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(Bloomberg) — Bitcoin was once conceived as a way to escape the financial system. Increasingly, some of its biggest holders are choosing to move deeper inside it.
Wall Street is making it cheaper and easier for investors to swap large crypto holdings for shares in exchange-traded funds, allowing them to retain exposure to Bitcoin while moving their wealth from private wallets and crypto platforms into the machinery of mainstream finance.
What began as a bespoke service for the very wealthy is becoming more routine. BlackRock Inc. cut the minimum size for such transactions to $1 million in July from $25 million when the process first became available. Since US regulators last summer permitted in-kind creations, which allow investors to swap crypto for ETF shares, more digital assets have been moving into funds this way and the market infrastructure has steadily expanded.
That pitch has acquired an extra edge amid a spate of kidnappings, hacks and custody failures involving crypto wealth. Investors can simplify how they hold the asset, shedding the burden of private keys, digital wallets and self-custody while gaining some of the protections of a conventional financial product. And because the Bitcoin is exchanged rather than first sold for cash, that shift can be accomplished without necessarily triggering an immediate capital-gains tax bill, depending on the investor’s circumstances.
“It’s going to keep growing because we keep expanding the access,” said Robbie Mitchnick, head of digital assets at BlackRock. “People see things happen in the outside world — whether it’s kidnappings, ransom, custody failures — that motivate them to make this switch for all or some of their holdings.”
Bitcoin surged over the past week to briefly top $80,000, as improving market conditions and returning investor demand accelerated a rally that had begun with a squeeze on bearish positions.
The transactions use the same in-kind creation process that underpins much of the ETF industry. Investors contribute Bitcoin or other digital assets to a fund holding the same asset and receive ETF shares in return, with an authorized participant or market maker handling the transfer.
The scale is already material at BlackRock. Its IBIT fund, the largest of the US spot Bitcoin ETFs, has facilitated more than $5 billion of such conversions up from more than $3 billion when Bloomberg reported on the trend last October
Source: finance.yahoo.com