Solana Trust Lands on NYSE: Crypto's Stock Market Leap
Published Date: 2/12/2025
Notice
Summary
NYSE Arca wants to start trading shares of the Grayscale Solana Trust, a fund tied to the cryptocurrency Solana, on their exchange. This change means investors can buy and sell Solana Trust shares more easily starting soon, opening new doors for crypto fans and traders. The SEC is now asking for public feedback before giving the green light.
Analyzed Economic Effects
7 provisions identified: 2 benefits, 4 costs, 1 mixed.
Solana Network Attack and Outage Risks
The filing describes network risks including vulnerability to a 51% attack (if a party gains >50% of staked SOL), concentration of staking (the top three staking pools controlled ~93.5% of staked SOL as of December 31, 2023), and historic outages (e.g., September 14, 2021 outage lasting 17 hours). The filing states similar attacks or outages could materially adversely affect the price of SOL and the value of the Shares.
Grayscale SOL Trust Proposed Listing
NYSE Arca filed to list and trade shares of the Grayscale Solana Trust (SOL) under NYSE Arca Rule 8.201-E; the filing was submitted on January 24, 2025 and replaced by Amendment No. 1 on February 4, 2025. The Trust has about $134.2 million in assets under management, represents approximately 0.1% of all SOL in circulation, and its Shares are held by more than a quarter of a million U.S. investor accounts; if approved, investors would be able to buy and sell the Trust's Shares on a regulated national securities exchange.
Index Price Drives NAV; Provider Has Discretion
The Trust values its SOL and calculates NAV by reference to the Index Price published by CoinDesk Indices, Inc.; the Index Price is calculated on a 24-hour basis from Constituent Trading Platforms (e.g., Coinbase, LMAX Digital, Kraken as of September 30, 2024). The Index Provider may change the methodology or the Constituent Trading Platforms at its discretion and may adjust weighting or intervene in rare events, and the Sponsor may notify shareholders of material changes via Form 8-K.
Redemptions of SOL Are Conditional
The Trust may transfer SOL in exchange for Baskets surrendered for redemption only subject to obtaining regulatory approval from the Commission and approval of the Sponsor. In other words, access to underlying SOL via redemption is not automatic and depends on regulatory and Sponsor approvals.
Regulatory Uncertainty Over SOL’s Legal Status
The filing notes uncertainty about whether particular digital assets are 'securities' and states the Sponsor believes SOL is not a security after reviewing legal tests and external counsel memoranda; the SEC, however, has brought enforcement actions against issuers and trading platforms alleging some digital assets are securities and has brought actions that include SOL. This regulatory uncertainty may affect transactions in SOL and the Trust.
Shares Decline as Fees Are Paid in SOL
The Trust’s Shares reflect accrued but unpaid expenses, so the number of SOL represented by each Share will gradually decrease over time as the Trust’s SOL are used to pay the Sponsor's Fee and other expenses. The Sponsor expects market price of Shares will fluctuate with SOL but each Share’s SOL-equivalent declines as expenses accrue.
Cold Storage and Key-Shard Custody
The Trust’s custodian is Coinbase Custody Trust Company, LLC, which uses offline (cold) key generation and storage ceremonies in Faraday cages, quantum random number generators, encrypted private key 'shards' distributed geographically in secure vaults (including in the U.S.), and multi-factor procedures to sign transactions. These procedures are intended to remove single points of failure and secure the Trust’s SOL held in the Digital Asset Account.
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