Morgan Stanley anticipates that bitcoin will eventually be included on US bank balance sheets, although several key obstacles still need to be addressed, as stated by Amy Oldenburg, the bank's head of digital asset strategy. Oldenburg discussed the firm's efforts to lay the groundwork for expanding its digital asset business in response to growing client demand during her speech at the Bitcoin Conference in Las Vegas.
She noted that the regulatory environment has become more favorable for the bank's involvement in the digital asset space over the years. Oldenburg also mentioned that US banks may eventually hold bitcoin on their balance sheets, but she highlighted several barriers that must be overcome first, including the Federal Reserve, Basel rules, and the requirement for multiple global regulators. This is not the first time a major bank has stated that banks will eventually become more involved in the digital asset sector.
According to BNY CEO Robin Vince, large financial institutions will drive the next phase of crypto adoption by acting as a bridge between traditional finance and digital assets, but they first require regulatory clarity. Morgan Stanley is taking proactive steps to enter the digital asset space, as stated by Oldenburg.
The bank has recently introduced MSBT, a bitcoin-backed exchange-traded product, which is the first of its kind to be offered by 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 pointed out that there is a significant gap between the products offered by advisors and client demand. While Morgan Stanley recommends a 2-4% bitcoin allocation to clients, the slow adoption among advisors is due to a lack of education, according to Oldenburg. The bank has launched internal training programs to educate financial advisors, and Oldenburg noted that 80% of ETP exposure on the wealth platform is self-directed.
The demand for regulated bitcoin exposure is well-established, as seen by the success of BlackRock's IBIT, which has amassed over $61 billion in assets. Furthermore, Oldenburg stated 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.