Large holders of Bitcoin are increasingly converting their coins into spot exchange-traded funds (ETFs) through a new policy that allows for in-kind creations. This development enables investors to transform off-platform Bitcoin into assets within brokerage accounts, presenting opportunities to leverage those assets for loans or include them in estate planning strategies.
The shift traces back to a decision made by the U.S. Securities and Exchange Commission (SEC) on July 29, 2025, where the agency approved orders permitting in-kind creations and redemptions for crypto-asset exchange-traded products. This policy marks a departure from prior approvals that restricted transactions to cash-only options for Bitcoin and ether. The SEC noted that this change aligns cryptocurrency practices with longstanding procedures employed in commodity ETF transactions.
The new framework allows authorized participants to either deliver or receive the actual Bitcoin when creating or redeeming shares of ETFs, rather than relying solely on cash. SEC Chair Paul Atkins highlighted that this move is expected to enhance the efficiency and cost-effectiveness of these financial products. In a similar vein, Trading and Markets Director Jamie Selway described the policy shift as an important milestone that provides added flexibility for both issuers and investors.
In the wake of this regulatory update, reports indicate that significant Bitcoin holders, often referred to as “whales,” are transferring their BTC to ETFs in exchange for fund shares, avoiding the necessity of selling their cryptocurrencies. This structure is generally regarded as tax-neutral since it does not trigger a taxable sale. While the holders maintain their market exposure, their assets are now recorded in brokerage accounts, where they can be utilized as collateral for loans or factored into estate planning.
Bloomberg’s coverage revealed tangible evidence of this trend, citing BlackRock’s success in facilitating over $3 billion in such transactions. Robbie Mitchnick, the head of digital assets at BlackRock, noted that the firm has seen substantial interest from clients eager to reflect their holdings on wealth management platforms. Bitwise has reported receiving daily inquiries from clients regarding this same conversion trend, while Galaxy Digital, led by Michael Harvey, has also processed several transactions.
The motivations behind these conversions are varied; some clients opt to move only a portion of their holdings while others consolidate entirely, finding it to be the simplest method for future management of their assets. Bitwise President Teddy Fusaro emphasized that integrating cryptocurrencies into the traditional financial system offers distinct advantages, particularly in terms of the services provided by private banks.
While banks currently play a limited role in facilitating these types of trades, especially regarding creations, non-bank broker-dealers remain the only entities capable of executing the entire process. As this landscape evolves, many industry stakeholders are observing the implications of these changes on both the cryptocurrency and traditional financial markets.
