U.S.-approved Bitcoin ETFs have been surprisingly popular in recent weeks, based on volume and flow metrics. But Bitcoin ETFs miss Bitcoin’s true utility of facilitating peer-to-peer transactions and bypassing traditional intermediaries.

Unrelated to the inherent merits of crypto assets

Investors in Bitcoin ETFs simply gain exposure to the price of Bitcoin. In no way do I own Bitcoin (BTC).

ETF participants do not benefit from what Bitcoin is inherently about: allowing everyone to experience financial ownership and sovereignty. This ideal was what Bitcoin creator Satoshi Nakamoto was aiming for when he wrote the Bitcoin white paper 15 years ago.

The big problem with Bitcoin ETFs is that they simply replicate the functionality of an outdated financial system built on old technology.

By relying on intermediaries, Bitcoin ETFs reintroduce counterparty risk that has been a part of finance for decades. This includes Lehman Brothers and, more recently, FTX and Silicon Valley Bank. These are just a few examples of traditional players mismanaging their customers’ assets, wiping out billions of dollars in an instant.

Cryptocurrencies are a way out of this flawed and archaic system that currently only 9% of Americans are satisfied with. Bitcoin ETF investors not only face counterparty risk, but are also trapped within the framework of a US-centric financial system.

On the other hand, a core property of cryptoassets is that anyone can access permissionless networks and benefit from an unparalleled level of decentralization. ETFs have borders, but crypto assets are permissionless, and the two are fundamentally at odds.

don’t own the private key

Importantly, investors in Bitcoin ETFs are given the all-important “private key” in the crypto asset: a secret code generated by an algorithm that mathematically proves that a user is the sole owner of a digital token. that you don’t own it.

Owning a private key is the only way people can interact with the crypto world, own Bitcoin, engage in decentralized finance, and leverage decentralized apps with ownership and freedom. Private keys are the gateway to the future of finance and the future of the Internet. That’s something ETFs can never offer.

Not only does it go against the usefulness of crypto assets, it’s also important to remember that Bitcoin ETFs are more expensive than independent safe self-custody options.

Bitcoin ETFs pay fees of 0.2% to 1.5% even though they do not own the underlying asset. Additionally, the need for security is critical for corporate players as well as individuals deploying crypto assets.

Financial intermediaries involved in ETFs, which are responsible for protecting their customers’ assets, must adopt appropriate security and governance frameworks to avoid FTX-like catastrophes.

I agree with Bitcoin ETF

So are Bitcoin ETFs bad for crypto assets? no way. My crypto wallet company, Ledger, is not anti-ETF. While deviating from the crypto asset’s public end goal, the ETF will help Bitcoin in multiple ways.

First, it not only provides new entrants with exposure to Bitcoin, but also has the potential to significantly increase Bitcoin adoption.

In fact, the heavy advertising of Bitcoin ETFs in the US highlights that ETFs are Bitcoin’s most powerful marketing tool to date!

Moreover, as Bitcoin has become accepted into the most sophisticated areas of the financial system, it has become harder for skeptics to dismiss it as a tool for illicit activity.

Second, Bitcoin ETFs will serve as a gateway to the “promised land” of self-custody for crypto assets, just as centralized exchanges have done for years. I believe that there is no difference.

A virtuous cycle could unfold, with millions of people exposed to Bitcoin through ETFs, learning the benefits of digital ownership, and ultimately opting for true self-custody.

Interestingly, after 2004, personal gold ownership was not discouraged, but rather became popular as a result of the approval of the first gold ETF.

The first step towards financial freedom

Bitcoin ETFs are a hoax, but they are very real and should be used as a stepping stone to the promise of true ownership and sovereignty over crypto assets.

Contrary to the beliefs of skeptics, the future of Bitcoin is not simply a speculative asset held in investment products like ETFs to which mainstream investors can gain exposure. Rather, it is a paradigm shift that rewrites the rules of digital ownership and reshapes value exchange. Just as the Internet has changed the way information is exchanged for billions of people.

People are only now beginning to understand the breadth of use cases that the crypto revolution offers. Just as the true potential of the Internet was barely understood in the late 1990s.

A revolution of this magnitude is a marathon, not a sprint. Bitcoin ETFs are just one step on the broader path to financial freedom enabled by crypto assets. The true potential of crypto assets will only be realized when mainstream users have true sovereignty over their assets.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: Cryptocurrency cold wallet produced by Ledger
｜Original text: A Bitcoin ETF Will Never Be Your Bitcoin