Morgan Stanley anticipates that bitcoin will eventually be included on US bank balance sheets, although significant obstacles must be overcome, according to Amy Oldenburg, the bank's head of digital asset strategy. Speaking at the Bitcoin Conference in Las Vegas, Oldenburg outlined the firm's efforts to expand its digital asset business as client demand grows. Oldenburg stated that the regulatory environment has become more supportive, allowing the firm to make progress in the digital asset space. However, she highlighted several barriers, including the Federal Reserve, Basel rules, and the need for multiple global regulators, before a bank of Morgan Stanley's scale could start holding bitcoin on its balance sheet.
This is not the first time a major bank has expressed its intention to venture further into the digital asset sector. BNY CEO Robin Vince previously stated that large financial institutions will drive the next phase of crypto adoption by serving as a bridge between traditional finance and digital assets, but regulatory clarity is necessary before making a significant investment.
Morgan Stanley has already begun its foray into the digital asset space, with the recent launch of MSBT, a bitcoin-backed exchange-traded product, which drew over $100 million in its first six days of trading. Notably, these inflows came entirely from self-directed clients, as Morgan Stanley's financial advisors had not yet begun offering the product.
Oldenburg noted 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, Oldenburg said. To address this, the bank has launched internal training programs to bring financial advisors up to speed. The demand for regulated bitcoin exposure is evident, 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.