10 or Top 5, SOL indeed has the highest potential.

What is the biggest problem with SOL?

On June 5, 2023, the SEC classified SOL as a security in the Binance case.
On June 6, 2023, the SEC classified SOL as a security in the Coinbase case.
Why is it difficult for a security to pass an ETF? What is the relationship between the two?
In the U.S., securities are regulated by the SEC and must comply with a series of regulations, including SEC registration and disclosure requirements, and may face trading restrictions, etc. The whole process is quite strict.
For example: SEC = supermarket 🏪, cryptocurrency = fruit 🍎, ETF = fruit basket 🧺
🔸 If considered a non-security, it is like labeling the fruit as "regular fruit," making it easy to put into the fruit basket.
🔸 If considered a security, it is like labeling the fruit as "special fruit," which then needs to meet more rules and requirements from the supermarket, making it difficult to be placed in the fruit basket.
A year ago, the SEC classified SOL as a security, and it is impossible for them to immediately turn around and say SOL is not a security (they also care about their reputation), so a SOL ETF is unlikely in the short term.
Additionally, in the aforementioned two cases, other tokens classified as securities include BNB, BUSD, ADA, MATIC, ATOM, FLOW, ICP, and 18 other tokens. Similarly, these tokens are also unlikely to pass an ETF in the short term.

There is also good news ------ FIT21 Act

On May 22, 2024, the FIT21 Act passed in the U.S. House of Representatives with a vote of 279 to 136. This has profound significance for the industry, comparable to the approval of the ETH ETF (although the market attention is generally lower).
Key points of the FIT21 Act for us 👇
🔸 Clearly defines two types of digital currencies and their regulatory bodies.
Decentralized tokens = digital commodities, regulated by the CFTC.
Non-decentralized tokens = securities, regulated by the SEC.
🔸 Definition of decentralization:
No one can control the entire blockchain network alone.
No one owns more than 20% of the digital assets or voting rights.
FIT21 improves the entire regulatory framework for digital currencies and expands the freedom of the industry. Especially the two points mentioned above suggest a pathway for more ETFs.
To learn more about the FIT21 Act, you can read the article from a16z:
https://a16zcrypto.com/posts/article/fit21-why-it-matters-what-to-do/

Conclusion

Americans are known for their fickleness; a token currently labeled as a security does not mean it will always be defined as one.
Returning to the initial topic, who will be the third cryptocurrency to pass an ETF? I believe SOL is one of the most likely candidates. Whether it will happen in the next year or in three to five years depends on the progress of the FIT21 Act (the process for a bill to become law: House of Representatives ✓ ------ Senate ------ Presidential signature) and how the definitions of "digital commodity" and "security" are specifically implemented during this process.
*The above is just my personal opinion and not investment advice, DYOR.