In the United States, the recent approval of spot Ether exchange-traded funds (ETFs) has been met with celebration from the community. However, one industry executive, Mona El Isa, founder of Avantgarde Finance, has raised concerns about the centralized nature of these products.
The introduction of cryptocurrencies like Bitcoin (BTC) and Ether (ETH) has revolutionized finance by eliminating the need for intermediaries and allowing funds to be transferred without relying on a central authority. However, El Isa argues that with the introduction of ETFs, cryptocurrencies are at risk of becoming less decentralized.
According to El Isa, ETF issuers are using outdated technology in crypto products in order to stay relevant, undermining the true purpose of cryptocurrencies. While the Ether ETF is attracting interest from traditional finance (TradFi) due to its familiarity and alignment with conventional finance, it fails to capture the core benefits of Ethereum’s decentralized and disintermediated design.
El Isa predicts that although the newly approved Ether ETF may see some adoption, investors are likely to prefer self-custody in the long run, as it offers more advantages. Noncustodial or self-custodial crypto wallets allow users to have full ownership and responsibility for holding their private keys and assets. In contrast, spot crypto ETFs rely on third-party custodians like Coinbase, preventing investors from directly holding the cryptocurrency.
The approval of the Ether ETF has sparked excitement among investors, as well as a debate about decentralization. Hao Yang, Bybit’s head of financial products, acknowledges the challenges faced by Ethereum and the need to maintain its decentralization and democracy.
El Isa is not the only one skeptical about crypto ETFs and their potential for centralization. Josef Tětek, a Bitcoin analyst at Trezor, has expressed concerns that spot Bitcoin ETFs may distance investors from self-custody and potentially create unbacked Bitcoin. Trezor CEO Matej Zak also warns that storing an ETF’s underlying cryptocurrency on platforms like Coinbase makes spot crypto ETFs susceptible to hacks.
While concerns about centralization persist, issuers of spot crypto ETFs believe that there is no direct conflict between self-custody and these products. The recent approvals have sparked optimism about the future of the crypto industry.