Bitcoin ETFs are ‘moving away from crypto’ — Blockchain execs

Billions of dollars poured into US-based bitcoin (BTC) exchange-traded funds (ETFs) in the first week of trading. But despite their popularity, some crypto executives say these tools violate what crypto is built on.

The U.S. Securities and Exchange Commission first approved a multi-position Bitcoin ETF on January 10, and they began trading on January 11. Business activity shows that there was a huge demand for these products, which faced 10 billion dollars. Trading volume in the first seven days. Additionally, the Bitcoin ETF market saw a net capitalization of over $782 million in the first two days of trading.

But despite the proven popularity of these financial instruments, some executives in crypto companies are cautioning that ETFs may bring about greater centralization in the crypto industry and will not be needed in the future anyway.

Cointelegraph spoke to Andy Bromberg, CEO of wallet developer Eco, about the possibility of giving traditional financial institutions too much influence over the market. “When you actually buy one of these Bitcoin ETFs, you're giving Wall Street money to buy Bitcoin; [and] They own the bitcoin, and you have a piece of paper that says you have a stake in it,” Bromberg said. This, he says, is “moving away from the ideals” on which Bitcoin was founded.

“There's a world where everybody going into the industry is thinking and thinking, if this technology is not what it's going to do, but if it's value, they're going to buy into these Bitcoin ETFs. And one day these Wall Street institutions will own 70% of Bitcoin circulation […] I'm not sure that's what we were trying to build.

Bromberg called Bitcoin a “wonderful thing,” but ETFs said “Bitcoin has all the wonderful things taken away, leaving the value behind.”

Despite this criticism, Bromberg said he was happy that EFS was approved. Echoing SEC Commissioner Hester Pearce, he said the ruling would give Americans “the right to express their views on Bitcoin in the financial markets.” However, he argued that the crypto community is facing a critical challenge after the ETF approvals.

If crypto users can't help new investors “take a step” and keep their own money, “we'll end up with Wall Street-owned financial assets like everyone else and everything else.” in vain”

When asked about the solution to the problem, Bromberg said that developers “need to build products that make it easy to invest in Bitcoin ETFs, but also allow people to hold their own assets and fulfill the promise of crypto.”

Related: Echo's ‘Beam Wallet' Allows Users to Receive Crypto Using Twitter Login

Lukas Henning, chief technology officer of Suku's wallet development team, also criticized Bitcoin ETFs. For his part, Henning said that ETFs are inevitably able to attract the public's attention because most cryptocurrencies and protocols outside of Bitcoin don't easily get SEC approval to enter into an ETF. Henning said:

“As soon as something is built, like the Bitcoin ETF just built, people ask, ‘What's next?' They ask the question. And now it could be the next Ethereum ETF. If that's done, people will naturally ask, ‘Can we get Ethereum DeFi protocols?' They ask the question, ‘Can we get those sweet dividends and interest rates and everything possible?' And the answer is ‘no.'

Henning stressed that the SEC approved Bitcoin ETFs after a long legal battle, and even then, the regulator was quick to reassure investors that other cryptocurrencies don't necessarily get the same treatment. Per Henning, this means that much of the product in the crypto space is not available through traditional brokerage accounts.

In addition, Henning argued that self-maintenance of crypto assets will soon be easier than ever, especially in the Ethereum ecosystem, and this will further reduce the need for ETFs.

SECP256r1 referenced Ethereum Improvement Proposal (EIP) 7212, which allows for on-chain signatures using Elliptic Curve (also known as “R1”) cryptography. According to Henning, while most facial recognition software uses R1 cryptography, Ethereum and most other blockchains use “K1” instead. As a result, there is currently no way to sign Ethereum transactions using a facial scan or other biometric data.

But once EIP-7212 is implemented on Ethereum layer 2s, users will be able to sign transactions directly with their mobile devices using facial scanning or use a trusted intermediary to challenge transactions without having to store seed words.

Related: New technology could make crypto and Web3 wallets more convenient

As a result, self-sustaining wallets become easier to use as brokerage accounts. “We see wallets, and we see crypto apps built for them. [non-crypto native] “Where users don't even realize you're actually using crypto,” Henning said. In his view, this “wallet paradigm shift” will reduce the appeal of crypto ETFs as users no longer need ETFs to protect their crypto for them.

Other experts in the industry have also expressed their opinion on ETFs, with some saying that these funds represent a “revolutionary change” while others agree that they are more of a “dud”.