That route removes a lot of friction for a wealthy holder who already owns BTC. Selling Bitcoin, wiring dollars, and repurchasing exposure through an ETF adds execution costs and can realize a taxable gain, while in-kind transactions may defer that gain for some holders. Because the tax result depends on the holder and legal structure, each conversion requires individual tax advice.
So what was once a bespoke transaction is becoming a repeatable service, and a Morgan Stanley and Galaxy referral program announced in June shows how the process is spreading into wealth management. Under the arrangement, an eligible client lends crypto to Galaxy, which coordinates an in-kind creation with an authorized participant before ETF shares arrive in the client's chosen account. Galaxy cut its minimum for referred clients from $25 million to $5 million and said onboarding that can exceed four weeks may be shortened by as much as 75%.
Activity elsewhere shows the same process becoming routine, with Grayscale completing 62% of its gross Bitcoin creations in kind in June, up from 28% in March. Completed transactions at 21Shares averaged about $5 million over the three months through July, according to Bloomberg.
US spot ETFs already hold a large share of Bitcoin's total supply, with Bitbo counting 1,246,336 BTC across 13 funds on Aug. 25, equal to 5.935% of the 21 million supply. IBIT alone held 765,389.9 BTC, or 3.645% of the supply, while BlackRock listed its net assets at $60.65 billion on the same date.
Self-custody now carries a physical price BlackRock's head of digital assets, Robbie Mitchnick, told Bloomberg that kidnappings, ransom demands, and custody failures can motivate holders to move some or all of their coins into an ETF. The company hasn't broken the $5 billion down by motive, so the crime data provides context for the environment around the conversions and doesn't establish their cause.
The physical threat has become easier to quantify, with Chainalysis documenting 46 violent crypto incidents through late June and estimating that attackers successfully stole more than $30 million during the first half of 2026. That total was already more than half of the record $58 million taken during 2025, while only 12 of the 46 attempts produced a payment.
CertiK counted 52 verified incidents during the first half, up 33.3% from a year earlier, with $124.1 million in recorded exposure. The broader number includes losses and ransom demands, making it a different measure from Chainalysis's stolen-funds estimate; CertiK also found that home invasions jumped from one to 20 incidents year over year, while kidnappings rose from 12 to 16.
Self-custody removes an exchange or bank from the authorization chain, leaving the holder as the final signer. A properly secured wallet can resist remote theft, while a criminal inside the home can target the person who knows where the seed phrase, hardware device, or second multisig signer lives.
The true cost of self-custody therefore extends far beyond a hardware wallet, because multisig coordination, inheritance planning, private security, reporting, and recovery all consume money or attention. The burden expands when family members can become targets, which is why BlackRock describes IBIT as a way to simplify the operating and custody complexity of direct ownership.
However, IBIT's 0.25% annual sponsor fee and its dependence on brokerage and market infrastructure impose their own costs. The owner holds a security whose value tracks Bitcoin while the fund's custodians retain the coins, and direct custody preserves the ability to withdraw, transfer on-chain, and verify assets in a personal wallet.
August 27, 2026 2
