Morgan Stanley: If Bitcoin is to be included in bank assets, there are still "three hurdles" to overcome

Morgan Stanley executives expect Bitcoin to be added to bank balance sheets, but there are still hurdles to clear, including Federal Reserve regulations and the Basel Accords. The firm is actively applying for a digital trust license.

Bitcoin being formally included in the banking system is moving from imagination to reality. Amy Oldenburg, Head of Digital Asset Strategy at Morgan Stanley, expects that Bitcoin will inevitably end up on the balance sheets of major U.S. banks in the future, but for now there are still multiple hurdles to overcome.

Amy Oldenburg recently disclosed at the Bitcoin Conference held in Las Vegas that, as customer demand continues to heat up, the Wall Street investment bank is actively paving the way to expand its digital asset footprint. She said:

We’ve been deeply involved in the digital asset space for many years, and now, the regulatory environment is more supportive than ever for us to show what we can do.

Federal Reserve and international standards are key barriers

Amy Oldenburg also said that U.S. banks may eventually include Bitcoin on their own balance sheets, but for banks on the scale of Morgan Stanley to begin holding Bitcoin, they first need to clear several major hurdles, including the stance of the Federal Reserve (Fed), the Basel Accords (Basel Accords, global banking regulatory standards), and the need to reach consensus and obtain approvals from multiple regulators worldwide.

In fact, Wall Street leaders who are bullish that banks will move into the crypto space are not limited to Morgan Stanley. Robin Vince, CEO of BNY Mellon (BNY), said as early as March this year that large financial institutions will act as a bridge between traditional finance and digital assets, leading the next wave of mainstream cryptocurrency adoption; however, he also emphasized that regulatory clarity remains the top prerequisite before banks decide to “fully commit.”

Morgan Stanley’s MSBT listed for 6 days, raising more than $100 million

Despite regulations still being refined, Morgan Stanley has not stood still. Amy Oldenburg said the firm recently launched a Bitcoin spot ETF—“MSBT,” which is not only a major breakthrough for Morgan Stanley, but also the first time a U.S. chartered bank has issued a product of this kind.

Even more strikingly, MSBT had raised more than $100 million within the first 6 trading days after listing, with all funds coming from clients’ “active investments.” Morgan Stanley’s own wealth management advisors had not even started recommending this product to clients yet.

Advisors lagging behind client demand, with internal training accelerated

Amy Oldenburg pointed out that there is a clear gap between the products wealth management advisors offer to clients and clients’ actual needs. Although Morgan Stanley recommends that clients allocate 2% to 4% of their assets to Bitcoin, the pace of promotion is clearly lagging, mainly due to insufficient education and training.

She revealed that as much as 80% of ETP investment positions on Morgan Stanley’s wealth management platform are based on clients’ own trades. To address this, the firm has launched an internal training program to help wealth management advisors improve their skills.

The market’s demand for “compliant Bitcoin investment channels” is already an undeniable fact. For example, consider the Bitcoin spot ETF “IBIT” issued by asset management giant BlackRock. Since it was listed in January 2024, its assets have surged to more than $61 billion, setting a remarkable record for the fastest-growing ETF in history.

Next step: OCC digital trust license to enable direct custody and spot trading

Looking ahead, Amy Oldenburg said Morgan Stanley is currently actively applying to the U.S. Office of the Comptroller of the Currency (OCC) for a “Digital Trust Charter.”

If approved, Morgan Stanley would be able to directly provide cryptocurrency custody services for clients, and could even open up spot trading of cryptocurrencies on its own wealth management platform. As for the current MSBT product, it initially adopts a dual-custody model, with asset security jointly managed by the cryptocurrency exchange Coinbase and BNY Mellon.

• This article is reprinted with authorization from: 《Block Talk》
• Original title: 《Is the Fed the Final Boss? Morgan Stanley: 3 Obstacles to Bitcoin Inclusion on Bank Assets》
• Original author: Block Sister MEL