Institutions Are Moving Billions in Bitcoin, Ethereum and Solana Off Wallets and Into ETF Wrappers

Crypto ETFs are moving into a more mature market-structure phase as major issuers and Wall Street intermediaries expand in-kind creation and redemption channels for Bitcoin, Ether and Solana products. BlackRock’s iShares Bitcoin Trust has processed more than $5 billion in direct Bitcoin-to-ETF conversions, up from more than $3 billion last October, while the firm cut IBIT’s minimum conversion size from $25 million to $1 million. Morgan Stanley Wealth Management and Galaxy Digital now offer eligible clients a pathway to convert Bitcoin, Ether and Solana into spot crypto ETP shares, and Morgan Stanley says in-kind conversions already account for 5%–7% of holdings in its roughly $560 million spot Bitcoin ETF.

The institutional read is clear: crypto wealth is being moved from wallets and exchanges into securities accounts, advisory platforms and ETF plumbing. This reduces custody friction, improves operational efficiency and may deepen ETF liquidity, while also concentrating more crypto ownership inside Wall Street intermediaries. The value capture sits with ETF issuers, authorized participants, custodians, market makers and wealth platforms. The risk is that this conversion can be misread as fresh inflow when it may simply repackage existing coins.

BlackRock has become the reference point for the in-kind crypto ETF trade.

The firm’s IBIT has facilitated more than $5 billion of direct Bitcoin-to-ETF conversions, according to BlackRock digital-assets head Robbie Mitchnick. That figure is up from more than $3 billion when the trend was reported last October. BlackRock also lowered the minimum size for IBIT in-kind conversions from $25 million to $1 million, dramatically expanding the addressable base of large holders who can move BTC into ETF shares without first selling for cash.

The structure is spreading. Morgan Stanley Wealth Management announced a referral arrangement with Galaxy Digital in June that lets eligible clients lend Bitcoin, Ether and Solana to Galaxy and receive spot crypto ETP shares after Galaxy coordinates an in-kind creation with an authorized participant, cutting onboarding time by up to 75% in some cases. Separately, Ally Wallace, global head of ETFs at Morgan Stanley Investment Management, told Bloomberg in late August that in-kind conversions already account for 5%–7% of holdings in the firm's roughly $560 million Bitcoin fund, MSBT.

This is the core shift. Large crypto holders are no longer limited to a sell-BTC-for-cash-then-buy-ETF workflow. They can move coins into the ETF creation process and receive securities exposure instead.

The U.S. Securities and Exchange Commission approved orders in July 2025 allowing authorized participants to use in-kind creations and redemptions for crypto asset ETP shares. The SEC said the approval brought Bitcoin and Ether ETPs closer to the creation-and-redemption mechanics used by other commodity-based ETPs, after the original spot Bitcoin and Ether products were limited to cash-based creations and redemptions.

That distinction matters. In a cash model, an authorized participant delivers cash to the fund, and the fund or its agent acquires the crypto asset. In an in-kind model, the authorized participant delivers the underlying crypto directly to create ETF shares, or returns ETF shares to redeem the underlying crypto. That reduces unnecessary cash legs, narrows execution frictions and can improve tracking.

Bitwise moved quickly after the SEC approval, announcing that its Bitcoin ETF and Ethereum ETF would offer in-kind creations and redemptions through authorized participants. The firm described the approval as a milestone that could improve trading efficiency and ultimately lower trading costs for investors.

Solana is now part of the same framework. Bitwise’s Solana Staking ETF was launched with in-kind creation and redemption capability, while Grayscale’s Solana Staking ETF filings show the trust can create and redeem shares via in-kind transactions with authorized participants or their designees in exchange for SOL. Grayscale also amended participant agreements, including with Jane Street, to support in-kind creations and redemptions.

The first advantage is custody simplification. Direct ownership requires wallets, keys, transfer controls, insurance, tax records, trading venue access and internal governance. ETF shares sit inside brokerage, custody, advisory and tax-reporting systems that institutions already use. This helps large crypto holders avoid situations like the Coldcard hack.

The second advantage is portfolio mobility. ETF shares can be pledged, transferred, model-allocated, rebalanced and reported more easily than wallet-held crypto. That is particularly important for wealth managers, family offices and institutions with compliance constraints around direct digital-asset custody.

The third advantage is tax and execution planning. In-kind transfers may help some investors avoid an immediate cash-sale step, though tax outcomes depend on the transaction structure, jurisdiction and investor facts. The important point is that the transaction can avoid a spot-market sale simply to move from coin exposure into fund exposure.

