BlackRock sees $3.6 billion in Bitcoin ETF conversions as minimums fall to $1 million

Large-scale Bitcoin holders are increasingly looking to convert their directly held assets into shares of exchange-traded funds that track the digital currency, according to Barron's. In-kind crypto conversions are relatively novel since regulators granted approval last year, but already BlackRock, the massive investment management firm, has seen billions of dollars in transaction volume.

Robbie Mitchnick, BlackRock's head of digital assets, says the level of demand and interest has been moving steadily upward. Mitchnick notes that conversions of digital holdings to shares of BlackRock's iShares Bitcoin Trust ETF have been rising consistently regardless of price fluctuations.

Converting appreciated Bitcoin assets into ETF shares through an in-kind transaction generally avoids triggering capital-gains taxes. Investor motivations vary, but security and simplicity remain at the top of the list. Holding shares managed by a large fund company is widely seen as less risky than dealing with a crypto exchange or storing assets in an online wallet.

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Outsourcing custody to an institutional-grade cold-storage model reassures large holders who worry about digital exchange hacks. A big part of the rising interest is declining minimum transaction levels, which have expanded access. When BlackRock first began offering in-kind transactions, the minimum was around $30 million, but it now hovers between $1 million and $2 million.

Competitors such as Fidelity Investments and Grayscale are also offering in-kind conversions with lower minimums. Exchanging directly held Bitcoin for shares of an ETF can bring those holdings into a managed brokerage account where other assets live. That simplifies the treatment of digital assets in tax and estate planning within a private bank or wealth management account.