consultation – Earlybirds Invest

The US Securities and Exchange Commission (SEC) extended its review of two high-profile proposals for spot Solana (SOL) exchange-traded funds, signaling further delays in the approval process for crypto-linked investment products.

The agency said it would begin a new round of proceedings to assess whether the ETF proposals from asset managers Bitwise and 21Shares comply with key provisions of the Securities Exchange Act.

Specifically, the SEC cited concerns related to market manipulation and investor protection, factors it is obligated to weigh before granting any ETF listing.

Prolonged wait

Bitwise’s application, filed in January through Cboe’s BZX Exchange, and 21Shares’ separate proposal have now each been delayed at least once.

While both firms have experience offering crypto investment products, 21Shares already manages approved Bitcoin (BTC) and Ethereum (ETH) ETFs. The SEC has yet to authorize any fund tied to Solana, a blockchain often touted as a faster, lower-cost alternative to Ethereum.

The regulator said it is seeking additional public input and analytical time to determine whether the proposed rule changes would meet its standards for preventing fraud and ensuring investor confidence.

The regulator’s cautious tone suggests that Solana, despite its rising prominence, may face a longer path to ETF approval than its predecessors.

Regulatory inertia

The delay comes amid a broader regulatory bottleneck affecting several digital asset ETFs. The regulator has postponed decisions on several crypto ETFs in recent weeks and months. Nonetheless, optimism remains strong in the market.

Bloomberg analysts James Seyffart and Eric Balchunas have previously stated that they expect high chances of approval for most ETF applications, with the final green light anticipated sometime in the latter half of the year.

They estimated a 90% likelihood of eventual approval for both Solana and Litecoin (LTC) ETFs, attributing their optimism to favorable commodity classifications and rising institutional interest.

However, with final decisions potentially months away and broader policy uncertainty lingering, investors may be forced to wait until late 2025 for clarity on whether Solana ETFs will make it to US markets.

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Minimum competency standards

The draft guidelines establish clear criteria for professional qualifications, work experience, and continuous education for staff employed by crypto-asset service providers (CASPs).

Under the proposal, individuals providing investment advice on crypto-assets must meet stricter competency requirements than those offering basic informational services.

ESMA outlined that advisors must hold a tertiary education degree or equivalent, undergo at least 160 hours of professional training, and have at least one year of relevant experience. Those providing general information on crypto-assets would require a professional qualification of at least 80 hours and six months of supervised experience.

All professionals must undergo an assessment exam and complete ongoing training — a minimum of 10 hours annually for information providers and 20 hours for advisors — to ensure their knowledge remains up to date.

The guidelines also emphasize the importance of understanding crypto-specific risks, including market volatility, cybersecurity threats, blockchain governance, and liquidity risks associated with major asset holders.

Additionally, ESMA proposes that firms conduct annual internal reviews to assess staff compliance with these standards.

Regulatory implications

The consultation comes as MiCA’s provisions governing crypto-asset services take effect across the EU, with full implementation expected in 2025. The regulation seeks to establish a harmonized legal framework for digital assets, covering transparency, investor protection, and prudential oversight.

ESMA noted that the growth of the crypto industry warrants higher standards of operation to ensure investors remain protected.

According to the regulator:

“The rapid expansion of crypto markets has increased risks, particularly for retail investors. Ensuring that service providers maintain a baseline level of expertise is crucial for investor protection and market integrity.”

The guidelines closely align with existing MiFID II rules for financial markets but introduce crypto-specific considerations, reflecting the unique nature of blockchain-based assets.

Market participants, including CASPs, investors, financial institutions, and industry associations, are invited to provide feedback on the proposed standards.

ESMA will accept comments until April 22, 2025, and expects to publish the final guidelines in the third quarter of the year.