Morgan Stanley's Bold Step Into Crypto ETFs

By: Eva Baxter

Morgan Stanley, a notable player in the financial sector with $1.8 trillion in assets under management, has made headlines with its latest move into the crypto world. The bank has filed with the US Securities and Exchange Commission (SEC) for authorization to launch two exchange-traded funds (ETFs) – one for Bitcoin and another for Solana. These filings signify a significant step for the Wall Street giant, as it utilizes its brand directly rather than through its various subsidiaries like Calvert or Eaton Vance. The proposed ETFs will be only the third and fourth under the "Morgan Stanley" name.

These new investment vehicles are designed as passive trusts that will track the market prices of their respective cryptocurrencies without engaging in active trading or using leverage. While the ticker symbols and specific listing exchanges remain undisclosed, operational details have been established. The Morgan Stanley Bitcoin Trust, overseen by Morgan Stanley Investment Management Inc., plans to calculate the daily value of its shares using benchmarks from major spot Bitcoin exchanges. The uniqueness of the Solana Trust lies in its strategy to include staking rewards, thereby reflecting not only the price of Solana but also income from staking a portion of the trust's SOL.

The timing of these filings seems advantageous as recent regulatory shifts in the U.S. have made the environment more conducive to crypto innovations. The return of Donald Trump as President has contributed to a more crypto-friendly climate at the SEC, and new rules have been introduced to simplify the listing process for commodity-based trust shares, including those dealing with digital assets. Meanwhile, federal banking authorities have relaxed their stance on banks acting as intermediaries for digital assets, allowing them to engage in riskless principal transactions under specific guidelines.

Morgan Stanley’s push into crypto ETFs comes at a time of increasing institutional interest in digital assets, yet it is notable that the bank has not pursued ETFs for Ethereum or XRP. Despite growing inflows and interest in these cryptocurrencies, Morgan Stanley’s strategic focus on Bitcoin and Solana suggests a calculated approach, potentially aligned with client interests or regulatory considerations. While these actions highlight the firm’s strategic foresight, they also suggest that evolving market conditions and regulatory landscapes continue to shape which cryptocurrencies gain institutional backing.