BlackRock has cut the minimum amount of bitcoin needed for an in-kind conversion into its iShares Bitcoin Trust (IBIT) from $25 million to $1 million. That is a 96% reduction. The move could make the process easier for more institutional investors and large bitcoin holders.

However, the change does not mean ordinary retail investors can now exchange their IBIT shares directly for bitcoin. Robbie Mitchnick, BlackRock’s head of digital assets, confirmed the change during a Bloomberg Television appearance on August 10. He said:

The new $1 million minimum is much lower than before, which could allow more eligible institutions to use the in-kind process. Still, the process is not designed for everyday investors using a normal brokerage account.

An in-kind conversion allows bitcoin to be transferred directly into the ETF structure in exchange for IBIT shares. The process is handled through authorized participants, which are usually large financial firms, trading companies or market makers.

For example, an eligible participant can provide bitcoin and receive IBIT shares in return.
The process can also work in the opposite direction, allowing qualifying participants to exchange IBIT shares for bitcoin.

This is different from simply buying IBIT on a stock exchange with cash.

But it’s worth noting that a retail investor who owns IBIT shares cannot simply contact BlackRock and ask to exchange those shares for bitcoin in a personal wallet.

BlackRock came to the conclusion that the old $25 million minimum was very high. It meant that the in-kind mechanism was mainly useful to very large market makers and institutional trading desks.

The new $1 million threshold allows more eligible institutions to use the process when they want to move between direct bitcoin holdings and IBIT. More participants could also make the ETF market more efficient.

Normally, selling bitcoin for cash can create a capital gains tax event. An in-kind contribution may allow an eligible holder to move bitcoin into IBIT without first selling it for cash, therefore not owing any tax.

Digital asset tax specialist Clinton Donnelly said he believes that in the current tax system, an in-kind bitcoin contribution to IBIT is non-taxable. But there is an important warning; the IRS has not formally ruled on the issue.

Eric Balchunas made the point clearly, saying, “you don't realize gains but you do carry your basis, so it's merely deferral, not dodge.” This means the original cost basis can continue to apply after the conversion.

The $1 million threshold may not be the final target for BlackRock. Mitchnick has indicated that the company wants to make in-kind conversions available at even smaller transaction sizes.

The long-term goal has been described as making the process available at “any size.”
If that happens, the connection between directly held bitcoin and traditional ETF investments could become even stronger.

For now, however, the system still depends on authorized participants and other institutional requirements.

IBIT has become one of the largest spot bitcoin ETFs in the United States since launching in January 2024. The fund gives investors bitcoin exposure through traditional financial markets.

Instead of managing Bitcoin wallets and private keys, investors can buy and sell IBIT shares through a brokerage account. That has helped make bitcoin easier to access for investors who prefer traditional financial products.