Large bitcoin holders are transferring coins into spot exchange-traded funds through in-kind creations, transforming off-platform BTC into brokerage-account assets that can be used for borrowing or estate planning, as reported by Bloomberg on Tuesday.
This shift is based on a summer policy update.
On July 29, 2025, the U.S. Securities and Exchange Commission (SEC) announced it would permit in-kind creations and redemptions for crypto-asset exchange-traded product (ETP) shares, impacting spot bitcoin ETFs.
The agency indicated this was a departure from previous cash-only approvals for spot bitcoin and ether, aligning instead with established practices for commodity ETPs.
According to the SEC, authorized participants can deliver or receive the underlying asset, instead of cash, when creating or redeeming ETP shares. SEC Chair Paul Atkins remarked that this change would make products “less costly and more efficient,” while Trading and Markets Director Jamie Selway referred to it as an “important development” that offers more flexibility for issuers and investors.
In this context, Bloomberg noted that some whales are transferring BTC to ETFs and receiving fund shares without selling, a structure generally tax-neutral since no sale occurs. The exposure remains the same but is reflected in a brokerage account where it can be used as collateral or factored into estate planning, per Bloomberg.
Early activity has already been reported. BlackRock has facilitated over $3 billion in such conversions, according to Robbie Mitchnick, its head of digital assets. Bitwise stated to Bloomberg that it receives daily inquiries from clients looking to have holdings shown on wealth platforms. Galaxy has also processed several transactions, as noted by Michael Harvey.
Some clients only move a portion of their holdings; a “subset” fully consolidates because “it’s the easiest way” to manage assets going forward, Mitchnick mentioned to Bloomberg.
Bitwise President Teddy Fusaro highlighted the “benefits of having things in the traditional financial system,” especially regarding how clients are served by private banks.
Banks currently play a limited role in facilitating these transactions — particularly on creations — even though only non-bank broker-dealers are able to complete the entire process, Bloomberg added.
BlackRock, Bitwise, and Galaxy did not respond immediately to CoinDesk’s request for comment.
