There is no doubt that BlackRock’s spot Bitcoin exchange-traded fund (ETF) application — and the flood of contenders that followed — has buoyed the bulls. It could signal the winds of change in the regulatory sphere, they say. It could bring Bitcoin exposure to the masses, they holler.
While there might be some truth in these statements, we need to take a step back and look at the bigger picture. We should not be in a world where the mere possibility of a spot Bitcoin ETF coming to fruition in the United States sends markets into overdrive. BlackRock’s potentially oversized impact on Bitcoin’s (BTC) price trajectory should give everyone in the Bitcoin community pause for thought rather than be a cause of celebration.
A spot Bitcoin ETF would clearly be a simple way for U.S. retirement funds to gain exposure to Bitcoin’s upside, and it’s very possible that an approved ETF in the U.S. would drive significant price appreciation in the years that follow. But what will it do to further Bitcoin’s cause — to decentralize finance, empower the unbanked and revolutionize how we interact with money globally? Very little, if anything.
The TradFi invasion
BlackRock’s application and the discussions around it have certainly served as a reminder of the distrust that exists between some parts of the crypto community and the traditional finance world.
The timing of BlackRock’s foray into Bitcoin ETFs is particularly intriguing and has sent conspiracists wild. Given the Securities and Exchange Commission’s lawsuits against Binance and Coinbase, some believe the agency is disarming crypto-native firms to pave the way for the likes of BlackRock to take over the crypto mantle.
Of course, such claims are unsubstantiated speculation. However, they demonstrate how the more deeply involved traditional finance (TradFi) entities become in the digital assets space, the more we risk Bitcoin becoming just another asset class and losing sight of its intended purpose and true value proposition.
These are the key dates and timeline for the BlackRock Spot Bitcoin ETF
This is how I’m positioning over the coming weeks… pic.twitter.com/V1Kwvbh8Rc
— Ξ huf (@hufhaus9) June 26, 2023
When you delve further into the details of BlackRock’s filing, the alarm bells start ringing louder. The filing makes a provision that in the event of a hard fork, BlackRock can “use its discretion to determine which network should be considered the appropriate network for the Trust’s purposes.” This could potentially be significant, enabling BlackRock to attempt to weigh in on Bitcoin’s direction — or at least steer institutional allocations and mainstream uptake.
Oversized influence on what is intended to be a decentralized monetary system is clearly a cause for concern in and of itself, but the broader issue with ETFs is that investors cannot withdraw the underlying Bitcoin. It’s in the ownership of Bitcoin that the true benefits lie.
Upholding Bitcoin’s ethos
Let’s not forget that Bitcoin was created as a direct response to the bailouts and quantitative easing that followed the 2008 financial crisis. Unlike traditional currencies, Bitcoin has a limited supply, is genuinely scarce and operates with decentralized governance.
Fifteen years on from the crash, central banks around the world can still not break the habit of printing money, using it as a “get out of jail free” card. Except it is nothing but free. Ordinary, hard-working individuals the world over are paying the price as their currencies are debased, which is now exacerbated by soaring nontransitory inflation.
While central banks play Russian roulette with public finances, Bitcoin’s ethos is to empower individuals by providing a censorship-resistant, borderless form of money. As an open-source monetary network, Bitcoin has the power to transform the way we interact with money. It could significantly reduce the importance of centralized institutions — perhaps even render them obsolete — which the conspiracists would say TradFi knows only too well.
Bitcoin ETFs seem at odds with this empowerment ethos. El Salvador — with its radical approach to Bitcoin adoption — is arguably more aligned with Bitcoin’s core aims than any ETF could ever be. While El Salvador seeks to empower the unbanked through actively promoting Bitcoin ownership, Bitcoin ETF investors will be left without any of the benefits of Bitcoin while lining the pockets of — and cementing the status of — TradFi institutions.
Ownership over price speculation
Bitcoin spot ETFs are likely to establish a stronger presence within the cryptocurrency ecosystem in the years to come and appeal to a certain class of investors, yet their role should not overshadow the trajectory of Bitcoin’s future. If we only focus on giving people exposure to price movements without actual ownership, then we will have totally missed the point of what could be a revolutionary monetary system. And no, if a rule is ever proposed that demands retail can only invest via ETFs rather than through direct ownership, this is not “consumer protection.” It spells their disempowerment.
Our industry should maintain a cautious stance, understanding that the increasing involvement of ETFs and traditional finance in the cryptosphere could pose risks to the underlying purpose of Bitcoin. Being alert to these risks means not getting blinded by the hype, but remaining committed to the original ethos of Bitcoin — a tool to transform the world’s financial systems, not merely an asset for speculation.
Ben Caselin is vice president and chief strategy officer at MaskEX, a digital assets trading platform headquartered in Dubai, UAE. Focused on driving the mass adoption of Bitcoin and digital assets, he is responsible for MaskEX’s global expansion efforts across business development, marketing and communications. Prior to joining MaskEX, he held various senior executive roles at AAX. He holds a BSc degree in cultural anthropology and development sociology from Utrecht University and an MSc in global migration studies from UCL.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.