Zhao Ying, Wall Street Journal
According to the latest media reports, large Bitcoin holders are transferring their wealth from the blockchain to Wall Street balance sheets. The new generation of ETFs provides a new way for cryptocurrency tycoons to incorporate digital assets into the regulated financial system - without having to sell them, and through funds operated by large asset management companies such as BlackRock.
The trend was spurred by a regulatory change this summer that allows large investors to exchange bitcoin for shares in an exchange-traded fund (ETF) through a "bargain" transaction . This transaction method is already widely used for most ETFs but was not approved for bitcoin products until July.
This process is typically tax-neutral, involves no cash transfer, and is not recorded as a sale. The result is that the volatile digital asset is transformed into a line item on a brokerage account statement—making it easier to borrow against, pledge, or pass on to heirs.
Robbie Mitchnick, head of digital assets at BlackRock, revealed that the company has facilitated over $3 billion in such conversions. Bitwise Asset Management stated that it now receives inquiries daily from investors about transferring their holdings to its wealth management platform. Liquidity provider Galaxy has already processed several conversions.
From rebellion to return: Bitcoin embraces the traditional financial system
It’s the latest transformation for the world’s largest cryptocurrency, which was born as a decentralized rebellion against mainstream financial institutions but has now been quietly co-opted by them as its anti-establishment backers realize that some parts of finance are more accessible through traditional systems.
By exchanging Bitcoin for ETF shares, investors can maintain the same exposure to the cryptocurrency while converting it into a form recognized by the financial system .
Within a brokerage account, these holdings can be pledged as collateral, used for borrowing, or incorporated into estate planning—operations that are cumbersome, risky, or even impossible in a private digital wallet. ETF wrappers provide legitimacy and convenience, transforming wealth that once languished outside the system into assets that banks and advisors can manage.
Teddy Fusaro, president of Bitwise, which completed its first physical exchange transaction through its BITB ETF in August, said there are still benefits to holding assets within the traditional financial system.
Wealth management service upgrades drive conversion demand
Fusaro illustrates the practical benefits of conversion by saying, "Let's say an investor has a $1 million portfolio on a wealth management platform and another $5 million worth of Bitcoin held in a hardware wallet. Your wealth management platform will treat you as a client with $1 million," Fusaro said. "If you transfer the $5 million of Bitcoin into a Bitcoin ETF and hold it on the wealth management platform, you'll receive a higher level of service."
Mitchnick said large Bitcoin holders are realizing the "convenience of being able to hold exposure within their existing financial advisor or private banking relationship," which is one of the big reasons for switching .
He declined to disclose the exact number of transactions processed by BlackRock's IBIT ETF, but said further regulatory clarity would expand trading volume and the participation of large banks. He revealed that client inquiries range from wanting to convert 20% of their Bitcoin into ETF form to completely switching to traditional finance.
"There's a segment of people who are choosing to convert 100%, saying, 'This is the easiest way for me to hold all my assets in the future,'" he said.
Wall Street's role is deepening
More Wall Street institutions may soon take advantage of these physical swaps. BlackRock said banks already play a limited role in facilitating these trades — particularly in ETF creation — though currently only non-bank broker-dealers can handle the full transactions.
“Life is easier in traditional finance — we’ve spent a century perfecting integration, access, and security,” said Wes Gray, CEO and founder of Alpha Architect, an ETF firm specializing in tax strategies. “Bitcoin holders are finally realizing this. The great irony, of course, is that Bitcoin was created as an escape from traditional finance — and now its largest holder is trying to get back in.”
BlackRock pointed out that as regulations become clearer, more investors and financial institutions are expected to participate in such conversion transactions, promoting deeper integration of Bitcoin into the mainstream financial system.
