Original Article Title: "First SOL Staking ETF Launched in the U.S.! Institutional Compliance Era Begins"

Original Article Author: KarenZ, Foresight News

This week, REX Shares officially confirmed the launch of the Solana Staking ETF 'REX-Osprey SOL+Staking ETF' on Wednesday (July 2nd), marking the first staking-based cryptocurrency ETF in the United States. The launch of this ETF signifies further integration of cryptocurrency and traditional finance, introducing staking to the ETF investment space and providing investors with a dual value proposition of 'asset price exposure + staking rewards'.

Shortly after the announcement last night, SOL's price surged over 6% to nearly $160, before retracting to around $153. JTO saw a brief spike of over 8%, nearing $2.5 at one point. Although SOL and JTO have mostly retraced their gains, it highlights the market's high interest in this product.

By Whom Was It Launched? What Service Providers Are Involved?

The 'REX-Osprey SOL+Staking ETF' has the ticker symbol SSK and is co-launched by REX Shares and Osprey Funds. REX Shares is an innovative ETP provider specializing in alternative strategy ETFs and ETNs, known for its MicroSector and T-REX product lines, offering traders leverage and inverse tools, and recently introducing a range of option-based income strategies.

Osprey Funds was established as the cryptocurrency arm of REX Shares in 2019 and spun off as a separate entity in 2021. The team has launched over 100 exchange-traded products and has been investing in Bitcoin since 2013. The fund may indirectly hold all or part of Solana shares through an investment in the subsidiary REX-Osprey (TM) SOL + Staking (Cayman) Portfolio SP, domiciled in the Cayman Islands. The fund wholly owns and controls this subsidiary and will consolidate its investments with the subsidiary.

In addition to the issuer, the ETF fund's service providers include:

· Fund Investment Advisor: REX Advisers, LLC. Matthew Pelletier serves as the portfolio manager of this fund, responsible for its day-to-day investment management. REX Advisers has held fixed income sales and trading positions at BNP Paribas, Western Asset Management, and Susquehanna International Group.

· Commonwealth Fund Services, Inc. serves as the fund manager, overseeing the fund's operations.

· U.S. Bank provides certain financial management services (excluding services provided by the manager) and fund accounting services.

· U.S. Bank National Association serves as the ETF custodian of the fund, responsible for custody and holding of the fund's cash and ETF-issued securities and other non-Solana asset securities, settling the fund's non-Solana asset transactions, and collecting investment income on the fund.

· Anchorage Digital Bank National Association serves as the fund's cryptocurrency custodian, responsible for safeguarding the fund's cash, Solana holdings, and LST, settling the fund's Solana asset and LST transactions, and collecting staking rewards.

· Foreside Fund Services LLC is responsible for distribution, acting as agent to distribute creation units of the fund.

Fund Strategy Details: From Asset Allocation to Staking Strategy

The ETF's primary investment strategy is as follows:

· Core Investment Objective: The fund aims to provide investors with exposure to Solana assets and an additional source of income by tracking Solana's price performance and generating yield through on-chain staking.

· Asset Allocation: According to filings with the U.S. Securities and Exchange Commission (SEC), the fund will, under normal market conditions, invest at least 80% of its net assets in Solana or assets that provide Solana exposure. The fund may also invest in other ETF shares, including non-U.S. cryptocurrency ETFs that offer similar exposure to Solana.

· Staking Strategy: The fund will seek to stake at least 50% of the Solana it holds, to generate income and realize capital appreciation. Specifically, the fund will instruct the Solana custodian to delegate a portion of the SOL held by the fund (as determined by the advisor) to one or more validators. Rewards will be paid in Solana and subject to lock-up period restrictions.

· Fund Share Trading: The fund is only open to specific institutional investors (such as market makers, brokers) for issuing or redeeming shares in large units (Creation Units, with each unit consisting of at least 25,000 shares). Individual shares can only be traded through a broker-dealer on a national securities exchange.

