Morgan Stanley anticipates that bitcoin will eventually be included on US bank balance sheets, although several obstacles remain, as stated by Amy Oldenburg, the bank's head of digital asset strategy, during the Bitcoin Conference in Las Vegas. Oldenburg outlined the firm's efforts to expand its digital asset business as client demand grows. She noted that the regulatory environment has become more supportive over the years, allowing the firm to engage in the broader digital asset space.
Oldenburg also mentioned that US banks may eventually hold bitcoin on their balance sheets, but highlighted several barriers, including the Federal Reserve, Basel rules, and the need for multiple global regulators. This isn't the first time a major bank has expressed interest in the digital asset sector, with BNY CEO Robin Vince stating that large financial institutions will drive the next phase of crypto adoption. However, regulatory clarity is necessary before banks can fully engage with the sector. Morgan Stanley has already begun its push into the digital asset space, launching MSBT, a bitcoin-backed exchange-traded product, which drew over $100 million in its first six days of trading.
The inflows were notable, as they came entirely from self-directed clients, demonstrating significant demand for such products. Oldenburg emphasized the gap between what advisors offer and client demand, with Morgan Stanley recommending a 2%-4% bitcoin allocation to clients. The slow adoption among advisors is due to an education problem, which the bank is addressing through internal training programs.
The appetite for regulated bitcoin exposure is well-established, with BlackRock's IBIT amassing over $61 billion in assets. Additionally, Morgan Stanley is pursuing an OCC digital trust charter, which would enable the bank to custody crypto directly and offer spot crypto trading on its wealth platform.