The Texas government plans to completely convert the $5 million worth of Bitcoin it holds through BlackRock's IBIT from ETF shares into on-chain spot, independently controlling the private keys.

Written by: Cathy

In 2013, the Federal Republic of Germany made its first request to the United States: to return the gold stored in the underground vault of the New York Federal Reserve Bank back to Frankfurt.

The Americans were not pleased. The gold was stored 25 meters deep in a granite cave in Manhattan, guarded by armed security, insured, and subject to global authoritative audits. Why would you want to move it?

The Germans did not explain much. They simply felt that when it matters most, something stored for you by someone else may not necessarily still be yours.

Thirteen years later, the same script is being replayed in the digital asset market.

In May 2026, the U.S. spot Bitcoin ETF saw a net outflow of over $2.6 billion in just two weeks. At the same time, the Texas government issued a tender to convert the $5 million Bitcoin it holds through BlackRock's IBIT from ETF shares into on-chain spot, with the state government independently controlling the private keys.

On one side is Wall Street frantically redeeming, while on the other, the government is quietly moving gold bars into its own cellar.

The institutions have not exited. They simply no longer trust intermediaries.

ETF Ebb: Temporary Escape of Arbitrage Funds

On May 27, the spot Bitcoin ETF saw a net outflow of $733 million in one day, setting a record high since January 2026.

BlackRock's IBIT was redeemed for $528 million in a single day, marking the second largest daily outflow since the fund's inception. Grayscale's GBTC experienced a run of $105 million, and Fidelity's FBTC saw a run of $60 million. Aside from Morgan Stanley's MSBT, which saw an inflow of $4.3 million, the entire market was deep in the red.

But just the day before, a massive block trade of 29 million shares occurred in IBIT, with a nominal value of about $1.3 billion. The transaction price remained stable, indicating strong liquidity and resilience in the market.

What does this mean? There is intense turnover among large institutions. Some are running, but others are picking up.

To put it simply, ETFs carry the speculative funds that are most sensitive to macro interest rates and geopolitical conflicts. The escalation of the U.S.-Iran conflict, persistent inflation delaying interest rate cut expectations, and rising yields on ten-year U.S. Treasuries. In such an environment, "shallow" institutional funds buying ETFs through traditional securities accounts inevitably need to exit first.

This is not a denial of digital assets. This is the standard action that happens in traditional financial markets every time there is a risk-off scenario.

Texas Moves Gold Bars: From IBIT to Cold Wallet

The truly noteworthy events happen on the opposite side of the ETF redemption tide.

In November 2025, Texas, based on its Strategic Bitcoin Reserve legislation (SB 21), purchased $5 million worth of Bitcoin through IBIT, with an average acquisition price of about $87,000. At that time, the state government lacked mature crypto custody infrastructure, so using the ETF was a pragmatic compromise.

But this "transition" was officially declared over in May 2026.

Texas issued a public tender, explicitly seeking a custody provider with high liquidity and top compliance qualifications, to completely liquidate IBIT shares for on-chain spot Bitcoin within 60 days after the contract is awarded, for independent physically isolated cold storage custody under the name of "Texas State Government."

Moreover, Texas requires the winning bidder to build a public real-time reserve website that continuously displays the true on-chain balance and real-time fair value.

Why is there a need to move out of the ETF?

An ETF is essentially a securitized certificate bundled with multiple layers of intermediaries: asset management companies, authorized participants, trust custodians. In extreme financial crises or wartime conditions, ETFs face risks of suspension, delayed liquidation, or even freezing. Directly holding private keys means truly holding that "gold bar."

There is also a calculation: although ETF management fees are low, as a strategic reserve intended to be held for decades, the compounded erosion of fees accumulates over time, resulting in public loss. Direct custody incurs almost zero holding costs.

Texas is the first state in the U.S. to move from ETF paper assets to on-chain physical holdings. Once this precedent is successful, other states and public trust institutions will line up to follow suit.

Corporate Treasuries: One Killed by Debt, One Thriving on Staking

If Texas's story is about "from paper gold to physical gold bars," the differentiation in corporate treasuries is even harsher, a matter of life and death in real currency.

