1) Create an Etsy review site/blog/mailing list that points to the "good" merchants.
2) IndieHackers for Etsy. Do some interviews with legit Etsy owners who sell quality stuff and make a living on Etsy.
3) Independent review company that rates etsy sellers.
4) Hard mode: compete directly with Etsy and have some sort of verification process that you're not drop-shipping crap from China.
I would say the safest is actually #4 without taking VC or going public. Etsy already validated the hand crafted market, but imho it isn't a devour the world market. The desire for ever expanding growth has increasingly forced Etsy to effectively abandon this market, leaving a hole for you to step into.