The Controversial Impact of Bitcoin ETF Approvals on Decentralization

Now it's all official. The U.S. Securities and Exchange Commission (SEC) made history by approving a group of Bitcoin spot exchange-traded funds (ETFs), breathing life into markets that have been eagerly awaiting this for months.
This hard-fought victory is significant for an industry looking to rebuild its reputation after the dramatic market crash of 2022, fueled by the likes of Sam Bankman-Fried. However, not everyone in the crypto community views it the same way.


Some early advocates of the Bitcoin blockchain fear that collaborating with traditional finance (TradFi), its true competitor, jeopardizes the original promise of decentralizing financial services. Conversely, some argue that Bitcoin, as a cryptocurrency, was designed for the masses, and aligning with TradFi is both inevitable and mutually beneficial.
Software engineer and Bitcoin advocate Jameson Lopp notes, "This was always an inevitable part of the mainstreaming process. Wall Street also wants to get its share." Lopp adds that Bitcoin ETFs will expedite the adoption cycle and make the asset class "less intimidating" for mainstream followers.
Erik Voorhees, one of the early entrepreneurs in crypto, stated on the social media platform X that the "most significant outcome" of Bitcoin ETFs would be dissuading governments from taking a harsh stance against crypto. He says, "When 50 million boomers passively own bitcoin, a ban will significantly less impact political and economic damage. BTC is no longer just an asset for mysterious developers; it's now a Trojan Horse about to pass through the gates of Troy."
The risk of losing its essence
Fifteen years ago, when Satoshi Nakamoto published the Bitcoin whitepaper, it was a powerful rebellion against TradFi. Bitcoin was supposed to be the people's weapon against the unchecked power of major banks that brought the global economy to its knees with irresponsibility and greed in 2008.
Given this context, the approval of ETFs for both sides doesn't just signify the convergence of two ostensibly competing worlds but also represents the potential corruption of both.
Chris Blec, the host of the podcast "Proof of Decentralization," says, "The approval of Bitcoin ETFs is inevitably a very bad development for Bitcoin decentralization."
Nicky Gomez, Senior Partner at XReg Consulting, believes that while ETFs may be good for institutional and individual cash flows, they will "distance Bitcoin from its real value and potential."
Gomez says in an interview with CoinDesk, "Ultimately, this will encourage a greater divide within the crypto ranks."
On the TradFi side, the economic security community Better Markets criticizes SEC approvals, claiming in a tweet that bitcoin and crypto continue to be the preferred products of "speculators, gamblers, and criminals."
SEC official Caroline Crenshaw described the approval of ETFs as a "unhealthy and untimely" decision.
The inevitable case
CoinDesk columnist and stock researcher JP Koning argues, like Lopp, that the convergence of crypto with TradFi is inevitable.
"Since Bitcoin was first released in 2009, adoption has always relied on close integration with traditional finance, so a Bitcoin ETF is not actually unexpected; it just represents the development of the connection between these two sectors."
In simple terms, it all comes down to money.
Koning continues, "I don't think Bitcoin ETFs conflict with the hopes of the most idealistic types of bitcoiners because even the most idealistic forms of bitcoinism have always existed with a desire to make money."
"After ETFs start trading, the bitcoin community will continue to push for bonds because that's what will actually drive the price even higher."