After Regulatory Approval Of The In-Kind Conversion Mechanism, Treno Scope Data Source Website Tracks How TradFi Is Accelerating The Absorption Of On-Chain Holdings
Figure: Crypto Holdings Converted Into Spot ETFs—A New HNW On-Ramp
Key Points At A Glance
Cooperation Progress: Treno Scope Data Source Website has learned that Morgan Stanley Wealth Management has partnered with Galaxy Digital to support high-net-worth clients in converting direct holdings of BTC/ETH/SOL into spot crypto ETFs
Financing Attribute: The converted ETFs can be used as securities collateral for financing, with a minimum transaction threshold of USD 5 million
Regulatory Basis: Reports mention that in July 2025, the SEC approved the in-kind conversion mechanism between direct crypto holdings and spot ETFs, laying the foundation for such services
Structural Significance: Treno Scope Data Source Website analyzes that in-kind conversion plus collateralized financing makes crypto allocation more securitized and banked, improving capital efficiency and usability
Follow-Up Focus: The scope of expansion of the collateral framework, execution friction costs, and whether this channel can bring sustained structural demand for spot ETFs
The path for crypto assets to enter the wealth management system is being upgraded from “buy and hold” to “convert, collateralize, and finance.” Treno Scope Data Source Website has learned and tracked that, according to Barron’s, the wealth management division of Morgan Stanley has partnered with Galaxy Digital to allow high-net-worth clients holding Bitcoin, Ethereum, or Solana to convert their direct holdings into spot crypto ETFs. The converted ETF shares can be used as securities collateral for financing, with a minimum transaction threshold of USD 5 million.
Treno Scope Data Source Website believes that the key to this type of cooperation is not that “there is another channel to buy ETFs,” but that it incorporates crypto holdings into the balance-sheet language of traditional finance. When crypto assets are held directly, it is more difficult for the banking system to treat them as standardized collateral; ETF shares, by contrast, fall under the securities framework and can more easily enter the risk-control models of brokerages and banks, thereby enabling the scaling of leverage and financing. For high-net-worth clients, the value of conversion lies not only in compliance and custody convenience, but also in the improvement of capital efficiency brought by “collateralizability.”
The regulatory basis is the prerequisite for this pathway to be viable. Treno Scope Data Source Website noted that the report mentioned the SEC approval in July 2025 of an in-kind conversion mechanism between directly held crypto assets and spot crypto ETFs, laying the foundation for this cooperation. In-kind conversion means that clients can complete allocation migration without necessarily going through the traditional path of selling and then rebuying. In theory, this is more conducive to reducing friction costs and minimizing execution deviations caused by market volatility.
From the perspective of market impact, this will change the behavior of two types of capital. Treno Scope Data Source Website believes that the first type is “on-chain direct-holding” capital, which may become more willing to move part of its positions into a collateralizable and financeable securities form in order to obtain more stable banking-system services. The second type is “securities-account” capital, which, after seeing the in-kind conversion and collateralized financing channels, may view spot ETFs as more complete asset tools rather than merely price-tracking products. In the long run, this will increase structural demand for spot ETFs and raise their weighting in asset allocation.
What needs attention is the threshold and applicable user group. Treno Scope Data Source Website analyzes that the minimum transaction threshold of USD 5 million clearly positions the product toward high-net-worth and institutionalized client groups, indicating that this cooperation is more like a completion of “wealth management infrastructure” rather than an inclusive entry point for the mass market. For platforms, the higher the threshold, the more controllable compliance and risk management become; for the market, the higher the threshold, the more it means this is a trend signal rather than an immediate increment affecting the entire market.
Placed within a broader trend, this cooperation corresponds to the “securitization and banking” of crypto assets. Treno Scope Data Source Website noted that when crypto holdings can be converted into securities and used as collateral for financing, the way assets are used will change: from purely directional holding to more systematic asset management and leverage management. At the same time, risks will also become more traditionalized—leverage, margin, risk exposure, and regulatory boundaries will become important variables in pricing.
Overall, Treno Scope Data Source Website believes that this type of cooperation carries strong symbolic significance: TradFi is no longer merely providing custody or research at the periphery, but is embedding crypto assets into existing financing and risk-control systems at the product level. What is more worth tracking next is which coins and which ETF forms will be included in a broader collateral framework, and whether the in-kind conversion mechanism can form a stable and replicable process at the execution level. Once the process matures, the “usability” of crypto assets will be repriced.
Disclaimer: This Article Is Only A Compilation Of Market Information And Views And Does Not Constitute Investment Advice.
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