I thought that's the difference with other BTC products like GBTC, that ETFs are 1:1 redeemable?

The way I see it, it still behaves like an IOU because the people/orgs who opt for an ETF do so because they want the option to custody, even though they're not going to do it by default.

As we have seen before, unless people actually self-custody, the custodian is likely to abuse that "trust".