Morgan Stanley anticipates that bitcoin will eventually be included on US bank balance sheets, although several key obstacles remain, as stated by Amy Oldenburg, the bank's head of digital asset strategy. During her speech at the Bitcoin Conference in Las Vegas, Oldenburg outlined the firm's efforts to lay the groundwork for expanding its digital asset business in response to growing client demand. "The regulatory environment has been more supportive of our involvement in the broader digital asset space over the past few years", Oldenburg said. Oldenburg, who is scheduled to speak at CoinDesk's Consensus Miami conference, also mentioned that US banks may eventually hold bitcoin on their balance sheets.
However, she highlighted several barriers that must be overcome, including the Federal Reserve, Basel rules, and the need for multiple global regulators, before a bank the size of Morgan Stanley can start including bitcoin on its balance sheet. This is not the first time a major bank has stated that banks will eventually venture further into the digital asset sector.
BNY CEO Robin Vince said in March that large financial institutions will drive the next phase of crypto adoption by serving as a bridge between traditional finance and digital assets, although regulatory clarity is needed before they can fully commit to the sector. However, Morgan Stanley is taking proactive steps to enter the digital asset space, according to Oldenburg. The bank recently launched MSBT, a bitcoin-backed exchange-traded product, which is the first of its kind from a US-chartered bank.
The product attracted over $100 million in its first six days of trading. What's notable about these inflows is that they came entirely from self-directed clients, as Morgan Stanley's financial advisors had not yet begun offering the product, Oldenburg said. "All of that was self-directed, it was not even available in advisory on the wealth platform", she said. This dynamic demonstrates significant demand for such products from clients.
Oldenburg stated that there is a substantial gap between what advisors are offering clients and where demand lies. While Morgan Stanley recommends a 2%-4% bitcoin allocation to clients, the slow adoption among advisors is due to a lack of education, Oldenburg said.
She also noted that 80% of ETP exposure on the wealth platform is self-directed and that the bank has launched internal training programs to bring financial advisors up to speed. The demand for regulated bitcoin exposure is well-established, as BlackRock's IBIT has amassed over $61 billion in assets, becoming the fastest-growing ETF in history since its launch in January 2024.
Additionally, Oldenburg said that 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. The MSBT product itself uses Coinbase and BNY Mellon as dual custodians.