Are BTC ETF's a reverse Trojan horse from Wallstreet?

If BTC etf's are cash settled, it can potentially lead to ETFs issuing more shares than the BTC they have to back it up?

Even if multiple ppl have claims on the btc or if the btc price goes up a bit, they can just pay them the USD value and not BTC when ppl sell or redeem their shares, essentially working like Indexes/Index Derivates.

Similarly, when users sell, they may not need to sell at all or as much, if etf issuer can somehow shell out the cash value. Yes that may incur a loss in the short term, but given enough scale and cash from other operations, it significantly lowers the probability of such events.

At a larger scale, it will mean that ppl will believe they have a certain btc, but all they have is a claim on btc, which could eventually end up becoming multiple claims on the same btc, essentially inflating away the btc supply using fractional reserves via etfs.

This will potentially help circumvent around the 21M supply cap issue for the govts/banks.

Any thoughts?