Bitcoin Has Not Lost Its Way. It Has Captured Wall Street

The launch of U.S. Bitcoin exchange-traded funds was crypto's most celebrated event in 2024. But for some, the term “Bitcoin ETF” is an oxymoron.

The launch of U.S. Bitcoin exchange-traded funds was crypto's most celebrated event in 2024. But for some, the term “Bitcoin ETF” is an oxymoron.

Take it from Gary Gensler – the Securities and Exchange Commission chairman who begrudgingly approved such products for public trading.

“Satoshi (sic) said this was gonna be a decentralized system… but now you can buy it through this thing called an exchange-traded product as well, which is centralized,” he argued in January.

He has a point. Over 1,000,000 BTC and counting are now controlled by Bitcoin ETF providers across the world. Some of the largest providers include giants of traditional finance like BlackRock and Fidelity – exactly the sort of centralized firms that crypto wants to disintermediate.

Does this mean that Bitcoin has lost its way? Has the project been captured by the big banks?

Far from it. In fact, BlackRock's embrace of Bitcoin is how the company adapts to and survives crypto's continuous march toward global adoption.

Bitcoin provides investors with an invaluable service that traditional banking will never replicate. As BlackRock CEO Larry Fink said in a CNBC interview, Bitcoin is like “digital gold” that you buy “when you believe that countries are debasing their currencies by excess deficits,” or to “invest in something that is outside your country's control.”

The closest BlackRock could come to matching that service was to launch a Bitcoin ETF. As of now, Bitcoin ETFs fill a niche for regular people and institutions seeking price exposure to Bitcoin who face hurdles to acquiring the real thing. That niche market alone made the iShares Bitcoin Trust the most successful ETF launch of all time.

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Yet these ‘hurdles’ to buying real BTC in your own crypto wallet – be they technical or regulatory – are all falling away fast. The user experience of sending, receiving, and holding Bitcoin in a personal wallet is dramatically improving. Meanwhile, Congress is passing legislation to provide regulatory clarity for firms trying to launch crypto products, and build decentralized financial services.

In due time, managing financial affairs on the blockchain will be more efficient, secure, and useful than doing it through the bank – and all of traditional finance is scrambling to prepare.

In March, BlackRock launched its first “tokenized fund” giving investors access to US dollar yields through a token issued on the Ethereum blockchain. Earlier this month, Franklin Templeton expanded its blockchain-based money market fund, FOBXX, to Arbitrum – a network that processes Ethereum transactions for pennies at sub-second speeds.

Even the big banks and payment providers are diving into crypto. PayPal has already launched its own stablecoin, PYUSD PayPal USD , which is a custom crypto token whose value is backed by U.S. dollars. Mastercard is experimenting with JP Morgan, Citibank, and other TradFi giants on tokenized asset settlement to make cross-border transfers run more smoothly.

Finally, let's not forget the chorus of central banks worldwide who are either researching, developing, or piloting their own central bank digital currencies.