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Solana ETF attracts $420 million in first week, LSEG data

shows

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First-mover advantage cited as key reason to push forward

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NYSE proceeded with ETF launches despite SEC shutdown

risks

By Suzanne McGee

Nov 11 (Reuters) - Crypto firm Bitwise Asset

Management's successful push to launch the first U.S. spot

Solana ETF while the Securities and Exchange Commission was shut

down has upended the regulatory playbook and forced competitors

to rethink their product plans, said industry executives.

On October 28, Bitwise launched Solana Staking ETF

which tracks the spot price of the sixth largest cryptocurrency,

using an untested process that does not require a formal SEC

sign-off. That gave Bitwise the first-mover advantage in what

analysts see as the next biggest market for single crypto ETFs,

angering competitors who took a more cautious approach and are

now scrambling to catch up, said half a dozen industry sources.

The product has already attracted $420 million in its first

week, LSEG data shows. Such "altcoin" ETFs could attract $14

billion during their first six months, of which $6 billion could

flow into Solana products, JPMorgan has predicted.

"We do like firsts at Bitwise," said Matt Hougan, the firm's

chief investment officer, adding: "We are following the rules."

An SEC spokesperson did not respond to a request for comment

amid the ongoing U.S. government shutdown.

'STAKES ARE HIGH'

Bitwise's maneuver has overturned the playbook for multiple

other issuers waiting to launch altcoin ETFs, said the sources.

Grayscale Investments the next day converted its existing

private fund to an ETF via the same route. Others including

VanEck, Fidelity and Invesco have recently adjusted their

registration statements to follow Bitwise's lead. They and other

firms have also filed to launch ETFs tied to Ripple's XRP,

public filings show.

Multiple other issuers, meanwhile, are evaluating whether

they want to take the same risks, the people said.

Competition to grab investor attention by launching first is

particularly intense when launching products that have few other

differentiating factors, say analysts.

They point to ProShares Bitcoin ETF which won SEC

approval in 2021 only days ahead of rivals. The bitcoin futures

ETF has never relinquished its dominance, with $2.8 billion in

assets compared to only $40 million for its closest rival.

"The stakes are high for anyone who can seize first-mover

advantage," said Ben Slavin, global head of ETFs at BNY, the

custodian for many asset managers. "Even a day's advantage" can

determine who captures millions of dollars of fees, he said.

SHUTDOWN PROBLEMS

In mid-September, the SEC allowed exchanges to adopt generic

listing standards for crypto ETFs, expediting what had been a

lengthy review. That opened the door for dozens of ETFs waiting

in the wings to launch without an official SEC nod.

Many issuers, though, still wanted the customary SEC

blessing and were hesitant to test the new process with the

looming government shutdown threatening to shutter the agency,

sources said.

The day before that happened on October 1, the SEC said

issuers could launch a product while it was shut down provided

they amended their filing to warn investors that it would

automatically become effective after 20 days. Still, it

cautioned to "consider carefully" the risks. These could include

the agency intervening to suspend or pull the product if it

found problems, ETF issuers and lawyers said.

That left the final decision to issuers and exchanges. Cboe

Global Markets ( CBOE ) advised issuers to await the SEC's nod,

according to four of the sources granted anonymity to discuss

regulatory matters. The New York Stock Exchange, meanwhile, was

willing to go ahead.

On October 23, Bitwise said in filings it had shifted its

proposed ETF from CBOE to NYSE and it began trading five days

later. A spokesperson for Bitwise said "it was important to

bring BSOL to the world's largest and most experienced ETP

listing venue for a product this unique."

Using the same process, Canary Capital also that day

launched the first new ETFs tied to spot litecoin and hedera,

two much smaller altcoins, on the Nasdaq Stock Market.

"A very unique constellation of events left us at this point

where some issuers felt comfortable moving forward," said Thomas

Erdosi, head of product at CF Benchmarks, which provides indices

for investors in crypto, including other crypto ETFs.

NYSE declined to comment. Cboe did not respond to requests

for comment. Craig Salm, Grayscale's chief legal officer, said

its engagement with the SEC at the point the firm converted its

fund was "essentially complete."

The staggered altcoin launches are a departure from the

previous blanket approvals the SEC granted bitcoin and ether

ETFs - an approach many issuers expected it to adopt for

altcoins. Some issuers privately complained the Solana process

was unfair and disorderly, although others said Bitwise simply

followed the rules.

"If you don't move, you lose the opportunity to win," said

one.