A fierce debate is unfolding at the heart of Bitcoin’s intellectual community as industry veterans clash over the future of custody, sovereignty, and the role of ETFs in driving mainstream adoption.
ETFs Enter the Crossfire in Bitcoin’s Growing Self-Custody Debate
Recently, investor Fred Krueger endorsed Nick Szabo’s call for a dual strategy regarding Bitcoin custody. Krueger’s stance advocates for embracing institutional frameworks like banks and ETFs while simultaneously asserting the importance of self-custody.
“Szabo is right,” Krueger wrote. “The answer is BOTH: welcome adoption by Banks, ETFs, and the greater establishment. And at the same time, encourage and practice self-custody. And defend the right to self-custody.”
His approach aims to bridge the widening divide between Bitcoin purists, who treasure personal sovereignty, and supporters of ETFs, who argue that achieving scale necessitates traditional infrastructures.
This discussion traces back to November 30, when Bram Kanstein suggested that gold excels as money because it has largely been supplanted by paper notes created from thin air.
In response, Szabo offered a historical overview: the centralization of gold in vaults and its vulnerability to theft made trust-based alternatives more appealing for merchants and banks.
This centralization eventually led to gold being partially replaced by bills of exchange and telegraphic wire transfers.
ETFs vs. Self-Custody: A Philosophical Standoff
In this context, a broader ideological rift emerges. Bloomberg’s Eric Balchunas challenged the “snobby OGs,” questioning why they accept exchanges holding Bitcoin while opposing ETFs. Balchunas argues that both rely on outsourced custody, with ETFs being “much cheaper and safer.”
“I don’t understand why the snobby OG’s were totally fine with crypto exchanges holding your bitcoin and not ETFs? It’s the same outsourced custody concept, except ETFs are waaay cheaper and safer,”
— Eric Balchunas (@EricBalchunas) December 7, 2025
Sam Wouters responded assertively, noting that users can withdraw to self-custody from exchanges any time, unlike with an ETF.
“Snobby OGs love bitcoin as money that creates freedom. An ETF is a bird in a cage,” he wrote.
Wouters emphasized that the flexibility of self-custody lies in the option to exit whenever one chooses, even if it isn’t exercised by many currently. He cautioned that with ETFs, that option vanishes.
On the contrary, Balchunas maintained that ETFs could accelerate adoption and distribute ownership to millions, facilitating Bitcoin’s evolution into a more stable asset.
Yet, some critics argue that Bitcoin proponents don’t endorse coins being locked away under corporate control, even if it increases overall numbers. Concerns arise that ETFs may grant institutions undue influence over Bitcoin’s protocol direction.
As discussions progress, Balchunas labeled self-custody as “a pain” and “very expensive” when executed through exchanges. Detractors argue that many platforms provide free withdrawals, low spreads, and no annual fees, which contrast with the nature of ETFs.
In response, Balchunas insisted that ETF issuers do not seek to control the protocol, although there remains a general sentiment that corporations can always be subjected to pressures.
“I got a ledger thing, then the app went out to source BTC, and it was 1.4% minimum to convert my money. Some were even 2-3%. For an ETF person, that’s really expensive, worse than the 1970s,” he noted.
Ultimately, many argue that Bitcoin exists precisely because investors don’t trust corporations at face value. As Bitcoin’s identity is consistently challenged between notions of sovereignty and scalability, the ETF–self-custody debate has evolved into more than a mere disagreement; it now represents a critical fault line in the asset’s future narrative.