While Nick himself was beyond bloodline abilities as a tier five going on seven that didn't mean that it was any less of an important discovery. From what he could understand most bloodline abilities were for a lack of better explanation paths to follow towards divinity. The reason for this was that if one were to focus their progress around their abilities then the domains tied to those same abilities were grasped much faster than those who lacked this direction to grow in. In simple terms bloodline abilities made it easier to reach divinity.-
While it was true that bloodline abilities also granted more immediate benefits to those who have them it was also very true that these benefits tended to stop being all that relevant once one hit tier four as any wizard or witch that got that far on the path had spells just as powerful. Even Nicks own bloodline abilities were just powerful applications of magic at this point with the exception of his avian dominion and all understanding ones. Those were always useful as they had nothing to do with power to begin with.-
Anyway this discovery of Zanpakuto spirit turned daedra bloodline ability conversion had Nick curious to see if he could mimic this process to a degree in order to artificially introduce new bloodline abilities in already born wizards. The reason he hadn't even considered doing so for muggles was that thanks to the knowledge he got from his newest crafting style turning a mundane soul into anything not was a slow and in most cases not worthwhile process. Previously when he tried to forcefully add magic to a nonmagical soul the creature died since they spawned magic in their bodies but had no way of releasing it.-
As it turned out according to the information he got with his new style such brute force methods would in almost every single case result in death. So Nick wasn't willing to gamble on success in hopes of converting the muggles to magicals using that method. That said he also had high hopes that the introduction of Zanpakuto amongst the muggles would cause them to evolve in a sort of spiritual human race not unlike the Quincy. This way even if the population of wizards on the planet didn't dramatically rise the muggles would not be so helpless to keep up with them.-
As for why Nick didn't think the Zanpakuto would give the wizards an unfair advantage in the case they were also influenced by their usage? Because wizards already empowered their own souls simply by learning and using magic. Adding Zanpakuto to that doesn't do anything besides speeding the growth up a bit. Even if the average power of wizards in the world rises to tier three rather than tier one or two it won't change the fact that only the really dedicated or talented could set foot in tier four and beyond.-
For this reason Nick began to set aside some of the blank Zanpakuto to be sold to other parts of the world. Dumbledore and Flammel were the first to get access to them outside Nick's territory and even then it was in small quantities as they still had to deal with war bands and thieves. Thievery in Nicks city was impossible as each and every Zanpakuto was documented alongside who got it. The entries and exits to the city was also monitored strictly so you couldn't just nab an item and leave. You couldn't fly or dig your way out either as both those routes were under constant monitor so any unauthorized intrusion into them below or above a certain point was spotted immediately.-
Good luck finding anyone to buy said stolen goods in the city as well as without the ridiculous laws banning so many things that the ministry had a lot of previously illegal goods could now be sold openly. This meant that there wasn't really any need for a black market or criminal underworld in the city. Nick had taken the most useful parts of laws and rules from history and after modifying them based on logic applied them to his city. -
As a result crime was damn near nonexistent in his city as there simply wasn't any need for it. It wasn't a utopia or any such impossible concept but it was better than everywhere else and that was all that mattered. In a funny twist Zeus actually sent people demanding Zanpakuto for his own empire "For equality" which had Nick and Hephaestus laughing their heads off. It was such a load of crap that even the people across the ocean could smell it. Obviously Zeus recognized the war potential of the Zanpakuto and wanted to possess it for his own or perhaps he was worried that Hephaestus would grow an army so powerful using them that his own would get stomped easily.