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Bitcoin investors are gaining easier access to in-kind conversions that swap the cryptocurrency directly for ETF shares, as asset managers lower the thresholds for using the mechanism.
BlackRock’s iShares Bitcoin Trust, the largest US spot Bitcoin ETF, has facilitated more than $5 billion in such conversions, according to Bloomberg. The total was more than $3 billion when Bloomberg reported on the trend last October.
The Securities and Exchange Commission authorized in-kind creation and redemption mechanisms for crypto exchange-traded products last summer. The process lets investors move Bitcoin into an ETF without first selling it for cash, potentially avoiding a capital-gains event.
Transactions generally run through authorized participants and other institutional channels rather than directly between an individual investor and an ETF issuer. BlackRock lowered IBIT’s minimum transaction size to $1 million in July from $25 million when the process first became available.
Bitwise has also reduced its minimum for in-kind transactions, from $100 million when it first used the process to $3 million. At Morgan Stanley, in-kind conversions represent about 5% to 7% of holdings in its roughly $560 million spot Bitcoin ETF, MSBT, according to the firm’s global head of ETFs.
The mechanism is also being used for Ether and Solana products. Bloomberg reported that the structure can reduce the burden of private-key and wallet management while giving investors the protections associated with a conventional financial product.
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