REX Financial, an ETF provider, and Osprey Funds, an asset manager, recently made revisions to their fund registrations. 

Key Takeaways:

• The SEC has raised concerns with the planned structure of the Solana and Ether ETFs. 
• The agency identified the C-corp structure as incompatible with ETF requirements. 
• Final decisions on staking ETFs are likely to be delayed until October. 

The Securities and Exchange Commission (SEC) of the United States has expressed concern about the structure of prospective Solana (SOL) and Ether (ETH) staked exchange-traded funds (ETFs), claiming that the products may not meet current ETF requirements.

REX Financial, an ETF provider, and Osprey Funds, an asset manager, recently made revisions to their fund registrations. However, according to Bloomberg, the SEC noted the use of a corporate form, an unusual choice for ETFs, as incompatible with Rule 6C-11, also known as the “ETF rule,” which establishes allowed fund structures. 

SEC Flags Compliance Issues in Proposed ETF Structures

According to a letter dated May 30, the SEC staff continues to have unanswered issues regarding whether the proposed funds, if organised and operated as intended, fulfil the definition of an “investment company” under the Investment Company Act. The letter also stated that representations regarding the funds’ investment company status “may be potentially misleading.”

Despite the regulatory opposition, analysts remain optimistic. “REX lawyers say they can work it out,” Bloomberg ETF analyst Eric Balchunas said in a May 31 piece on X.

“Issuers are pushing the envelope hard to get first to market.”

Market participants are eagerly following the success of cryptocurrency and staking-based ETFs, seeing them as a potential entry point for new institutional capital into the crypto sector.

The SEC’s warning comes after it explained earlier this year that cryptocurrency staking does not constitute a securities transaction. However, the agency has delayed decisions on some staking and altcoin ETF applications.

BlackRock’s Bitcoin ETF Sees Record $430M Outflows

As previously reported, BlackRock’s iShares Bitcoin Trust (IBIT) had $430.8 million in outflows on May 30, capping a 31-day inflow streak, the longest since its inception.

According to Farside data, the move is IBIT’s largest single-day outflow to date, following BlackRock’s addition of $6.2 billion in Bitcoin in the previous month.

Despite the drop, IBIT’s total Bitcoin holdings are currently at $70 billion.

The outflows were part of a larger trend in U.S. spot Bitcoin ETFs, which experienced $616.1 million in net redemptions on May 30, the second day of outflows. The prior day saw $346.8 million withdrawn. Notably, BlackRock was the only issuer to report inflows on May 29, while others had redemptions. 

Crypto-asset investments are high-risk; you may lose your capital