A silent transition is taking place among Bitcoin’s richest investors — moving from cold storage to custodial accounts.
A new series of U.S. exchange-traded funds (ETFs) is enabling longtime Bitcoin enthusiasts to integrate their assets into the conventional financial system without needing to offload any satoshis.
The shift follows regulatory approval for “in-kind” transactions involving spot Bitcoin ETFs this summer, which allows investors to deposit Bitcoin directly into a fund to receive shares, as reported by Bloomberg.
This approach is a tax-efficient method common in equities and commodities ETFs.
The outcome: volatile digital assets are transformed into regulated, reportable holdings on brokerage statements, making them significantly easier to borrow against, use as collateral, or incorporate into estate plans.
BlackRock, the largest asset manager globally, has already executed conversions worth over $3 billion, according to Robbie Mitchnick, the firm’s head of digital assets. Bitwise Asset Management reports receiving daily inquiries from investors wanting to transition private Bitcoin holdings into managed portfolios. Liquidity provider Galaxy has also facilitated numerous such transfers, according to Bloomberg.
This transition represents another ironic twist for Bitcoin — an asset initially designed to operate independently of the banking system is now being integrated into it.
As ETFs incorporate Bitcoin into brokerage infrastructures, even many critics of traditional finance are beginning to see that some of its tools — custody, leverage, and estate planning — are challenging to replicate on-chain.
Some holders are transferring only a portion of their Bitcoin, while others are consolidating all assets into ETFs for efficiency. This trend could enhance Wall Street’s engagement with Bitcoin, bridging the divide between the crypto sphere and traditional finance.
BlackRock’s ETF and Tokenization Initiatives
BlackRock’s iShares Bitcoin Trust ETF (IBIT), which launched just 22 months ago, has recently surpassed $100 billion in assets under management, making it the firm’s most successful fund.
Bringing in roughly $244.5 million in annual revenue, IBIT has outpaced established BlackRock ETFs, including the 25-year-old iShares Russell 1000 Growth ETF, in terms of both growth and profitability.
Last quarter, the fund also surpassed Coinbase Global’s Deribit platform to become the leading venue for Bitcoin options worldwide.
Additionally, BlackRock is concurrently developing technology to tokenize a diverse range of assets, from equities and bonds to real estate, aiming to link the $4.5 trillion global digital wallet market with U.S.-based investment products.
