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Why Crypto Idealogues Won’t Touch Bitcoin ETFs


The ETFs will have a “mosquito effect,” says Max Keiser, who advises the government of El Salvador on bitcoin policy, “carrying the mind-virus of bitcoin far and wide.”

The attitude of crypto businesses, particularly those that support the ETFs with services, is that an increase in the profile and mainstream acceptance of crypto, in whatever form, will be beneficial to the long-term health of the industry after a long series of reputational setbacks.

“ETFs are just a form of distribution,” says Marshall Beard, chief strategy officer at Gemini, a crypto exchange that stores bitcoin on behalf of ETF issuers. Although investing in bitcoin through an ETF is not functionally identical to storing one’s own bitcoin, he says, the new funds will cater to an underserved demographic, for whom ease of access is the priority. “It’s not necessarily that one model is better than the other. It’s just different,” he says.

A diversification of parties with a stake in the crypto industry need not compromise the objectives of the earlier adopters, says Brett Tejpaul, head of institutional service at Coinbase, another crypto exchange partnering with ETF issuers. “I believe they will coexist in harmony with one another,” he says.

There are potential practical implications of a split in the way people choose to interact with bitcoin, though. One possible quirk, says Samson Mow, CEO of bitcoin-centric technology firm JAN3, could be a divergence in the price of bitcoin held by financial institutions and the bitcoin that changes hands peer-to-peer.

“Americans are probably just going to buy ETF shares and put them in their 401K,” says Mow, because “the average person doesn’t care about financial freedom,” leading to large pools of bitcoin ending up in the custody of institutions. This “institutional bitcoin,” as Mow calls it, could be prevented from exiting a closed-loop system by rules proposed by the Financial Action Task Force, an intergovernmental body of which the US is a member, requiring large institutions in some circumstances to only transact with one another. The “free bitcoin” in circulation may trade at a premium, Mow predicts.

There is some wistfulness among bitcoiners for the loss of the bygone era where almost everyone involved in bitcoin was like-minded—bound by a shared ideological commitment. But it is offset by a conviction that a method for bringing the asset to the masses, even in a bastardized form, was a necessity.

“I’m a little afraid,” says Arthur van Pelt, a bitcoin consultant and cohost of the Dr. Bitcoin podcast, of the prospect that storing one’s own bitcoin becomes a niche practice. Buying into an ETF is just “not the bitcoin ethos,” he says. “But I’m trying to be realistic.”

The ETFs, as a precursor to wider adoption and acceptance, are an inevitable step in the evolution of bitcoin as money, he claims: “It’s the natural order of things.”