Morgan Stanley Wades Into Crowded Bitcoin Market

Morgan Stanley has a New Year’s Resolution that can go right on a ledger … a distributed ledger, that is.

The bank is the latest to prep bitcoin and Solana exchange-traded products, filing trusts on Tuesday. Those would mark its first step into the digital-asset product realm, a booming category in which it previously avoided direct participation, though it has allowed its more than 14,000 advisors to offer products from other asset managers.

The forthcoming ETPs may enable Morgan Stanley “to consolidate wallet share among its wealth management clients, disincentivizing multihoming with another crypto custodian that might gradually try to compete for other chunks of that customer’s business,” said Sean Dunlop, director of equity research at Morningstar.

Fashionably Late?

Given the relatively short time that bitcoin and other digital asset ETPs have been on the market (two years) and the absolute dominance of BlackRock’s $73 billion IBIT, it would seem like a daunting entry point for even the largest fund companies with major footprints in other asset classes. Still, traditional financial services companies that initially resisted crypto are coming to terms with the asset. Notably, Vanguard recently allowed its massive base of clients to access some of the more established crypto ETPs. Morgan Stanley itself expanded crypto ETP access last year to all clients, not just those with $1.5 million and big risk tolerance, as it previously had.

For the bank, which reported $1.8 trillion in assets under management or supervision as of September, the opportunity likely boils down to a combination of asset management, wealth management and operational efficiency, Dunlop said. Morgan Stanley issued a press release acknowledging the trust filings, though the company declined to comment further. 

The Long Game: The product filings come not only after early entrants have their own ETPs up and running, but also have launched down-market and even memecoin funds. Since the Securities and Exchange Commission recently allowed the major exchanges to use generic listing standards, which accelerates fund launches, many more funds of different varieties have been filed. Even so, the interest for players like Morgan Stanley might be more about the tech than the products, Dunlop said. 

“The benefits of distributed ledger technology are increasingly well understood — faster transaction speed, better security and lower cost — and while crypto assets may not be the ‘killer use case,’ the underlying technology could be quite disruptive in the financial services space,” he said.