Morgan Stanley Opens Up to Crypto ETFs. Who’s Next?

A domino just fell in the crypto ETF market.

As of today, Morgan Stanley no longer places restrictions on which clients can invest in digital asset ETFs. Until now, the firm had limited access to risk-happy clients with investable assets of at least $1.5 million, a source familiar with the matter confirmed to ETF Upside. The shift follows a string of developments in the broader digital-asset ETF market, including the SEC recently paving the way for exchanges to quickly list spot-price crypto ETFs of many flavors. The biggest fund, the iShares Bitcoin Trust (IBIT) is the fastest-growing exchange-traded product in history, and it’s nearing $100 billion in assets. Investors, meanwhile, got a painful reminder last week of how volatile Bitcoin can be, with prices dropping 12%. Amid all that, Morgan Stanley’s change in policy is a massive development, said Ric Edelman, founder of the Digital Assets Council of Financial Professionals.

“It shows that the wirehouses now recognize the strong advisor and investor demand for crypto, and they are using crypto to attract new AUM and clients,” he said. “Morgan Stanley is demonstrating its leadership in this space, and its competitors will have no choice but to accelerate their crypto activities in order to catch up.”

No Blocking the Blockchain

Times are changing. Even one of the biggest skeptics, Vanguard, recently indicated it is reevaluating its policy against crypto ETFs. But the category has plenty of nonbelievers, including Massachusetts Secretary of State Bill Galvin, who has long taken issue with crypto assets. Last week, Galvin wrote to several US senators, urging them to revise sections of the Responsible Financial Innovation Act, which splits aspects of crypto oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission.

Having tens of thousands of advisors suddenly able to work with more clients on crypto will contribute to the flood of assets into the category’s ETFs, Edelman said. Among other consequences he cited:

• That could help buoy prices to increasingly high levels.
• Advisors who aren’t up to speed won’t get new clients with a specific interest in crypto, and they risk losing clients who want some exposure to the asset class.

Crypto Keepers: The warming to crypto (or at least the idea of providing access to it) didn’t happen overnight. “They’ve been doing due diligence at many of these firms and receiving a fair amount of pressure and demand from advisors and clients,” said Christian Magoon, CEO of Amplify ETFs. “It’s an established asset class.” Morgan Stanley’s change will put pressure on Wells Fargo, UBS, Merrill Lynch and others, he added. “It’s only going to speed up.”