Bitcoin Owners Transitioning to ETFs
Recent reports indicate that significant Bitcoin holders are reallocating their assets into spot ETFs by converting off-platform Bitcoin into assets held within brokerage accounts or incorporating them into estate plans.
This activity comes following a policy shift announced by the U.S. Securities and Exchange Commission (SEC) on July 29, 2025. The SEC approved an order allowing the in-kind creation and redemption of shares for crypto exchange traded products (ETPs), particularly affecting spot Bitcoin ETFs.
The SEC noted that this new approach differs from earlier cash-only approvals for Bitcoin and Ether and aligns with practices established for commodity ETPs. As a result, authorized participants can exchange the underlying assets directly rather than using cash for the creation or redemption of shares. SEC Chairman Paul Atkins remarked that this would make the product cheaper and more efficient, while Trading and Markets Director Jamie Selway referred to it as an important development that could enhance flexibility for both issuers and investors.
Bloomberg reported that some large holders, often referred to as “whales,” are transferring their Bitcoin to ETFs without selling, receiving fund shares instead. This method is generally tax-free since the act of selling isn’t recorded. While your overall exposure remains unchanged, these assets will now appear in your brokerage account, making them available for use as collateral or as part of an estate plan.
Activity in this area is already notable. For instance, BlackRock has reportedly facilitated over $3 billion in these conversions, according to Robbie Mitchnick, who leads digital assets. Bitwise mentioned it receives numerous daily inquiries from customers wanting to manage their Bitcoin holdings on its platform, while Galaxy has managed a limited number of transactions, as noted by Michael Harvey.
Some investors choose to move only a fraction of their holdings. Mitchnick mentioned that fully integrating these “subsets” is the easiest way to handle them moving forward. On the subject, Bitwise President Teddy Fusaro highlighted the advantages of entering the traditional financial system, such as enabling private banks to cater to clients better.
While banks play a limited role in facilitating these trades, particularly with creative products, it’s important to note that currently, only non-bank broker-dealers can complete the full transaction process.
Responses from BlackRock, Bitwise, and Galaxy regarding this ongoing trend have not yet been received.
