Bitcoin ETF Approval: My Insights on the Milestone and its Implications for Blockchain Adoption.

The US capital markets regulator SEC approved 11 spot bitcoin ETFs, including those by BlackRock, Vanguard, Franklin Templeton, Valkyre, Fidelity, and Invesco, on January 10.

On Friday 12 Jan 2024, investors started trading ETFs, and approval of ETFs is a watershed moment in the crypto market. ETFs will bring more stability to the price of bitcoin and liquidity risks will be reduced over time.

First, let’s start with what is Bitcoin ETF?

Bitcoin ETFs are instruments that are traded publicly on a stock exchange that enable investors to gain exposure to Bitcoin without actually owning it. An ETF is an investment fund that tracks the performance of underlying assets and moves up and down depending on asset value.

When you invest in a bitcoin ETF, you are not directly purchasing it but instead buying units in a mutual fund that holds bitcoin. Since ETFs are regulated, it is easier for investors to gain exposure to Bitcoin’s price movement, the complexity of digital currency and wallets, and the security and risk associated with it. Even without opening an account on a crypto exchange or setting up digital wallets like Trust Wallet, Binance, and Metamask for asset storage, which is a complex process,

So if we look at the ETF definition, it is simply bringing centralization to a decentralized world. That is right and much needed for the security of assets and avoiding fraud in the crypto market. But I don’t know why crypto investors are so hyped about it. ETFs are good for regulators and governments because now they can control the price of ETFs and have tighter AML/KYC rules to avoid fraudulent transactions and money laundering in the economy. ETFs are going to solve that KYC/AML issue, and now Bitcoin or other cryptocurrencies that will have ETFs in the future will be more stable and will become one of the asset classes like gold.

Definitely!! This ETF approval will spur technology adoption because of regulatory clearance and other global regulators will follow the same path. It also created an opportunity to address the parallel economy, which has been going on for a long time due to the crypto market. Now, by creating ETFs, the crypto market could be regulated and controlled.

I have certain views about this incident and how it will help other regulators consider this technology for other use cases.

Just one example , Recently SEBI( India Capital market Regulator) said that they can’t allow use of blockchain in real estate fractional ownership. Because they think blockchain is just crypto currency and public ledger but which is not true. Blockchain could be private & permissioned and SEBI can define all rules and govern the capital market. So after ETF approval and more education about technology help use of blockchain technology

“SEBI has declined to permit fractional ownership using blockchain based solutions, Citing the reason that blockchain based platforms being decentralised and due to involvement of cryptocurrencies may transgress the norms, regulations and rules set by SEBI.”

• "Shift your focus from Bitcoin; envision a scenario where we tokenize data and seamlessly transfer it through an exchange, potentially giving rise to the most substantial economy we've ever observed."

• Other regulators will see this as a starting point to consider to regulate and build ETFs in respective markets.

• change of mind to see Blockchain and tokenization revolutionize the capital market and other financial sector use cases.

• Increase of  Real-world Asset tokenization and get regulatory approval

• Technology will become more mainstream across different enterprise use cases.

In recent conversation with CNBC ,  Larry Fink  CEO of BlackRock said that “ETFs are step one in the technological revolution in the financial markets. Step two is going to be the tokenization of every financial asset” 

“I see value in having an ETH ETF,” he said. “As I said, these are just start stepping stones toward tokenization.” The largest financial institutions in the world are signaling their interest in tokenization. “We have the technology to tokenize today,” he added. “If you had a tokenized security … the moment you buy or sell an instrument, it’s known it’s on a general ledger that is all created together. … This eliminates all corruption, having a tokenized system.“

https://www.linkedin.com/posts/chainlink-labs_etfs-are-step-one-in-the-technological-revolution-activity-7151656496706056192-A6Qp?utm_source=share&utm_medium=member_desktop

There is a different view from RBI governor Shaktikanta Das when question asked about Bitcoin Approval -

" The way we look at crypto remains unchanged, irrespective of who does what," says Reserve Bank of India (RBI) governor Shaktikanta Das on questions asked about Bitcoin ETF approval by US SEC. Also he said “What's good for another market need not be good for us” on crypto regulations.

https://www.linkedin.com/posts/kamlesh-nagware-1456094b_rbi-governor-remains-firmly-against-bitcoin-activity-7151437530255499265-VyZP/?utm_source=share&utm_medium=member_desktop

Conclusion

This historical moment of ETF approval by the US SEC will be a game changer not just for the crypto investment market but will add more value to technology adoption. We should not see ETF approval just for the crypto market, as a blockchain technology ambassador we should take this opportunity to build new use cases in tokenization and help regulators build more inclusive digital assets and technology policy around adoption and use cases beyond just crypto, NFT & and DeFI.

I strongly believe that whether ETF approval will help the crypto market or not. It’s going expedite blockchain adoption and especially uses for RWA, asset tokenization, and in general tokenization in the capital market and financial services sector.   Also, I see more regulation by other regulators in India and globally. And open mindset about technology adoption across industries and governments. Looking forward to trusted, transparent, and secure systems using blockchain technology

References

https://www.cnbc.com/2024/01/12/blackrocks-larry-fink-says-bitcoin-etfs-are-just-the-first-step-in-the-technological-revolution-of-finance.html

https://www.moneycontrol.com/news/business/personal-finance/explainer-why-spot-bitcoin-etf-approval-by-us-sec-matters-to-indian-crypto-investors-12035211.html#google_vignette

https://www.linkedin.com/posts/quillaudits_bitcoin-etfs-activity-7151184462796468225-M3Pb/?utm_source=share&utm_medium=member_ios

https://www.coindesk.com/consensus-magazine/2024/01/10/bitcoin-etfs-approved-the-industry-reacts/amp/

#blockchain #bitcoinetf #tokenization #adoption