Bitcoin ETF News
By: Ryan Loomba
Tags: Investing, Security, Finance, Ethereum, Bitcoin

Did you follow the Bitcoin ETF news last week?

I reject the role of gatekeeper of innovation — a role very different from (and, indeed, inconsistent with) our mission of protecting investors, fostering capital formation, and facilitating fair, orderly, and efficient markets.

These words are found at the conclusion of SEC Commissioner Hester Peirce’s Dissenting statement on last week’s rejection of the Winklevoss twins’ Bitcoin ETF proposal. They should be recognized for what they are: a forceful defense of free market innovation and laissez faire capitalism from an important member of the SEC; a repudiation of the SEC’s role a heavy handed government organization so focused on investor protection that it shuts out opportunities for Americans.

Why a Bitcoin ETF is Important

Some enthusiasts may wonder why Bitcoin, a financial system designed to be outside the system, should be packaged into an ETF. As many Bitcoiners have learned, if you don’t own your private keys, you don’t own your Bitcoin. Early exchange hacks, such as the infamous Mt Gox theft, cost speculators millions. For many early adopters, private keys are everything.

At the same time, this view is not uniformly held by industry professionals. Here at Hedge, we use a proprietary system that allows users to hold Bitcoin without ever directly exposing their private keys. Despite old time Bitcoiners’ belief to the contrary, it is unknown if the concept of private keys will ever become common enough to be a household term.

But holding Bitcoin through an ETF does make sense if one wants exposure to a growing market. And holding Bitcoin through an ETF that is professionally managed by trusted parties-parties who have decades of experience safeguarding assets will often be the safer choice for many.

The Most Secure is not always the Most Secure

Consider password requirements. For years, the security industry instructed users on the best policy for passwords: a string of random numbers, letters, and special characters that was a minimum of 15 characters. These passwords were often required to change monthly or quarterly, which meant that users had to figure out an entirely new password 4 times per year, per system.

The result? Passwords taped to keyboards. It turns out, human beings don’t do too well remembering random strings of characters. We forget too easily, and make shortcuts and reminders that put our data at risk.

In 2017, the NIST revamped their password policy recommendations to drop periodic changing of passwords, as well as the arbitrary password complexity requirements. NIST understood that people will seek easy solutions that may match a predefined rule, but can be easily exploited by human intelligence.

With Bitcoin private keys, the problem is the same: it’s easy to forget private keys (remember the guy from the UK who was searching the landfill for his old hard drive?). Even the technically savvy early adopters who have a better grasp on the importance of private keys have made costly errors.

Are we going to leave non-techies with no options to buy Bitcoin because they’re uncomfortable with being their own bank?

I hope not. Because if we do, Bitcoin will not be the democratization of money-it will be the creation of a technocracy. Just as the internet was built while people simultaneously used AOL to log on as well as more technical providers, adoption of Bitcoin has to allow people with easier, more familiar solutions.

ETFs are a great vehicle for this to happen. While it is unfortunate that the SEC denied this particular request, we look forward to a near future where a request is accepted-and approved-and more people can safely get exposure to Bitcoin.

What Hedge Offers

Security:

Hedge leads the industry in providing secure wallets with proprietary best in class distributed cold storage practices. The keys to your funds never touch the internet and cannot be stolen by hackers. There is no single point of failure that can jeopardize your fiduciary.

Applications:

Hedge offers application interface solutions to make your apps work with our apps. Small regional bank looking to compete? Incorporate Hedge’s APIs into your app and give your customers the ability to buy and sell bitcoin through your institution.

Access:

Hedge is the only firm in the industry that gives you 24/7 access to your funds. We net settle transactions in a proprietary process that maintains the safety of keys in cold storage, but with near real time trading.

Let Hedge manage blockchains; you manage your clients.