Morgan Stanley to add spot bitcoin ETFs

Morgan Stanley is reportedly considering adding spot bitcoin ETF products to its brokerage platform. This move comes after the Securities and Exchange Commission (SEC) approved the investment vehicle in January.

Currently, there are 10 spot bitcoin ETFs trading in the US, with Grayscale’s GBTC, BlackRock’s IBIT, and Fidelity’s FBTC holding the majority of assets.

The introduction of bitcoin ETFs is expected to broaden the investor base for bitcoin, as purchasing ETFs is easier than buying the primary cryptocurrency directly. Major registered investment advisor networks and broker-dealer platforms, including Merrill Lynch, Morgan Stanley, and Wells Fargo, are likely to see increased investments in these products.

Morgan Stanley is a leader in the alternative investment and private market space with over $150 billion in assets under management. In 2021, it became the first major U.S. bank to offer bitcoin fund access to its wealthy clients. The bank confirmed in its first-quarter earnings call that it was offering exposure to bitcoin through external crypto funds, such as those offered by Galaxy Digital and NYDIG.

The addition of bitcoin ETFs to its platform aligns with Morgan Stanley’s strategic focus on wealth management, which is less dependent on capital markets and offers less volatile revenue sources. The company’s strategic expansion efforts, including the acquisitions of Eaton Vance, E*Trade Financial, and Shareworks, reflect this focus. The wealth management segment recorded a compound annual growth rate (CAGR) of 17.4% in total client assets over the past five years (2018-2023).

Earlier in January, Wall Street investment bank Goldman Sachs was reportedly in discussions to become an authorized participant (AP) for the spot bitcoin exchange-traded funds (ETFs) by BlackRock and Grayscale.

An authorized participant plays a crucial role in the ETF industry, responsible for creating and redeeming ETF shares. This ensures that the ETFs trade closely with their underlying assets. If the talks are successful, Goldman Sachs would join other financial giants like JPMorgan Chase, Jane Street, and Cantor Fitzgerald, who are already slated to be APs for various bitcoin ETFs.

BlackRock, the world’s largest asset manager, has aligned with J.P. Morgan and quantitative trading firm Jane Street for its bitcoin ETF. Valkyrie, another ETF applicant, has named Jane Street and Cantor Fitzgerald as its APs. These partnerships are crucial as the asset managers are not legally allowed to purchase the cryptocurrency directly.