The Chicago Board Operations Exchange (Cboe) has finally submitted the proposal for setting up a Solana Exchange Traded Fund (ETF).
Cboe has initiated a timeline for the US Securities and Exchange Commission (SEC) to finalize their decisions on the ETF. The Cboe wants a final decision to be taken by next March.
Investments manager VanEck and the digital asset manager 21Shares are the two companies that have applied to set up their products through the Solana ETF. If these proposals are approved by the SEC, Solana ETF will be the largest spot ETF after Bitcoin ETF.
Solana ETF by VanEck and 21Shares
VanEck and 21Shares have formally asked the US Securities and Exchange Commission (SEC) for permission to launch a Solana-based Spot ETF. This proposal is another successful attempt at ETF trading after the success of the Bitcoin ETF.
Solana is currently one of the largest blockchain networks, and a spot ETF based on a fixed price of Solana is the best way to leverage the benefits offered by this ETF. The Cboe is the regulatory body that has filed a request regarding the same to the SEC.
It is expected that the SEC will decide on the proposal within a few weeks, but Cboe has given the deadline as March next year. SEC has almost 240 days to take the decision.
This move is especially important for the cryptocurrency market because even with the announcement itself the price of the SOL tokens has increased by 9.4%.
If this proposal is approved, Solana will become a platform at par with the Bitcoin and Ethereum platforms. It is also a good way to increase institutionalized participation on the cryptocurrency platform.
What are ETFs?
ETFs are dedicated funds that provide pooled security on any exchange and can be traded like any individual stock. It can be used for various specific investment strategies such as income generation, speculation, and price rise, and to hedge the risk in an investor’s portfolio.
Unlike mutual funds, ETF shares are bought and sold many times a day, so its price fluctuates throughout the day.
ETFs Vs. Mutual Fund Vs. Stocks
The key distinctions between stocks, mutual funds, and exchange-traded funds are shown in the table below.
| Sl.No | Exchange Traded Funds | Mutual Funds | Stocks |
| 1 | ETFs are a combination of many securities. | Bonds, securities, and other instruments are included in mutual fund investments. | Stocks are performance-based securities. |
| 2 | ETFs are traded during market hours. | Mutual funds trades are done at the end of the day. | Stocks are also traded during regular market hours. |
| 3 | The securities are not owned by the traders. | Mutual Funds own the securities. | Stock owners are physical owners of the securities. |
| 4 | ETFs are not traded in cash. | Mutual funds can be encashed in money. | Stocks are traded in cash. |
| 5 | ETFs are highly tax efficient. | Mutual fund holders can get tax exemption only if their portfolio has any tax-exempt bonds. | Either the capital gains rate or the regular income tax rate is used to calculate the taxes. |
The Pros and Cons of ETFs
ETFs have many pros and cons.
- ETFs will give investors access to different stocks from different industries.
- ETFs are less expensive compared to other kinds of shares because they have a low broker commission.
- ETFs help you invest in diverse kinds of funds. This will help you tackle any risks that happen to one kind of asset in your portfolio through investments in other asset classes.
- A major con of ETFs is that the platform has higher user fees.
- There is also a chance of liquidity shortage in the case of ETFs which can hamper the smooth functioning of the platform.
The Bottom Line
ETFs are a cost-effective way to gain access to investment in a variety of securities. After the success of the Bitcoin ETF, Solana ETF is all set to take the stage.
Solana, the fifth largest crypto token with a market capitalization of $65,339,841,456, will see a price rise once the ETF is launched.
It is always a good idea to invest in cryptocurrency ETFs but take care to invest only after carefully considering the market trends as cryptocurrencies are ill-famed for price fluctuations.
