Re: existence of an ETF, it’s the only way to “hold” BTC (or ETH) in an account with tax advantages (such as TFSA or RRSP in Canada, equivalent to Roth IRA and 401K in the US respectively).
Why would a government want to subsidise cryptocurrency with tax advantages?
Proponents think it will collapse the dollar and bankrupt all governments.
Opponents think it's negative-sum and the sooner cryptocurrency dies the better for industries that actually create value.
Either way it's a (mild) attack on effective government and civilization more generally. The less subsidies for traders the better, from the perspective of a currently-influential government.
I think the argument is that if the government does not want to extend this subsidy to certain assets, Congress can pass laws excluding them. The current set of laws doesn’t necessarily give the SEC the authority to unilaterally decide broad questions about which types of assets are “bad for society,” and the SEC has to work within the legal framework it was given. But obviously I’m not a lawyer.