Canada’s 3iQ Under Fire For Misleading Solana ETF Claims, What’s Happening?

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As a crypto investor with a few years of experience under my belt, I have learned to be cautious and diligent when it comes to investing in new digital asset funds. With that being said, I am concerned about the recent marketing efforts surrounding 3iQ’s Solana Fund (QSOL).

3iQ Digital Asset Management has been drawing attention for its marketing of The Solana Fund (QSOL) as the first Solana exchange-traded product (ETP) in North America. Despite this label, some critics contend that the fund’s promotional tactics are misleading and that the Solana fund is not an exchange-traded fund (ETF) or ETP in actuality. The Solana fund, which has submitted a preliminary prospectus for an initial public offering of Class A and Class F units, intends to list on the Toronto Stock Exchange (TSX) under the ticker “QSOL.”

3iQ’s Solana Fund Is Actually Not An ETF

3iQ, a prominent digital asset investment firm, introduces the Solana Fund as an innovative investment option for investors seeking access to Solana (SOL). Based on a recent press announcement, the fund’s primary goal is to grant unitholders the opportunity to track Solana’s price fluctuations. Additionally, it provides possibilities for capital growth over the long term and allows participants to earn staking rewards from the network.

As a crypto investor, I’d rephrase it like this: To strengthen our staking capabilities, my investment fund, 3iQ, intends to leverage Coinbase Custody’s robust institutional-grade staking infrastructure. Our objective is to become the first Solana Exchange-Traded Product (ETP) listed in North America. However, Eric Balchunas, a senior ETF analyst at Bloomberg, has expressed some doubts about this goal.

Balchunas highlights that for a fund to be classified as a true Exchange-Traded Fund (ETF) or Exchange-Traded Product (ETP), it must have a “daily creation and redemption mechanism” in place. He contends that 3iQ’s strategy represents an effort to “capitalize on the widespread appeal and trust associated with ETFs and ETPs,” without fully complying with the essential structural requirements that distinguish these investment vehicles.

Is It A CEF To ETF Game?

As a researcher, I’ve come across Balchunas’ skepticism towards the recent launch of the 3iQ Cryptocurrency Solutions ETF (SOLAN) in Canada, which is shared by James Seyffart, another Bloomberg Market Analysis colleague. While it’s true that 3iQ and other Canadian issuers like Ninepoint have a history of introducing funds as closed-end funds (CEFs), with the intention to convert them into exchange-traded funds (ETFs) at a later stage, Seyffart raises an important concern. The current promotional material surrounding the Solana fund does not make this conversion intent explicitly clear to potential investors.

Furthermore, Seyffart points out that the strategy used by 3iQ for their Solana fund may be deceiving to some extent. Thus, it would be beneficial for 3iQ to provide clearer explanations about the fund’s current standing and future plans in their communications. Balchunas acknowledges the challenges of marketing but believes that 3iQ’s approach is overly manipulative. He also recommends that companies should only label their products as Exchange-Traded Products (ETPs) once they have met all necessary qualifications.

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2024-06-21 13:40