According to Cointelegraph: The potential approval of spot Bitcoin exchange-traded funds (ETFs) in the United States poses a significant risk to the core principles of Bitcoin and may lead to the creation of millions of unbacked bitcoins, warns Trezor's Bitcoin analyst, Josef Tetek.
Tetek contends that the concept of spot Bitcoin ETFs, which track the price of Bitcoin by holding the digital asset, is at odds with the idea of self-custody, a core principle held by Bitcoin's anonymous creator Satoshi Nakamoto. Self-custodial crypto storage solutions let users own Bitcoin by taking full responsibility for holding the private key or the actual assets.
Tetek warned that a spot Bitcoin ETF could shift people further from self-custody, potentially introducing systemic risks. He speculated that in a downside scenario, vast quantities of Bitcoin could be stored centrally, where governments could seize them. Moreover, because ETF holders cannot withdraw the underlying asset, there's the possibility of unchecked issuance of "paper Bitcoin", not backed by actual Bitcoin, thus distorting markets and depreciating the value of real Bitcoin.
His cautionary statements arrive in the midst of heightened market optimism with several companies and analysts expecting the U.S. securities regulators to approve a spot BTC ETF as early as January 2024.
However, not everyone is as optimistic. Some experts such as Arthur Hayes, co-founder of crypto exchange BitMEX, believe successful spot Bitcoin ETFs could "completely destroy" Bitcoin by competing with centralized crypto exchanges like Coinbase given their expected lower fees.
Meanwhile, for Quantum Economics founder Mati Greenspan, there is no direct conflict between self-custody and spot Bitcoin ETFs as retail users will continue to opt for self-custody. He advises retail investors to hold Bitcoin instead of Bitcoin ETFs due to the latter's disadvantages.
