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Morgan Stanley Bitcoin ETF Offering: Broker Dealer Giant to take BTC to the Masses?

Last Updated February 29, 2024 5:19 PM
Shraddha Sharma
Last Updated February 29, 2024 5:19 PM

Key Takeaways

  • Morgan Stanley is reportedly considering adding Bitcoin spot ETFs to its brokerage services.
  • Filings with the SEC suggest that a European fund may seek exposure to Bitcoin ETFs.
  • Analysts speculate this could be part of a growth strategy amid low inflows when BTC ETF inflows have peaked.

In a move that could potentially bring Bitcoin (BTC) to the masses, Morgan Stanley is reportedly exploring the addition of spot Bitcoin ETFs to its brokerage offerings. Morgan Stanley is a traditional financial institution with assets under management of over $1.5 trillion under its belt.

After JP Morgan was part of at least two Bitcoin ETF applicants as AP, expectations around cryptocurrency’s integration into mainstream financial institutions had heightened. With Morgan Stanley, it could further help with Bitcoin’s acceptance.

Morgan Stanley’s Foray into Bitcoin ETFs

As per media reports, Morgan Stanley is conducting due diligence on the feasibility of offering Bitcoin spot ETFs on its platform. In a recent SEC filing, Morgan Stanley Europe Opportunity Fund Inc stated in Form N-1A , “Bitcoin Exposure: The Fund may have exposure to bitcoin indirectly through cash-settled futures or indirectly through investments in pooled investment vehicles and exchange-traded products that invest in bitcoin (“Bitcoin ETFs”).”

However, it’s unclear if this is a concrete interest or a precautionary measure. Earlier in February, Morgan Stanley filed  to offer ETF share classes of its mutual funds, expanding its revenue stream. 

Another publication revealed, based on sources, that the large brokerage firm is looking to enter the Bitcoin ETF since its January approval. However, according to investor Fred Krueger, Morgan Stanley and UBS might offer existing ETFs.

Strategic Growth and Market Expansion

The possibility of Morgan Stanley’s brokerage platform offering Bitcoin ETFs created speculation in the financial community.

Eric Balchunas, a senior ETF analyst at Bloomberg, suggests that the inclusion of Bitcoin ETF exposure could serve as a growth strategy for funds. In a thread on X, the analyst said the record Bitcoin ETF volume growth comes likely from genuine buyer interest rather than automated trading or arbitrage strategies.

He mentions that traditional brokerage firms are considering offering these products on their platforms due to increasing demand. Balchunas further explained that the hesitation from these firms usually comes from a desire to see a proven track record and to ensure they will profit from offering these products.  

Balchunas humorously imagines a scenario where a financial advisor at a firm like Morgan Stanley can’t provide a product like $IBIT to a client because their platform hasn’t approved it yet, likening it to a child being restricted by a parent, which could be quite an awkward and uncomfortable position for the advisor.

Influence of Traditional Financial Institutions

The news has gathered attention from community figures like Anthony Scaramucci, who praised Morgan Stanley’s progressive stance. Meanwhile, the role of JPMorgan as an Authorized Participant in Bitcoin ETF applications, despite CEO Jamie Dimon’s skeptical view of Bitcoin, makes it less surprising for traditional financial giants to benefit from digital offerings.

Digital Offerings Less Surprising

Morgan Stanley’s potential venture into Bitcoin ETF offerings could mark another shift if the filing disclaimer is not just meant to be a risk mitigation exercise.

As the broker-dealer giant contemplates this move, there will be broader implications for the Bitcoin ETF market, which is already booming.

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