Tax Rules: Taxed as a Regular C Corporation

According to documents filed with the SEC, unlike most ETFs, due to the limited number of holdings in the fund, it will not be subject to U.S. federal income tax as a regulated investment company; instead, it will be taxed as a regular C corporation. It is worth emphasizing that C corporations are subject to double taxation, where corporate profits are first taxed at the corporate tax rate, and then dividends received by shareholders from the corporation are taxed again at the individual income tax rate.

1. At the Fund Level

· Capital Gains Tax: When the fund sells or otherwise disposes of these securities, the internally accumulated securities gains will be taxed at the fund level, and the gains will be subject to tax at the corporate tax rate (federal + state tax).

· Excise Tax: If the total value of redemptions by the fund during a tax year exceeds 100 million U.S. dollars of the total market value of units issued, an excise tax (1% on the excess amount) must be paid.

· Accumulated Earnings Tax: If the fund fails to distribute sufficient profits to shareholders, an additional 20% tax may be levied (on retained earnings).

2. At the Investor/Shareholder Level

1. Tax Treatment of Dividend Income

· Dividend Tax: If the dividend is from the fund's current or accumulated earnings, it is taxed at the dividend tax rate.

· Corporate Investors: Eligible entities may benefit from a dividend deduction.

· Individual Investors: Long-term capital gains tax rates (lower than ordinary income tax rates) may apply when holding period requirements are met.

2. Taxation of Share Sales or Creation Units Redemption

· Capital Gains Tax

Holding period over 1 year: Long-term capital gains (taxed at a lower rate).

Holding ≤ 1 year: Short-term capital gains (taxed at ordinary income rates).

Fee Structure

According to the registration document, the portion of fees mentioned is as follows:

· Advisor Fee: The fund advisor REX Advisers, LLC is entitled to a 0.75% annual management fee. This fee is calculated daily as a percentage of the Fund's average daily net assets and is paid monthly.

· Fund Management Fee: The fee for the fund manager Commonwealth Fund Services, Inc. is calculated based on the Fund's daily net assets, accrued daily, and paid monthly. The specific fee percentage is not mentioned.

· Financial Management and Fund Accounting Fee: Paid to U.S. Bank based on the Fund's total net assets at an annualized rate. The specific fee percentage is not mentioned.

What's the Impact?

The regulatory approval of the Solana Staking ETF signals a shift in the regulatory stance on the crypto staking economy from "cautious observation" to "limited acceptance." This breakthrough sends two major signals to the market:

· Emergence of a Regulatory Framework: The SEC's approval of the staking product signifies that the path of integration between crypto assets and traditional financial instruments has been established, potentially expediting the approval process for similar products (e.g., Ethereum Staking ETF).

· Boost in Market Confidence: Institutional investors show significantly higher acceptance of regulated products compared to custody-free crypto assets, and the launch of this ETF may attract long-term funds such as pension funds and mutual funds.

Additionally, the launch of this ETF will further strengthen the fundamental aspects of the Solana ecosystem:

· Structural Increase in SOL Demand: At least 80% of the fund's assets are directly allocated to SOL, which could bring substantial buying pressure.

· Over 50% of holdings entering on-chain staking will increase the staking rate, raising SOL's "opportunity cost of holding."

· The combination of staking mechanism and ETF signifies TradFi's acceptance of the cryptocurrency economic model, potentially driving more mainstream funds into the Solana staking market through compliant channels. At the same time, this will be favorable for Solana's staking protocol in the ecosystem.

· The increase in staking rate will further solidify Solana's decentralized foundation.

Of course, the "REX-Osprey SOL+Staking ETF" document also highlights risks such as SOL investment risk, SOL regulatory risk, industry-wide digital asset risks, staking risks, liquidity risk, concentration risk, network security risk, and custodial risk.

Of note, the ETF sponsor Commonwealth Fund Services, in the filing submitted to the U.S. SEC, simultaneously applied for the REX-OSPREY ETH + STAKING ETF. The registration document outlines a similar investment strategy to both an Ethereum staking ETF and a Solana staking ETF. The market expects that the launch of the Solana staking ETF may pave the way for an Ethereum staking ETF.

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