The announcement of the approval of 11 bitcoin ETFs led to a short-lived spike in prices and unbridled optimism about the potential for other future ETFs and for mass adoption and acceptance of crypto within the financial system.
Money laundering, sanctions, ransomware
Despite this, SEC Chair Gary Gensler’s hardline stance on crypto does not appear to have softened. “Investors should be aware that the underlying asset is a highly speculative, volatile asset, and amongst its use cases is for illicit activity – money laundering, sanctions, ransomware and the like,” Gensler said in a CNBC interview.
Despite Gensler’s adamant stance that bitcoin is used for largely nefarious purposes, his CNBC interviewer gave a statistic that 20,000 dollar units were used for money laundering as opposed to just 33 for bitcoin.
“These are just stepping stones towards tokenization and I really do believe this is where we’re going to be going. If you have a tokenized security and identity, the moment you buy or sell an instrument it is known and on a ledger. This eliminates all corruption.”
Larry Fink, CEO, BlackRock
In a separate interview directly after the SEC approval, when asked how he thought the “begrudging” approval might affect his business, Coinbase CEO Brian Armstrong said: “Many [investors] will graduate from ETFs to actually holding it and using it directly. This will pave a way for other cryptos, and we should have index funds. Maybe a central bank holding bitcoin would be a next milestone.”
Ether ETF
The final decision on a bitcoin ETF has led to speculation that an ethereum ETF could be in the pipeline. The second largest crypto in terms of market cap ($306 billion to bitcoin’s $836 billion as of January 15), ethereum, also known as ether, is viewed by crypto enthusiasts as a strong case due not just to its market cap, but its technological capabilities as a platform for smart contracts.
Bloomberg ETF analyst Eric Balchunas told Cointelegraph he couldn’t see a scenario where spot bitcoin ETFs are approved but spot ether ETFs aren’t. “The ether spot is tied to the hip of bitcoin spot for sure. It’s gonna go wherever it goes. It’s basically like on a 15-foot rope following it,” he said, predicting a 70% chance of approval by the end of May.
The earliest deadline for a spot ethereum ETF decision is in May for VanEck’s ethereum ETF and August for BlackRock. “I see value in having an ethereum ETF,” Larry Fink, BlackRock CEO, told CNBC. “These are just stepping stones towards tokenization and I really do believe this is where we’re going to be going. We have the technology to tokenize today. If you have a tokenized security and identity, the moment you buy or sell an instrument it is known and on a ledger. This eliminates all corruption by having a tokenized system.”
JP Morgan’s Nikolaos Panigirtzoglou was less optimistic, telling The Block he didn’t see more than a 50% chance of the SEC classifying ethereum as a commodity before May, a necessary step for approval. So far, all cryptos besides bitcoin are classed as securities by the SEC.
Conflicting ideologies
In a commentary on the conflict between bitcoin traditionalists and those welcoming ETFs, Blockworks said Bitcoin ETFs have never really mattered, since what’s good for TradFi is not good for bitcoin. The article highlighted the fact that investment in ETFs is very different from asset ownership.
A core tenet for bitcoin maximalists is the primacy of self-custodial or cold wallets. These allow the holder to actually own bitcoin to the extent it’s possible to physically own a digital asset, as opposed to keeping the asset on an exchange or in an online wallet.
“[Shareholders are] storing their value in the trust that BlackRock or whoever else issues the ETF can keep up their end of the deal — buying bitcoin and keeping it secure, lest the fund lose any right to claim that it’s backed by actual crypto,” says Blockworks editor, David Canellis.