Bitcoin Spot ETF Approved: The U.S. Finds It Hard to Ban Digital Assets

The approval of the Bitcoin Spot ETF has sparked widespread discussion, but its impact goes far beyond short-term price fluctuations. The profound significance of this decision lies in its making it difficult for the United States to ban digital assets, thus paving the way for Bitcoin to continue changing the way currency operates.

Political Motives Behind Currency Devaluation

About 15 years ago, Satoshi Nakamoto reiterated people's long-standing concerns about the political economy of currency in the Bitcoin white paper: governments have a strong incentive to devalue their fiat currency in order to achieve the goal of spending more than their income. Increasing government spending is usually popular, while raising taxes is not. Therefore, governments often increase spending by borrowing or creating money out of thin air.

In the short term, this approach is politically feasible because politicians can win re-election by increasing spending on specific voter groups. However, in the long run, an increase in the money supply will lead to a decrease in the purchasing power of each unit of currency, which is inflation.

Satoshi Nakamoto and his followers address this issue by limiting the supply of Bitcoin to 21 million units. Unlike major fiat currencies, the total circulation of Bitcoin is not subject to political influence. Theoretically, this makes Bitcoin a more reliable long-term store of value than modern fiat currencies.

The Possibility of the U.S. Government Banning Bitcoin

If Bitcoin truly becomes a superior store of value compared to the US dollar, some people worry that the US government may ban this cryptocurrency. However, from a technical perspective, the US government cannot completely ban Bitcoin, just as it cannot ban the internet. Bitcoin operates on a distributed computer network that is beyond the jurisdiction of the United States.

Nevertheless, the U.S. government still has some influence. In theory, it could prohibit the exchange of Bitcoin for dollars on major exchanges, ban banks from collaborating with Bitcoin businesses, prevent retail companies from accepting Bitcoin payments, or make it difficult for companies to hold Bitcoin on their balance sheets through regulatory means.

ETF makes it harder to ban Bitcoin

The newly approved Bitcoin ETF has greatly changed the situation. Some of the largest and most influential companies in the financial sector, such as BlackRock, Fidelity, Invesco, and Franklin Templeton, will hold billions of dollars in Bitcoin. This allows a large number of investors who have never traded Bitcoin on cryptocurrency exchanges or held it privately to gain immediate access to Bitcoin.

This is crucial as it greatly expands the interest groups that support maintaining and strengthening Bitcoin's position in the US financial market. If there are congressional members or regulators who want to restrict Bitcoin, they will not only face opposition from ordinary coin holders but also resistance from major financial players with considerable influence in Washington.

Currently, the Bitcoin held in ETFs has exceeded $25 billion, with about $1 billion generated within two weeks after approval. This is quite a considerable amount of funds even for financial giants.

The Decision of the US SEC

The process of the U.S. Securities and Exchange Commission (SEC) approving a Bitcoin ETF has been controversial. The SEC's role is not to determine whether Bitcoin is a good investment, but to allow investors and the market to make that decision. However, for the past decade, the SEC has resisted allowing investors to access Bitcoin through mainstream, regulated tools, as they are aware that such recognition would significantly increase investor interest in digital assets.

The SEC's final approval of the Spot Bitcoin ETF was a decision made under pressure from the U.S. Court of Appeals for the D.C. Circuit. The court found that the SEC's previous resistance was "capricious and arbitrary." SEC Chairman Gary Gensler stated that this decision is "the most sustainable path forward," although he still criticized Bitcoin as a speculative and volatile asset.

Future Outlook

If Bitcoin's market capitalization reaches a level sufficient to compete with the US dollar (around $7 trillion, approximately 9 times the current market value), the US government may take action. However, by that time, any suppression actions may backfire, as this would send a signal to the global market: the US no longer believes in the inherent superiority of the dollar.

Ideally, the United States should address its fiscal issues, particularly the excessive spending on medical benefits, to put federal debt on a sustainable path. Until then, Americans can use Bitcoin as a hedge against the depreciation of the dollar due to the surge in federal debt. The SEC's latest decision effectively ensures the long-term availability of this insurance.