Bloomberg reported on Tuesday that some large Bitcoin holders are moving their coins into spot exchange-traded funds through in-kind creation, converting off-platform BTC into brokerage account assets that can be borrowed or included in estate plans.
Mechanics are taking a break due to a summer policy change.
On July 29, 2025, the U.S. Securities and Exchange Commission (SEC) announced a decision approving an order permitting the in-kind creation and redemption of crypto exchange traded product (ETP) shares, a policy covering spot Bitcoin exchange traded funds (ETFs).
The agency argued that the change is a departure from previous cash-only approvals for Spot Bitcoin and Ether and is consistent with long-standing practice for commodity ETPs.
In practice, authorized participants can give and receive the underlying assets, rather than cash, when creating or redeeming ETP shares, the SEC said. SEC Chairman Paul Atkins said the move would make the product “lower in cost and more efficient,” while Trading and Markets Director Jamie Selway said it was an “important development” that would give issuers and investors flexibility.
Against this backdrop, Bloomberg reported that some whales are handing over BTC to ETFs and receiving fund shares without selling them. The outlet noted that this structure is generally tax-free because the sale is not recorded. Your exposure won't change, but it will show up in your brokerage account and can be pledged as collateral or included in your estate plan, according to Bloomberg.
According to Bloomberg, activity is already visible. BlackRock has facilitated more than $3 billion in such conversions, said Robbie Mitchnick, head of digital assets. Bitwise told Bloomberg that it receives daily inquiries from customers asking to reflect their holdings on the asset platform. Bloomberg added that Galaxy processed a small number of transactions, citing Michael Harvey.
Some customers only shift a portion of their holdings. Mitchnick told Bloomberg that fully integrating the “subsets” is “the easiest way” to maintain them going forward.
Bitwise President Teddy Fusaro said there were “benefits to bringing things into the traditional financial system,” such as allowing private banks to serve customers.
Bloomberg added that banks already have a limited role in facilitating these trades, especially those in creative products, although currently only non-bank broker-dealers can complete the full process.
BlackRock, Bitwise, and Galaxy did not immediately respond to CoinDesk’s requests for comment.
