Beyond the Bitcoin ETF Hype: Insights from VALR CEO, Farzam Ehsani

By Farzam Ehsani, CEO of VALR:

Much has been said about the approval of spot Bitcoin ETFs in the US being a watershed moment for the crypto industry and Bitcoin specifically.

Many commentators believe that institutional inflows into Bitcoin are a sign of validation for the sector. Bitcoin can finally be seen as a legitimate asset class now that the “institutions” have arrived.  

The ETF will certainly be a milestone in Bitcoin’s development. In years to come, the ETF approval will definitely be worth plotting on Bitcoin’s timeline. 

However, to say that the Bitcoin ETF signals the maturity of the crypto sector is to misunderstand Bitcoin. Unlike other assets traded for pure price speculation, bitcoin is an ideology, a protocol, a new language – it has the potential to revolutionise how our entire financial system is structured and how humans interact with money and financially communicate.

We will only be able to say that the crypto sector has reached maturity when we can unlock the underlying use cases of the technology for the masses, and we are not there yet.

Redefining maturity in finance

Seeing traditional banking behemoths adopt new technology to make their businesses more efficient and profitable should not be the end goal of financial innovation. With Bitcoin and crypto, we have the opportunity to be bold and rethink what the global financial system should look like to better serve humanity. 

Cryptocurrencies were designed to be groundbreaking. Their decentralised nature means they are not restrained by geography and politics in the way fiat currencies are. They are inherently borderless, offering a universal medium of exchange that is accessible regardless of location. 

Cross-border transactions that might have once required a bank account, high transaction fees and taken days to process suddenly become almost instant, cheap and accessible to anyone with an internet connection anywhere in the world. Millions of unbanked people in marginalised communities can finally start to access financial products previously unavailable to them.

Achieving maturity in finance therefore does not equate to giving the existing financial order new tools to operate with or new products to offer their investors. It’s about totally rethinking how finance serves the masses.

Fixing the trust deficit

The promise of crypto sits within the context of a tumultuous period for the sector. The Terra Luna collapse, FTX’s downfall and the slew of lawsuits hitting industry players have undoubtedly dented trust in crypto assets.

Banks too have a trust problem, particularly following the 2008 financial crash. A recent survey from the UK’s Financial Services Compensation Scheme found that 32% of people distrust banks with only 7% trusting them completely. 

Bitcoin is undoubtedly under the global spotlight thanks to the ETF, which provides an unprecedented opportunity for the crypto ecosystem to not only rebuild some of the lost trust, but also to push forward with building a better financial system that is not only possible, but within sight. 

This involves every crypto asset service provider acting with integrity and placing crypto’s ultimate purpose – to deliver a new global financial order that transcends nation-state frictions – at the heart of operations. Crypto industry leaders need to re-establish the trust that has been lost over the last two years by committing to truthfulness, humility and a resolve and determination to keep learning and serving. Of course, there will continue to be malicious actors – as there are in all industries, old and new – but they must be held accountable and brought to justice.

Exchanges will have a particularly important role to play. Not only are they the gateway into crypto for the majority of people, but they provide the infrastructure to purchase the underlying assets for traditional financial products such as the recently-approved ETFs.  Only the exchanges with the highest commitment to compliance, security and the law will be successful in this next phase of the crypto asset industry.

Conclusion: crypto maturity a long way off

When we look back on the approval of a spot Bitcoin ETF in the US, we will remember it as a key moment in bringing Bitcoin more to the public consciousness and increasing its exposure as an asset class for those who choose not to own and custody crypto assets directly themselves. However, we will not see it as the time when Bitcoin finally matured.

Institutional involvement in Bitcoin does not equal maturity. In fact, to some extent, it is the exact opposite. Widespread ownership – where millions around the world are using Bitcoin and other cryptocurrencies as a borderless means of exchange – is when the asset and technology will have reached maturity.

Cryptocurrencies offer an unprecedented opportunity to redefine our financial systems and transform how we interact with money. The future is not one where humanity has a jumble of monetary systems as we have today.  The future is one where a harmonised system of world currency operates largely through electronic impulses and serves the needs of humanity as a whole. Once we start seeing this transition, we can start talking about the maturity of the sector.

Until then, every participant in the crypto ecosystem needs to work hard – and collaboratively – to rebuild trust and present crypto as a viable and enriching alternative to a financial system that is currently lamentably defective.

Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.