Morgan Stanley appears poised to become the first major Wall Street bank to allow its financial advisors to offer bitcoin ETFs to clients, marking a significant step in mainstream finance's adoption of cryptocurrency.
CNBC reported that the bank's 15,000 financial advisors can start pitching bitcoin ETFs to clients starting next Wednesday, citing sources familiar with the policy.
The financial giant isn’t exactly throwing open the doors to crypto ETFs, however. The policy only allows advisors to recommend two specific bitcoin ETFs, BlackRock's iShares Bitcoin Trust and Fidelity's Wise Origin Bitcoin Fund, and only to eligible clients.
In a sense, Morgan Stanley’s relaxed but still guarded stance on bitcoin ETFs was a long time coming, as it arrives more than half a year after the SEC’s January decision to approve 11 spot bitcoin ETFs.
The OG cryptocurrency, as the kids might call bitcoin, has gone through rollercoaster volatility, including multiple market selloffs, euphoric run-ups, and the high-profile collapse of crypto exchange FTX.
It has also faced criticism from the likes of JPMorgan Chase CEO Jamie Dimon and Berkshire Hathaway CEO Warren Buffett. Despite these challenges, bitcoin's integration into the mainstream financial landscape continues to progress.
Bucking a trend set by its peers – including Goldman Sachs, JPMorgan, Bank of America, and Wells Fargo – Morgan Stanley is now allowing its advisors to proactively offer these ETFs to clients rather than just waiting for clients to request them.
It’s been much slower to green-light bitcoin ETFs compared to the broader wealth space. In February, Carson Group gave its advisors approval to recommend a small shelf of four bitcoin ETFs, while Cetera revealed its own “prudent embrace” of bitcoin ETFs with a policy for advisors in March.
Morgan Stanley’s shift is a response to growing client demand and an evolving digital asset market, according to unnamed individuals familiar with the matter.
Still, the firm is unlocking bitcoin ETF recommendations to a very select clientele. Under the policy, only clients with a net worth of at least $1.5 million, a high risk tolerance, and an interest in speculative investments will be deemed suitable.
The bank is also reportedly emphasizing that these investments are intended for taxable brokerage accounts and not for retirement accounts – though some industry proponents have suggested bitcoin ETFs have a place in 401(k)s – and it will monitor clients' cryptocurrency holdings to prevent excessive exposure to the volatile asset class.
The revelations are just the latest in Morgan Stanley’s record of flirtation with the crypto investment space. Previously, it approved the purchase of private funds from Galaxy and FS NYDIG, which were made available starting in 2021.
As for the newly approved ether ETFs, the bank is reportedly keeping an eye on the new crypto fund vehicles, but has yet to decide whether it will offer access to those products.
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Pro-bitcoin professionals, however, say the cryptocurrency has ushered in change.
“LPL has evolved significantly over the last decade and still wants to scale up,” says one industry executive.
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