Morgan Stanley is considering expanding its sales of Bitcoin exchange-traded funds (ETFs) by allowing its brokers to actively recommend these products to customers. This move comes as the firm aims to tap into the growing demand for cryptocurrency investments. Currently, the firm offers Bitcoin ETFs on an unsolicited basis, but by enabling advisors to actively recommend these products, they could potentially broaden their customer base. Morgan Stanley is in the process of establishing safeguards for solicited purchases, including requirements related to risk tolerance, limits on allocation, and trading frequency.
The approach taken by Morgan Stanley aligns with other major banks in the industry, such as Bank of America’s Merrill Lynch and Wells Fargo, who introduced Bitcoin ETFs shortly after their regulatory approval in January. However, not all institutions offer crypto ETFs, with some choosing not to offer cryptocurrency products citing concerns about their suitability for long-term portfolios. LPL Financial, the largest independent brokerage, announced plans in February to evaluate which Bitcoin funds it could offer to customers, while Cetera Financial Group approved four Bitcoin ETFs for its advisors in March.
While customers have shown considerable interest in Bitcoin ETFs, a Morgan Stanley executive noted that it is still regarded as a speculative investment. The executive mentioned that clients are not heavily investing in Bitcoin, but rather are putting in a little bit of money out of interest. In Hong Kong, the Securities and Futures Commission recently granted approval to several fund managers to offer spot Bitcoin and Ethereum ETFs by the end of April. The goal is to establish Hong Kong as a hub for digital assets by introducing a range of cryptocurrency ETFs.
In January, the Securities and Exchange Commission approved 11 applications for Bitcoin ETFs, including those from BlackRock, Ark Investments, Fidelity, Invesco, and VanEck. However, not all of these firms have made their Bitcoin ETFs available to investors. Some financial institutions, like Raymond James Financial and Vanguard, have chosen not to offer cryptocurrency products. Merrill Lynch, for example, set a minimum asset threshold of $10 million for customers interested in purchasing a Bitcoin ETF. Morgan Stanley is in the process of establishing safeguards, or “guardrails,” for solicited purchases, which would include requirements related to risk tolerance, limits on allocation, and trading frequency.
The potential move by Morgan Stanley to allow brokers to actively recommend Bitcoin ETFs to customers could broaden their customer base, although it would also expose the firm to additional liability. Other major banks have introduced Bitcoin ETFs shortly after their regulatory approval in January, but limitations on access to unsolicited purchases have been implemented. The interest in Bitcoin ETFs is still considered speculative, and while clients are interested, they are not heavily investing in the cryptocurrency. Hong Kong is also gearing up to launch spot Bitcoin and Ethereum ETFs by the end of April in an effort to establish itself as a hub for digital assets through the introduction of cryptocurrency ETFs.
