Navigating the Bitcoin ETF Approval Through Cypherpunk Eyes

Does the ETF further reinforces Bitcoin as just another asset class, akin to digital gold?

The recent approval of Bitcoin Exchange-Traded Funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) stands as a remarking moment for the crypto industry. However, this landmark decision is not merely a regulatory development; it is a narrative that can unfold against the cypherpunk principles — a subculture that champions decentralization, cryptographic privacy, and a fundamental challenge to a central authority.

Let's delve into the details of the SEC's approval of Bitcoin ETFs, and put it in contrast against the cypherpunk movement. This exploration goes beyond the regulatory nuances, we invited voices from diverse crypto communities to weigh in on the cypherpunk perspective. The goal is to unravel not only the implications of the SEC's decision but also to understand how various segments of the crypto sphere perceive this unfolding chapter in the ongoing saga of decentralized finance. Does this approval mark the first step towards Bitcoin full capture by the mainstream?

The ETF approval

Bitcoin exchange-traded Funds (ETFs) are investment funds available for public trading, offering investors the opportunity to access bitcoin (BTC) exposure without direct ownership of the cryptocurrency. In contrast to cryptocurrencies traded on dedicated crypto exchanges, these ETFs are listed and traded on traditional securities exchanges like the New York Stock Exchange and Nasdaq.

The Bitcoin ETF approval is a landmark for the industry

After ten years of refusal to approve such products, the SEC finally had to yield to a federal appeals court verdict in 2023. On Thursday, ten bitcoin spot ETFs began trading with SEC approval, backed by various names, from well-established firms like Fidelity and BlackRock to digital-focused companies like Grayscale and Ark Invest. Another ETF is still in the process of being launched.

Gensler's Cautious Stance:

In this pivotal moment, characterized as a victory for a sector described by SEC Chairman Gary Gensler as the "Wild West," the recent approval marks a significant win for cryptocurrency firms following an intense legal clash with the regulator. However, analysts caution against expecting a radical shift in the agency's stance on digital assets. Despite this approval, traditional finance remains hesitant to fully embrace it, and ETF issuers emphasize the individual investor's role in determining the suitability of these products for their profiles.

Gary Gensler is the SEC chairman

In a statement accompanying the announcement, Gensler clarifies that the SEC's approval does not embrace a cypherpunk perspective. The decision neither endorses intermediaries nor supports cryptocurrency trading platforms, many of which, he notes, "are not in compliance with federal securities laws and often have conflicts of interest." Importantly, the approval exclusively pertains to bitcoin ETFs, offering no indication of the Commission's inclination to approve launch standards for other crypto-asset-like securities. Furthermore, it communicates no stance on the status of other crypto assets under U.S. securities laws or non-compliance with laws governing crypto firms.

The Community's perspective on the approval

The Cypherpunk movement, birthed in the era of rapid technological advancement, envisions a world where individuals can exercise greater control over their digital interactions. Cypherpunks champion the idea that secure communication and privacy-preserving technologies are not merely tools but fundamental rights in the digital age.

Many different crypto communities share some of the cypherpunk principles, and they surely have an opinion over the Bitcoin ETF approval. Reuben Yap from the FIRO community thinks that the approval of the Bitcoin ETF is great for its adoption as a legitimate global asset by making it easier for regulated entities to invest in it. Even so, he still raises some concerns about it:

"The ETF further reinforces Bitcoin as just another asset class, akin to digital gold, which deviates from its original role of being an alternative decentralized currency that did not require intermediaries. Instead, ETFs necessitate centralized custody and intermediaries, contributing minimally to Bitcoin's original use case. Therefore, the perspective on 'adoption' hinges on how we define it. If adoption pertains to the ability for people to invest in and purchase Bitcoin, then an ETF does facilitate adoption. However, if adoption is viewed as people actively using Bitcoin, then an ETF reinforces the same structures that Bitcoin initially sought to disrupt."

Decred community member Tivra raises thought-provoking questions that prompt us to critically examine the implications of Bitcoin Exchange-Traded Funds (ETFs), first, he reminds us, that owning ETF Bitcoin is not the same as owning Bitcoin. After that, he questioned the influence of big firms over the coin:

"Can BlackRock someday influence Bitcoin? These ETFs could become the main sponsors for BTC development. It's already happening I think Vaneck announced they will sponsor... This could be connected to DCR governance."

The influence of big financial firms over Bitcoin and other cryptos is a great concern for the whole cypherpunk movement. Bitcoin, which was created to decentralize finance could be falling into the hands of traditional finance firms. Tivra sees with good eyes the possible value pump of BTC after the ETF approval, but also sees the possibility of Bitcoin losing influence over cypherpunk individuals:

"It should mean numbers go up, which in some way is good, but it could also mean Bitcoin becomes the establishment-accepted crypto and then the cypherpunk movement moves to others like XMR."
Could Bitcoin be falling into the hands of centralized finance?

Jose Trejo, member of the Digibyte community, doesn't see with good eyes the ETF approval. For him, the ETF is a distortion of Bitcoin values and utility:

"Do I think the Bitcoin ETF is good for crypto? I don’t think it’s good for Bitcoin. Bitcoin was meant to be A Peer-to-Peer Electronic Cash System. The Bitcoin blockchain is one of many networks. It has its capabilities and limitations. I don’t know how the Bitcoin ETF will affect the broader crypto community but it’s not going to stop the innovation from happening in the space. 15 years later and others are still improving upon what Bitcoin started, there’s opportunity.
And if no one else mentions it, I’d like to, read what Commissioner Crenshaw had to say about the recent ETF approvals:
“Wasn't Bitcoin supposed to solve this? If the technology is so revolutionary, why do so many of its uses revolve around recreating the existing financial system”?
-Caroline A. Crenshaw Commissioner of the U.S. Securities and Exchange Commission"

In essence, Jose Trejo's commentary, coupled with Commissioner Crenshaw's critique, underscores the dynamic nature of the cryptocurrency landscape. It prompts reflection on the trajectory of Bitcoin and the broader crypto community, encouraging a thoughtful examination of whether developments like the Bitcoin ETF align with the original ethos of decentralized, peer-to-peer financial systems envisioned by the pioneers of blockchain technology.

Moving Forward

The SEC's approval of Bitcoin Exchange-Traded Funds (ETFs) signals a momentous shift in the crypto industry, as it brings digital assets closer to mainstream finance. However, diverse perspectives within the crypto community highlight the tension between increased adoption and the potential distortion of decentralized ideals. While Reuben Yap, see ETFs as a gateway to wider Bitcoin acceptance, despite the ethos distortion, others, including Jose Trejo and Tivra, express concerns about compromising Bitcoin's original purpose and falling under the influence of traditional finance.

As the crypto landscape evolves, the interplay between mainstream adoption and cypherpunk principles will continue to shape the industry's trajectory, leaving open the question of how decentralization can coexist with institutional acceptance within regulatory boundaries. Do you think this approval was good for the industry? Or Bitcoin was just captured by the traditional financial system? Leave a comment with your opinion!