BlackRock says crypto ETF trading is shifting toward in-kind transfers as security concerns rise

BlackRock, the firm behind the biggest Bitcoin exchange-traded fund, says it is seeing “billions” of dollars’ worth of activity tied to conversions that use in-kind digital-currency transfers, according to a market report published Monday.

The reported shift centers on how investors and authorized participants move exposure to the fund. With in-kind transactions, the transfer happens in the underlying asset or related instruments rather than through cash moving hands each time, a structure that can change the operational flow of ETF creation and redemption.

In the account, BlackRock attributed the growing interest to investors’ heightened security concerns. The logic, as described, is that some market participants are seeking a process they view as more direct for handling the digital-asset leg of the ETF workflow, rather than routing through a cash-heavy or intermediary-heavy path.

While the report frames the move as potentially large in dollar terms, it does not break out how much of the activity is linked specifically to spot Bitcoin conversions versus other crypto-linked mechanics. It also does not provide details on whether the surge is concentrated among particular counterparties, geographies, or ETF share classes.

BlackRock’s broader position in crypto markets makes the development notable. As the manager of a flagship spot Bitcoin product, the company sits at the center of how traditional capital markets interface with digital assets, including how ETF structures handle custody, settlement expectations, and the operational steps needed for conversion activity.

For the ETF market, the key takeaway is less about trading direction and more about plumbing. When a meaningful share of conversions shifts toward in-kind handling, it can alter how authorized participants manage inventory, timing, and operational risk, especially during periods when market participants perceive higher security exposure.

Still, several details remain unclear from the published report. It does not specify the exact timeframe for the “billions” referenced, does not identify which conversion mechanisms were most affected, and does not quantify how often in-kind activity occurs relative to cash-based flows. BlackRock did not provide, in the reported excerpt, additional commentary on custody arrangements, settlement windows, or any regulatory or policy changes tied to the increase.

Investors and market operators will likely watch for follow-through in subsequent ETF flow disclosures and conversion metrics, if the data becomes available. The durability of the in-kind trend may also hinge on whether investors’ security concerns ease, intensify, or shift toward different risk-management priorities across the crypto ecosystem.