Which crypto asset might be the third approved ETF?

A recent vote showed that more than 60% of participants believe that SOL will be the next Crypto Asset to receive ETF approval after Bitcoin and Ethereum.

After the approval of the Ethereum ETF, the market's attention to SOL has indeed significantly increased. Many industry insiders have expressed a positive attitude towards this:

• The head of foreign exchange and digital asset research at a major bank expects that crypto assets ETFs such as SOL may be approved in 2025.
• The founder of a certain capital company stated that they will be ready for the SOL ETF.
• The CEO of an investment company pointed out in a television program that Solana may be the next candidate for a Crypto Assets ETF.

Why is SOL receiving so much attention? The main reason lies in its high market capitalization. From the perspective of market cap ranking, SOL is indeed the most likely to become the next ETF candidate among the top ten or even top five Crypto Assets.

However, the biggest obstacle facing SOL is its regulatory positioning. In June 2023, the U.S. Securities and Exchange Commission (SEC) classified SOL as a security in two lawsuits. Being classified as a security makes ETF approval more challenging, as securities must comply with stricter regulatory requirements.

In simple terms, non-securities crypto assets are more likely to obtain ETF approval, while crypto assets that are considered securities need to meet more conditions. In the short term, the SEC is unlikely to change its classification of SOL, which means that the likelihood of a SOL ETF being approved soon is low.

However, the advancement of the FIT21 Act may pave the way for more Crypto Assets ETFs. The Act was passed in the U.S. House of Representatives in May 2024, and it clarifies the classification of digital currencies and their regulatory bodies:

• Decentralized tokens are regarded as digital commodities, regulated by the Commodity Futures Trading Commission (CFTC)
• Non-decentralized tokens are considered securities and are regulated by the SEC.

The bill also defined decentralization, including conditions such as no single entity can control the entire network, and no one owns more than 20% of the assets or voting rights.

Overall, although SOL is currently regarded as a security, this positioning is not set in stone. With the further progress of the FIT21 bill (which still needs to pass the Senate and be signed by the President), as well as how to specifically define "digital goods" and "securities", SOL still has the potential to become a strong candidate for an approved ETF in the future. This process may take anywhere from one to five years, depending on the progress and implementation of the relevant legislation.