According to the latest media reports, large Bitcoin holders are transferring their wealth from the blockchain to Wall Street balance sheets. A new generation of ETFs provides crypto wealth holders with a new way to incorporate digital assets into the regulated financial system—without selling, and accomplished through funds operated by large asset managers like BlackRock.
A regulatory change this summer opened the door to this trend, allowing large investors to hand over Bitcoin to ETFs in exchange for fund shares through "in-kind exchange" transactions. This transaction method has been widely used in most ETFs but was only approved for Bitcoin products this July.
This process is typically tax-neutral, involves no cash exchange, and is not recorded as a sale. The result is the conversion of volatile digital assets into an item on a brokerage account statement—easier to use as collateral for loans, staking, or passing on to heirs.
Robbie Mitchnick, BlackRock's head of digital assets, revealed that the company has facilitated over $3 billion in such conversion transactions. Bitwise Asset Management stated that it now receives daily inquiries from investors about transferring holdings to wealth management platforms. Liquidity provider Galaxy has processed several conversion transactions.
From Rebellion to Return: Bitcoin Embraces the Traditional Financial System
This is the latest transformation for the world's largest cryptocurrency. Bitcoin was born as a decentralized rebellion against mainstream financial institutions but is now being quietly absorbed by these very institutions. Its anti-establishment holders are gradually realizing that some aspects of finance are more accessible through traditional systems.
By exchanging Bitcoin for ETF shares, investors can maintain the same exposure to the cryptocurrency while converting it into a form recognized by the financial system.
Within a brokerage account, these holdings can be pledged as collateral, used for borrowing, or incorporated into estate planning—operations that are cumbersome, risky, or even impossible in private digital wallets. The ETF wrapper provides legitimacy and convenience, transforming once-outside wealth into assets that banks and advisors can handle.
Teddy Fusaro, President of Bitwise, stated that there are still benefits to holding assets within the traditional financial system. The company completed its first in-kind exchange transaction through its BITB ETF in August this year.
Wealth Management Service Upgrades Drive Conversion Demand
Fusaro illustrated the practical benefits of conversion with an example: An investor has a $1 million portfolio on a wealth management platform and additionally holds $5 million worth of Bitcoin in a hardware wallet. "Your wealth management platform treats you as a $1 million client," Fusaro said. "If you transfer $5 million worth of Bitcoin into a Bitcoin ETF and hold it on the wealth management platform, you get access to a higher level of service."
Mitchnick stated that large Bitcoin holders are realizing "the convenience of being able to hold exposure within their existing financial advisor or private bank relationships," which is one of the important reasons for conversion.
He declined to disclose the exact number of transactions handled by BlackRock's IBIT ETF but said that further regulatory clarity would increase transaction volume and participation from large banks. He revealed that client inquiries range from wanting to convert 20% of their Bitcoin into ETF form to fully transitioning to traditional finance.
"There's a subset of people going 100%, saying, 'Consolidating all my assets this way, this is the simplest way for me to hold things going forward,'" he said.
Wall Street's Role Deepens
More Wall Street institutions may soon utilize these in-kind exchange transactions. BlackRock stated that banks are already playing a limited role in facilitating these transactions—particularly in the ETF creation process—although currently, only non-bank broker-dealers can handle the full transaction.
Wes Gray, CEO and founder of ETF firm Alpha Architect, which specializes in tax strategies, said: "Life is easier in traditional finance—we spent a century perfecting integration, access, and security. Bitcoin holders are finally realizing this. Of course, the biggest irony is that Bitcoin was born to escape traditional finance—and now its largest holders are trying to return."
BlackRock pointed out that with further regulatory clarity, more investors and financial institutions are expected to participate in such conversion transactions, promoting Bitcoin's deeper integration into the mainstream financial system.
