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Canada’s 3iQ Faces Backlash for Misleading Solana ETF Claims

3iQ faces backlash over misleading claims about its Solana ETF.

Mon, 24 Jun 2024, 04:17 am UTC

Canada’s 3iQ Digital Asset Management is under scrutiny for marketing its Solana fund as an ETF. Critics argue the fund doesn't meet ETF criteria, sparking a contentious debate within the financial community.

3iQ's Marketing of Solana Fund as ETF Sparks Controversy in the Financial Community

In a recent report by CoinGape, 3iQ Digital Asset Management has recently found itself amid a heated debate over its marketing of The Solana Fund (QSOL) as the first Solana exchange-traded product (ETP) in North America.

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." However, critics argue that 3iQ's promotional strategies are misleading, and the Solana fund is not an ETF or ETP, sparking a contentious discussion in the financial community.

3iQ, a prominent digital asset investment manager, has introduced the Solana fund as a groundbreaking investment vehicle that offers exposure to Solana (SOL). As stated in a press release, the fund's objective is to provide unitholders with exposure to Solana's price fluctuations. In addition, it intends to provide opportunities for long-term capital appreciation and staking yields generated by the network.

Therefore, 3iQ will employ Coinbase Custody's institutional staking infrastructure to facilitate its staking activities. The fund's official statements emphasize its aspiration to become the first Solana ETP listed in North America. Nevertheless, Eric Balchunas, a senior ETF analyst at Bloomberg, has expressed apprehension regarding this assertion.

Balchunas underlines the potential implications for investors, stating that a fund cannot be classified as a genuine ETF or ETP unless it has a "daily creation/redemption process." He argues that 3iQ's strategy attempts to "leverage the popularity and goodwill of ETFs" without adhering to the rigorous structural criteria that define these investment products, potentially putting investors at risk.

Analysts Criticize 3iQ for Misleading Marketing of Solana Fund, Urge Clearer Communication

James Seyffart, another Bloomberg analyst, shares Balchunas' skepticism. In the past, 3iQ and other Canadian issuers, such as Ninepoint, have launched funds as closed-end funds (CEFs) to convert them to exchange-traded funds (ETFs) at a later time. He acknowledged this. Nevertheless, he also emphasized that the present marketing strategy for the Solana fund needs to state this explicitly.

Seyffart points out that the strategy seems "a little misleading." This suggests that 3iQ could better communicate the Solana fund's actual status and future intentions. Conversely, Balchunas acknowledges the marketing pressures but maintains that 3iQ's strategy needs to be more sophisticated. He further advises that organizations should refrain from designating a product as an ETP until it is indeed eligible for the designation, shedding light on 3iQ's role in the controversy.

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