President of The ETF Institute, Nate Geraci, says the upcoming election will profoundly impact the future of crypto ETFs. The approval of new spot ETFs for assets such as Solana, XRP, and Litecoin is of particular interest.
A Kamala Harris administration, which many expect will be an extension of the Biden administration’s cautious approach to crypto, might delay progress in this area. Meanwhile, a Trump administration could finally mean a friendlier crypto environment in which ETF innovation accelerates.
Election Outcome Could Shape Future of Solana and Crypto ETFs
The future of crypto ETFs might take shape after this election, believes Nate Geraci, President of The ETF Institute. In particular, the eventual approval of new spot ETFs for assets like Solana, XRP, and Litecoin is expected.
A Kamala Harris-led administration continuance from the Biden Administration that was being cautious might make things go slow. A Trump administration would create a more congenial atmosphere where innovation and approvals of ETFs would possibly hasten.
The election outcome could have implications for the ETF industry…
3 key areas I’m watching:
1) Crypto ETFs
2) ETF Share Class Structure
3) ETF Taxation
My latest via @etfcom… https://t.co/h0gGa77KYG
— Nate Geraci (@NateGeraci) November 5, 2024
Nate Geraci said that successful spot Bitcoin and Ether ETFs have inspired a push for new crypto products. This includes potential spot ETFs for Solana, XRP, and Litecoin. Grayscale now wants to convert its Digital Large Cap Fund into an ETF.
Besides Bitcoin and Ether, the fund contains tokens from Solana, XRP, and Avalanche. Conversely, a Kamala Harris presidency would likely continue the same cautiousness toward crypto as the Biden administration. While there was a clear path that Bitcoin and Ether ETFs took about approval by the SEC, including futures-based products, there is no such framework for other crypto assets, and thus, a path forward is not well understood.
Trump, on his part, has indicated that his administration will be much friendlier toward crypto.
30+ Fund Firms, Including BlackRock, Seek SEC Approval for ETF Share Classes
Over 30 fund firms, including BlackRock, Fidelity, T. Rowe Price, and John Hancock, have filed for exemptive relief from the SEC. They intended to add an ETF share class in their existing mutual funds. This way, these firms could keep their lucrative 401(k) mutual fund channels intact while entering the growing ETF market.
Also, just recently, Canary Capital, a crypto-focused investment firm founded by former Valkyrie Funds co-founder Steven McClurg, filed for a Solana ETF with the U.S. Securities and Exchange Commission (SEC).
According to industry participants, this model is more likely to get approved by a Republican-led SEC, while significant growth in ETFs could come in 2025 if the election goes this way. This could catalyze record fund launches and inflows as large asset managers race to combine ETFs and mutual funds.
Nate Geraci, said the US debt crisis, now at $36 trillion, has legislators looking everywhere for new sources of tax revenue—and ETFs could be next on the list. With him would agree an analyst Ran Neuner who recently shared disturbing trend in the United States – addiction to debt. Neuner said that with the country heading towards one of the most significant elections, Neuner noted that this addiction to spending would have no impact resulting from the election.
In the past, Senate Finance Committee Chair Ron Wyden drafted legislation to eliminate the in-kind redemption tax-deferral feature of the ETF.
This critical component makes ETFs so tax-efficient. Although this legislation did not move forward, Geraci noted that it showed how ETF taxation is still in some politicians’ minds. This is particularly referred to asset managers looking to create ETF share classes to give mutual funds tax benefits. Come election results, the shift in the landscape of tax policies can go any which way. The ETF industry is preparing itself for any changes in rules that may alter how its tax benefits are structured.
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