BlackRock has lowered the minimum Bitcoin required for direct swaps into its IBIT ETF from $25 million to $1 million, while competitor Bitwise cut its threshold to $3 million. These in-kind creations allow investors to exchange digital assets directly for ETF shares through intermediaries, potentially deferring capital gains taxes. Driven by security fears like hacks and kidnappings, IBIT has processed over $5 billion in swaps. The model is also expanding to ether and solana.
BlackRock IBIT conversion minimum reduction
- ▪The 96% reduction in BlackRock's IBIT conversion minimum makes the direct swap service accessible to a broader group of wealthy investors and institutions.
- ▪BlackRock's iShares Bitcoin Trust (IBIT) has processed more than $5 billion in Bitcoin-to-ETF swaps, up from approximately $3 billion in October.
- ▪BlackRock reduced the minimum value of Bitcoin required for direct swaps into its iShares Bitcoin Trust (IBIT) from $25 million to $1 million in July 2026.
In-kind creation process mechanics
- ▪In-kind creations allow eligible holders to transfer Bitcoin directly into an ETF structure in exchange for shares representing comparable exposure, skipping the step of selling for cash.
- ▪The U.S. Securities and Exchange Commission approved in-kind creations and redemptions for spot crypto exchange-traded products in July 2025.
- ▪Only authorized participants can create or redeem shares directly with the iShares Bitcoin Trust, meaning ordinary holders generally require a broker, trading desk, or qualified intermediary to arrange a conversion.
Tax deferral benefits
- ▪The tax-deferral benefits of in-kind ETF conversions are not universal and depend on the individual investor, intermediary, jurisdiction, and legal structure of the exchange.
- ▪In-kind conversions can help investors avoid realizing capital gains taxes that would otherwise be triggered by selling Bitcoin outright to purchase ETF shares.
Security concerns driving adoption
- ▪While ETFs eliminate the need to manage private keys and hardware wallets, investors surrender direct control and cannot withdraw the underlying Bitcoin from the fund.
- ▪Security concerns, including crypto kidnappings, hacks, and self-custody failures, are motivating investors to swap their self-custodied Bitcoin for regulated ETF shares.
Industry-wide threshold competition
- ▪At 21Shares, completed in-kind transactions over a three-month period leading up to August 2026 averaged about $5 million.
- ▪Bitwise lowered its minimum threshold for direct Bitcoin-to-ETF conversions from an initial $100 million down to $3 million.
Multi-asset ETF swap expansion
- ▪In-kind transactions are expanding to other digital assets, with Grayscale and VanEck utilizing them for ether, and Bitwise supporting swaps for both ether and solana.
- ▪Grayscale's in-kind transactions for gross Bitcoin creations rose from 28% in March to 62% in June, while its gross ether in-kind creations rose from 57% to 63% over the same period.
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