June 5, 2024
Ethereum ETF Approval Sparks Excitement and Debate
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Ethereum ETF Approval Sparks Excitement and Debate

While the community celebrates the Ethereum ETF Approval in the United States, one industry executive has criticized the centralized nature of these products. The emergence of cryptocurrencies like Bitcoin (BTC) and Ether (ETH) has revolutionized finance by eliminating intermediaries and allowing fund transfers without relying on a central authority.

Concerns Over Centralization in Crypto ETFs

Despite the groundbreaking nature of cryptocurrencies, the introduction of ETFs risks making them less decentralized, according to Avantgarde Finance founder Mona El Isa. “ETF issuers are placing outdated technology back into crypto products and undermining its purpose, just to stay relevant,” El Isa said that. She noted that the Ether ETF attracts interest from traditional finance (TradFi) because the ETF structure and regulations are “familiar territory,” appealing to conventional finance.

Avantgarde Finance founder Mona El Isa. Source: Vision&

However, El Isa argued that accessing Ethereum through an ETF misses the core benefits of Ethereum’s decentralized and disintermediated design. She believes that while the newly approved product will see some adoption, investors are likely to eventually prefer self-custody over holding ETFs due to its inherent benefits. She said:

“I expect over time, as investors become more accustomed to cryptocurrency, they will want to hold Ethereum non-custodial to leverage the full benefits of the technology: low cost, removal of counterparty risk, and instant ability to transact.”

Noncustodial or self-custodial crypto wallets allow users to own Bitcoin by taking full responsibility for holding the private key or the actual assets. Unlike self-custodial solutions, spot crypto ETFs do not allow investors to hold the cryptocurrency as they rely on third-party custodians like Coinbase.

Industry Perspectives on Decentralization and ETFs

Some industry executives agree that the Ethereum ETF approval has sparked both investor excitement and a debate over decentralization. Hao Yang, head of financial products at Bybit, remarked, “As Buterin himself addresses the issues faced by Ethereum though, such as MEV and liquid staking, there is no doubt that a long-lasting battle lies ahead to maintain the balance and ensure Ethereum remains as decentralized and democratic as possible.”

“The approval injects a new sense of confidence in the wider cryptocurrency industry, as well as wider implications on other project prospects in DeFi, NFTs, and other token-based applications.”

Yang also expressed optimism about the future of the crypto industry in light of the latest Ethereum ETF approval. However, El Isa isn’t alone in her skepticism about crypto ETFs due to concerns about centralization. Josef Tětek, a Bitcoin analyst at the hardware crypto wallet firm Trezor, previously argued that spot Bitcoin ETFs may take investors further away from self-custody or even create “millions of unbacked Bitcoin.” Trezor CEO Matej Zak also highlighted the risks, stating that storing an ETF’s underlying cryptocurrency on platforms like Coinbase makes spot crypto ETFs vulnerable to hacks.

Despite these concerns, issuers believe there is no direct conflict between self-custody and spot crypto ETFs. As the debate continues, the balance between decentralization and traditional financial structures remains a key issue for the future of cryptocurrencies.

Image by wirestock on Freepik

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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