The French chip company Sequans serves as a textbook example of the opposite. In the summer of 2025, this company, lobbied by Swan Bitcoin, boldly announced its intention to accumulate 3000 Bitcoin by raising $384 million through the issuance of convertible bonds and stocks.

The fatal problem: an average acquisition price of $116,700, almost buying at the historical peak.

When Bitcoin dropped to around $60,000 in early 2026, the excess collateral requirements of the convertible bonds necessitated margin calls, while the main business's revenue plummeted by 24.8% in the first quarter, with operational losses exceeding $50 million. With no ability to generate cash flow and trapped by debt terms.

Sequans was forced to sell at the bottom: selling 970 Bitcoin in November 2025, then another 1025 in the first quarter of 2026, and making a final large liquidation at the end of May to repay the convertible bonds before maturity.

On May 28, Sequans announced a complete abandonment of its digital asset strategy, with only 658 Bitcoin left on the books, which will be gradually sold off. The stock price fell over 90% from its peak.

On the other hand, Nasdaq-listed Bit Digital took a completely different path.

As of the end of March 2026, this company held 155,400 Ethereum, of which 62% was staked. In March alone, the staking rewards amounted to 291.3 ETH, with an annualized protocol net yield of 2.9%.

Smarter still, Bit Digital reconstructed about 70,000 ETH of native staking into liquid staking tokens (LsETH) in the first quarter, maintaining yields while releasing flexibility for instant monetization.

Treasuries are not dead assets. They are productive resources.

Looking at Strategy Inc. (the core entity of MicroStrategy): 843,700 BTC in hand, accounting for 4.01% of the global total. In May, it repurchased $1.5 billion of convertible bonds at an 8% discount, reducing the total amount of convertible bonds from $8.2 billion to $6.7 billion. At the same time, it increased its position by nearly 24,900 Bitcoin through permanent preferred stock and common stock financing, achieving a net yield of 13.3% per share this year for BTC.

The key difference lies in the capital structure. Strategy's "perpetual preferred stock + $871 million cash pool" means that even if Bitcoin falls by 80%, it will not trigger a forced liquidation. Sequans' convertible bond terms, on the other hand, throttled it as prices fell.

Both are corporate holdings; one killed by debt, one lives on staking, and one repairs its moat with permanent capital.

Institutional Landmines

Behind these micro behaviors, two macro forces are advancing simultaneously.

The FASB released ASU 2023-08 at the end of 2023, ending the most absurd old rules regarding the accounting treatment of crypto assets. In the past, companies holding Bitcoin had to permanently impair the value even if the price dipped for just a second, whereas increases were not allowed to be counted as profit. This "only losing, not earning" accounting method drove CFOs away.

The new standard introduces fair value measurement: revaluation at market price at the end of each reporting period, with increases and decreases counted in the current net profit. In April 2026, the FASB further expanded the applicability to include wrapped tokens and receipt tokens, while studying the categorization of high-liquidity digital assets as cash equivalents.

At the federal level, on May 21, 2026, bipartisan lawmakers submitted the ARMA Act, which aims to formally codify the strategic Bitcoin reserve executive order signed by Trump in March 2025.

The core terms are very firm: integrating approximately 328,000 Bitcoin held by the federal government into the Treasury, not selling for 20 years, with sales proceeds earmarked for repayment of the $39 trillion national debt, and purchasing a maximum of 1 million Bitcoin within five years.

The accounting standards have removed the financial reporting barriers for corporations holding Bitcoin, while the federal legislation paves the way for national-level buying.

Conclusion

When the Germans shipped gold out of New York in 2013, Wall Street traders found it very absurd. The gold is in the safest vault in the world; why would you want to move it?

What they didn’t understand is that for sovereigns, the question of "who holds it for me" is itself a risk.

Now, as Wall Street’s short-term funds click "sell" in ETF accounts, the Texas Treasury Committee is interviewing custodians, while Bit Digital’s staking nodes are receiving rewards every 6.4 minutes. The Ethereum rewards, along with the ARMA Act, are progressing through Congress.

They’ve found a quieter, deeper way to stay at the table.

The cold wallet may not speak, but it is securing the gold bars.