Investors have poured more than $53 billion into spot bitcoin exchange-traded funds since launching in the U.S. in early 2024.
But despite ETFs being a major driver of bitcoin's price in the years since, one of the crypto industry's oldest hardware wallet makers warns that they pose a risk to a core bitcoin principle: self-custody.
Speaking with The Block at BTC Prague last week, Trezor Chief Commercial Officer Danny Sanders argued that more bitcoin investors relying on ETFs instead of holding their own private keys would be detrimental to the industry.
Sanders made the comments while talking about some of the challenges of onboarding new users to self-custody, which allows users to be the sole controller of their bitcoin instead of entrusting their assets to exchanges or custodians.
This comes with a downside, however, in that there is no backstop or recourse for someone to get their crypto back if they lose or misprint their seed phrase, or get tricked into sharing their private keys with a scammer.
And while this can be an intimidating hurdle to overcome for new bitcoin holders, Sanders argued that the barriers are more psychological than technical.
According to Sanders, the crypto industry now counts roughly 600 million users globally, but only around 10% self-custody their assets. Of those, just 12 million to 13 million use hardware wallets, which are generally considered the most secure way to hold one's private keys.
Trezor, which was founded in Prague in 2013, helped pioneer the crypto hardware wallet sector and introduced several foundational technologies that are still used in Bitcoin today, most notably the mnemonic seed phrase standard known as BIP-39.
In Sanders' opinion, the industry needs to continue focusing on making self-custody easier through better user experiences, educational tools, and backup systems rather than encouraging users to just rely on intermediaries.
The goal is to match the web2 experience over time," Sanders said. "We're not there yet, but I think that's the hardest thing that we all need to keep on focusing on and not saying, 'Okay, let's just put it in an ETF.' That's kind of the worst outcome, I think, for the industry."