No doubt about it BlackRock Bitcoin exchange-traded fund (ETF) spot application. — and the flood of bidders that followed — emboldened the bulls. It could signal winds of change in the regulatory realm, they say. It could bring exposure to Bitcoin to the masses, he screams.
While there may be some truth to these claims, we need to take a step back and look at the bigger picture. We shouldn’t be in a world where the mere possibility of a spot bitcoin ETF happening in the United States sends markets into a frenzy. BlackRock’s Potentially Outsized Impact on Bitcoin (BTC) price trajectory should give everyone in the Bitcoin community pause for thought rather than cause for celebration.
A spot bitcoin ETF would clearly be a simple way for US pension funds to gain exposure to the growth of bitcoin, and it is very possible that an approved US ETF will lead to significant price appreciation in the coming years. But what will it do for the next Bitcoin thing – decentralize finance, empower the unbanked and change the way we interact with money globally? Very little, if anything.
The BlackRock app and the controversy surrounding it certainly served as a reminder of the mistrust that exists between some parts of the crypto community and the mainstream financial world.
The timing of BlackRock’s foray into bitcoin ETFs is particularly interesting and has infuriated conspirators. In light of 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 up the crypto mantle.
Such claims are, of course, baseless speculation. However, they show that the deeper traditional finance entities (TradFi) get involved in the digital asset 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
Here’s how I’ll be positioning myself for the next few weeks… pic.twitter.com/V1Kwvbh8Rc
— Ξ huf (@hufhaus9) June 26, 2023
When you dive further into BlackRock’s details filing, alarm bells start ringing louder. The filing includes a provision that in the event of a hard fork, BlackRock may “use its discretion to determine which network should be considered an appropriate network for the purposes of the Trust.” This could potentially be significant and allow BlackRock to try to weigh in on Bitcoin’s direction – or at least drive institutional allocations and mainstream adoption.
The outsized influence on a decentralized monetary system is obviously a cause for concern in itself, but the broader issue with ETFs is that investors cannot withdraw the underlying bitcoins. The real benefits lie in owning Bitcoin.
Enforcing the Bitcoin Ethos
Let’s not forget that Bitcoin was created as a direct response to the bailouts and quantitative easing that followed the financial crisis of 2008. Unlike traditional currencies, Bitcoin is in limited supply, truly scarce, and operates with decentralized governance.
Fifteen years after the crash, central banks around the world still can’t shake the habit of printing money and using it as a get-out-of-jail-free card. Except it’s anything but free. Ordinary, hard-working individuals around the world are paying the price for their currencies being devalued, which is now compounded by skyrocketing inflation.
While central banks play Russian roulette with public finances, Bitcoin’s ethos is to empower individuals by providing a borderless, censorship-resistant form of money. As an open source monetary network, Bitcoin has the power to change the way we work with money. It could greatly reduce the importance of centralized institutions – perhaps even render them obsolete – which conspirators would say TradFi knows all too well.
Bitcoin ETFs seem to run counter to this ethos of empowerment. El Salvador — with its radical approach to Bitcoin adoption — is arguably more aligned with Bitcoin’s core goals than any ETF ever could be. While El Salvador seeks to empower the unbanked through active promotion of bitcoin ownership, bitcoin ETF investors will be left without any of the benefits of bitcoin while lining the pockets – and entrenching the position – of TradFi institutions.
Ownership over price speculation
Bitcoin spot ETFs are likely to establish a stronger presence in the cryptocurrency ecosystem in the coming years and appeal to a certain class of investors, yet their role should not overshadow the trajectory of Bitcoin’s future. If we focus only on giving people exposure to price movements without actual ownership, then we will completely miss the point of what could be a revolutionary monetary system. And no, if a rule is ever proposed that on-demand retail can only invest through ETFs rather than through direct ownership, that’s not “consumer protection.” It means stripping them of power.
Our industry should maintain a cautious stance and understand that the growing involvement of ETFs and traditional finance in the cryptosphere could pose risks to the fundamental purpose of Bitcoin. Being alert to these risks means not being blinded by the hype, but remaining committed to the original ethos of Bitcoin – a tool to transform the world’s financial systems, not just an asset for speculation.
Ben Caselin is the Vice President and Chief Strategy Officer of MaskEX, a digital asset trading platform based in Dubai, United Arab Emirates. Focused on mass adoption of Bitcoin and digital assets, he is responsible for MaskEX’s global expansion efforts in business development, marketing and communications. Prior to joining MaskEX, he held various leadership positions at AAX. He holds a BA in Cultural Anthropology and Development Sociology from Utrecht University and an MA in Global Migration Studies from UCL.
This article is for general informational purposes and is not intended and should not be construed as legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.