Solana stake ETF "SSK" performs well upon launch, innovative structure draws follow

On July 3rd, the first Solana stake ETF in the United States was officially listed on the Chicago Board Options Exchange, triggering a positive market response. The ETF's trading volume on its first day reached $33 million, with $12 million in inflows, exceeding the expectations of many observers.

This ETF not only tracks the market price of Solana (SOL) but also provides investors with native staking rewards for Solana. It is jointly managed by two companies, and the trading volume on the first day has already surpassed that of the earlier launched Solana futures ETF and XRP futures ETF.

Compared to traditional cryptocurrency ETFs, this Solana stake ETF offers an innovative feature - variable staking reward monthly dividends, with the current dividend yield at 7.3%. An ETF analyst commented: "This is a healthy trading start," noting that the trading volume reached $8 million in the first 20 minutes before listing.

Looking back at the recent performance of the SOL futures ETF, the Solana futures ETF that was listed on March 17 had a trading volume of $12.1 million on its first day, which was below market expectations. The two Solana futures ETFs launched on March 20 performed steadily, but the average daily trading volume was small, indicating that market demand has not been effectively boosted.

In contrast, the total trading volume on the first trading day of multiple spot Bitcoin ETFs listed in January 2024 reached as high as $4.6 billion.

The Solana staking ETF aims to meet the needs of various investors, including retail investors seeking exposure to cryptocurrencies, crypto-native investors supporting blockchain innovation, financial advisors looking for compliant blockchain income avenues, and institutions requiring ETF transparency.

It is worth noting that stake rewards are paid to the fund in physical form and increase its net asset value, which may result in taxable income for shareholders. Investors should consult professionals regarding related tax issues.

This ETF adopts the "C-corporation" registration form, which allows it to bypass the traditional ETF approval process and list quickly. It chooses to register under the Investment Company Act of 1940, rather than the Securities Act of 1933. This structure requires the ETF to have a qualified custodian to hold the underlying assets, instead of being held directly by the fund issuer.

However, this structure also faces some challenges, primarily tax issues. Since stake rewards are considered ordinary income, the fund is required to pay corporate income tax internally, and investors also need to bear dividend tax and capital gains tax, resulting in a higher overall tax burden.

Nevertheless, this innovative structure provides a reference for future crypto asset ETFs but may also face more regulatory scrutiny. A crypto independent researcher pointed out that this structure is suitable for altcoins like Solana, while the traditional 19b-4 approval process is more appropriate for mature large assets like Bitcoin.

Some believe that the price of the ETF may not accurately reflect the price fluctuations of SOL. The ETF documents indicate that under normal market conditions, it will invest at least 80% of its net assets in reference assets and other assets that provide exposure to reference assets.

During the application process, the ETF experienced some setbacks. At the end of May, regulators requested to delay the effective date of the registration statement. However, in the end, the regulators stated "no further comments," which was seen as an implicit approval.

Analysts believe that this C-corporation format may have bypassed the typical 19b-4 rule change procedures. The silence from regulators seems to confirm it as a compliant solution.

This ETF lowers the barrier to traditional staking, allowing investors to gain passive exposure to Solana and earn staking rewards through regular brokerage accounts. It provides a roadmap for similar products in the future, even though the staking mechanisms of other cryptocurrencies like Ethereum may be more complex.

Currently, multiple companies are vying for the opportunity to launch a Solana spot ETF. Analysts expect that these funds may receive approval within two to four months. Moreover, there are many other altcoin ETF proposals awaiting regulatory review and potential approval.