Wall Street Grabs Hold of Bitcoin Wealth via ETF Conversions

Bitcoin's biggest holders are increasingly moving their wealth into Wall Street by swapping large crypto holdings for shares in exchange-traded funds (ETFs). This allows them to retain exposure to Bitcoin while simplifying how they hold the asset and gaining some of the protections of a conventional financial product.

BlackRock Inc. has cut the minimum size for such transactions to $1 million, making it cheaper and easier for investors to make the switch. Since U.S. regulators permitted in-kind creations last summer, more digital assets have been moving into funds this way, expanding market infrastructure.

The process involves exchanging crypto for ETF shares through in-kind creation, which allows investors to swap their digital assets directly into the fund without selling them first. This can be accomplished without triggering an immediate capital-gains tax bill, depending on the investor's circumstances.

BlackRock's IBIT fund has facilitated over $5 billion of such conversions, up from over $3 billion in October last year. The process is becoming more standardized and institutionalized, with signs of broader adoption across the industry.