The fourth advantage is market efficiency. In-kind creation and redemption can help ETF market makers manage premiums and discounts more cleanly because the arbitrage process uses the underlying asset rather than cash-only execution.

For institutions, the product is no longer merely Bitcoin exposure. It is Bitcoin exposure embedded inside the same operating stack as equities, bonds and commodity ETFs.

For allocators still holding meaningful size in self-custody, the practical question is no longer whether to consider a wrapper — it's which issuer's in-kind service fits their holding size and jurisdiction. BlackRock's $1 million floor now covers a far wider set of holders than the old $25 million threshold; Morgan Stanley's Galaxy-brokered path adds lending and margin features on top. The decision increasingly turns on fee load, custodian, and how much operational control an allocator is willing to give up — not on whether to hold BTC, ETH or SOL exposure through a fund at all.

In-kind conversions should not be confused with fresh demand.

If a holder gives existing BTC to an authorized participant and receives ETF shares, the fund’s assets may rise, but the market has not necessarily seen new capital buying Bitcoin on an exchange. The coins moved from one ownership structure into another. That makes the flow different from a cash creation funded by a new investor who sends dollars that then need to be converted into BTC.

This matters for interpreting ETF flow data. A conversion can deepen ETF AUM, improve product liquidity and increase Wall Street custody share, while having limited immediate spot-buying impact.

The longer-term effect is still important. Once coins are inside ETF wrappers, they may become stickier institutional assets. Advisors can allocate them across portfolios. Banks can report them more easily. Market makers can hedge them more efficiently. Custody risk shifts from the investor to the fund structure.

That is a structural demand story, even when it is not a one-day spot bid.

The value capture is broad. ETF issuers capture management fees and scale economics. BlackRock wins when IBIT becomes the default landing place for crypto wealth entering brokerage accounts. Bitwise and Grayscale win by giving APs and advisors more efficient creation and redemption mechanisms. Morgan Stanley wins by keeping clients’ crypto exposure inside its wealth platform rather than watching assets remain on external exchanges or self-custody rails. Galaxy wins by facilitating the conversion infrastructure. Authorized participants and market makers win through spreads, arbitrage and balance-sheet services. Custodians win because ETF assets require institutional safekeeping.

The more assets move from wallets into funds, the more crypto resembles a fee-bearing Wall Street product. This is the same playbook that transformed gold exposure. Physical possession did not disappear. ETF ownership became the scalable institutional format.

Bitcoin in-kind conversion is mostly about custody, access and balance-sheet migration. Ether and Solana add another layer: staking.

Morgan Stanley recently launched Ethereum and Solana ETPs with staking infrastructure. Bitwise’s Solana Staking ETF also combines SOL exposure with staking rewards, and Grayscale’s Solana product similarly sits inside the staking ETF category.

That makes in-kind conversion more complex and potentially more valuable. A holder moving SOL or ETH into an ETF may be moving from self-managed staking or custodial staking into a fund wrapper that handles staking operations, validator selection, custody and distributions. The tradeoff is control. Investors outsource the staking stack to the sponsor and service providers.

For institutions, this is a meaningful step. ETH and SOL can now be framed not only as crypto beta, but as fund-held assets with potential yield distribution mechanics.

The major risk is concentration. If large crypto holders migrate into a few dominant ETFs, custody, pricing and market structure concentrate around major issuers and their service providers.

Other risks include operational control as In-kind crypto transfers require wallet controls, AP designee arrangements, custodian coordination and clean settlement procedures. There is also the added bit of tax uncertainty. In-kind conversion may be efficient, but investors should not assume a universal tax outcome.

Finally, In-kind redemptions can release underlying BTC, ETH or SOL back to authorized participants. During stress, that mechanism may improve ETF functioning, while also creating visible movement in underlying assets.

In-kind crypto ETF conversion is one of the most important market-structure upgrades since spot Bitcoin ETFs launched.

It does not automatically create new Bitcoin, Ether or Solana demand. It changes where crypto wealth lives. Coins held in wallets, exchanges or private custodians can now migrate into ETF shares, brokerage accounts, advisor platforms and institutional reporting systems with fewer frictions. That is how crypto becomes portfolio infrastructure.

The sharp thesis is this: investors should treat in-kind conversion as a Wall Street custody migration rather than a pure flow signal. It strengthens ETF liquidity, improves operational access and expands the addressable market for large holders, while shifting value capture toward issuers, APs, custodians, market makers and wealth platforms. Bitcoin gains the deepest immediate benefit because IBIT has scale; Ether and Solana may gain the higher-value wrapper over time because staking turns fund exposure into potential income. The winning issuers will be those that make crypto conversion feel as routine as moving shares between custodians.