BlackRock’s ETF will not be bitcoin friendly

BlackRock's ETF will not be bitcoin friendly

BlackRock’s claim to a bitcoin exchange-traded fund (ETF) — and the subsequent flood of competitors — no doubt spurred backers even higher. According to them, this could be a sign of change in the regulatory field. This could give the masses exposure to bitcoin, they claim.

If there is any truth to these statements, it is worth stepping back and looking at the bigger picture. We should not live in a world where the possibility of a Bitcoin ETF coming into effect in the United States causes markets to explode. BlackRock’s potentially overwhelming influence on the price trajectory of bitcoin (BTC) should be cause for thought rather than rejoicing for everyone in the bitcoin community.

A spot bitcoin ETF is clearly an easy way for US pension funds to gain exposure to the benefits of bitcoin, and a US-approved ETF can lead to significant price appreciation in the coming years. But what will this do for bitcoin – decentralize finance, empower the unbanked, and revolutionize the way we interact with money globally? Little, if anything at all.

TradFi Invasion

BlackRock’s request and the debates surrounding it were certainly a reminder of the lack of trust that exists between parts of the crypto community and the world of traditional finance.

The timing of BlackRock’s move into Bitcoin ETFs is particularly interesting and has sparked conspiracy theorists. In light of the Securities and Exchange Commission’s lawsuits against Binance and Coinbase, some believe the agency is disarming indigenous cryptocurrency companies to pave the way for companies like BlackRock to pick up the slack.

Of course, these claims are just unfounded speculation. However, they show how the involvement of traditional financial entities in the digital asset space increases the risk that bitcoin will become just another asset class and lose its original purpose and true value proposition.

Here are the key dates and timeline for the BlackRock Spot Bitcoin ETF. This is how I’ll be at my site for the next few weeks…
— Ξ huf (@hufhaus9) June 26, 2023

When one looks at the details of BlackRock’s application, the alarm bells start ringing louder. The request provides that, in the event of a hard fork, BlackRock may “use its discretion to determine which network should be considered the appropriate network for the purposes of the trust”. This provision could be significant, as it would allow BlackRock to try to influence the direction of bitcoin – or at least steer institutional allocations and mainstream adoption.

The far-reaching impact on a decentralized monetary system is obviously a concern in itself, but the wider problem with ETFs is that investors cannot monetize the underlying bitcoins. Owning bitcoin is where the real benefits lie.

Respect the ethics of bitcoin

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 has a limited supply, is extremely rare and works with decentralized governance.

Fifteen years after the crash, central banks around the world still can’t get into the habit of printing money, which they use as a simple get-out-of-jail-free card. Except it’s nothing but free. Ordinary workers around the world are paying the price for the depreciation of their currencies, which is now exacerbated by runaway and unsustainable inflation.

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While central banks play Russian roulette with public finances, bitcoin’s ethos is to empower individuals by providing a limitless, censorship-resistant form of currency. As an open source monetary network, Bitcoin has the power to change the way we interact with money. It could significantly reduce the importance of centralized institutions, or even make them obsolete, which conspiracy theorists TradFi knows all too well.

Bitcoin ETFs don’t seem to contradict this philosophy of empowerment. El Salvador, with its radical approach to bitcoin adoption, is arguably more in tune with bitcoin’s fundamental goals than any ETF will ever be. As El Salvador seeks to empower the non-banks by actively promoting bitcoin ownership, investors in bitcoin ETFs will not enjoy any of the benefits of bitcoin, while lining the pockets of TradFi institutions and cementing his status.

Ownership rather than price speculation

Spot Bitcoin ETF is likely to establish a stronger presence within the cryptocurrency ecosystem in the coming years and attract a certain class of investors, but its role should not overshadow the future trajectory of bitcoin. If we only focus on exposing people to price movements without owning them, we will have completely missed the point of a potentially revolutionary monetary system. And no, if it is proposed to require a rule that individuals can only invest through ETFs rather than direct ownership, that is not “consumer protection”, but disempowerment. Rather, it is a loss of power.

Our industry needs to be cautious and understand that the increased participation of ETFs and traditional finance in the cryptosphere may pose risks to the original purpose of bitcoin. When these risks are taken into account, there is no need to be blinded by the hype, but to remain committed to the original ethos of bitcoin – a tool to change global financial systems, not just an asset for speculation.

Ben Caselin is Vice President and Chief Strategy Officer at MaskEX, a digital asset trading platform headquartered in Dubai, United Arab Emirates. He is responsible for MaskEX’s global expansion efforts in business development, marketing and communications, and is focused on driving the mass adoption of bitcoin and digital assets. 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 was written for general information purposes and should not be considered legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent or reflect the views of Cointelegraph.

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