Morgan Stanley to Offer Crypto Access to Some of Its Most Affluent Clients
The rich want in on the cryptocurrency action. Banks want happy customers. So it’s perfectly natural that the wheels have been put in motion for Morgan Stanley (NYSE: MS) to offer crypto access to its clients.
But the plan does come with some interesting stipulations. Morgan Stanley crypto investors have to meet a litany of qualifications to be able to gain access to Bitcoin.
For starters, no newbies. Account holders must be clients for at least six months to be able to gain crypto exposure. This seems odd because the big bank won’t be able to use crypto access to draw in new customers. But because Morgan Stanley is the first major U.S. bank to grant access to clients, it’s treading lightly at first.
Secondly, the plan is for Morgan Stanley to offer crypto access only to those with “an aggressive risk tolerance.” It’s almost as if the bank is warning its clients to stay away from crypto. Even those who fit the bill will be allowed to invest only 2.5% of their total net worth in crypto.
Lastly, and here’s the big catch… only those with at least $2 million in assets held by the bank will be allowed to invest in crypto. The rich folks either too busy or too incompetent to venture into the world of crypto on their own finally got their bankers to do it. As funny as all of this is, it’s actually good news for Bitcoin bulls.
Behind the Decision for Morgan Stanley to Offer Crypto
Morgan Stanley has been crypto curious for a while now. Back in 2017, when initial coin offerings (ICOs) were happening by the hour and cryptocurrencies were on the tip of everyone’s tongue, Morgan Stanly floated an idea. The bank wanted to launch an investment tool that would be tied to Bitcoin. But the plan was scrapped. And the bank’s interest in crypto appeared to fade for a spell.
This announcement for Morgan Stanley to offer crypto access came shortly after another announcement. Counterpoint Global, which is a unit of Morgan Stanley, was exploring if and how it could make a bet on Bitcoin.
At the time, it seemed unlikely considering the regulators and the bank as a whole would need to sign off on it. But it signaled an increasing desire for Wall Street to get into crypto. And that desire appears to be on the cusp of being fulfilled.
According to the memo, Morgan Stanley will enable ownership of Bitcoin to its clients through three funds. Galaxy Digital, which was founded by former hedge fund manager Michael Novogratz, runs two of the funds. The third is overseen by a partnership between FS Investments and NYDIG – two alternative investment outfits.
Galaxy Digital was established for the purpose of offering diversified financial services in digital assets, cryptocurrencies and blockchain technology. Created in 2018, the firm touts itself as “the bridge between crypto and the institutional worlds.” This move by Morgan Stanley firmly cements Galaxy as doing just that.
The FS Investments and NYDIG partnership fund is another strong way into the crypto world. NYDIG is known for its secure Bitcoin ownership and management platform. And FS Investments is well-known for its ability to streamline crypto investing. Together, the duo will allow Morgan Stanley clients an easy point of entry to crypto.
Crypto’s Push Into the Mainstream
The move by Morgan Stanley to offer crypto is merely the latest in a list of institutions entering the crypto space. Mastercard (NYSE: MA) announced it would be bringing crypto onto its network. Crypto exchange-traded funds (ETFs) are a thing now. Tesla (Nasdaq: TSLA) went in big on Bitcoin and plans to accept it as payment for its vehicles. Despite digital currency derision from CEO Jamie Dimon, JPMorgan Chase (NYSE: JPM) launched a digital coin of its own not long ago. The Dallas Mavericks recently announced it would accept Dogecoin for ticket and merchandise purchases.
On top of all of this widespread crypto adoption, there are the increasingly popular crypto-adjacent non-fungible tokens (NFTs). And here’s an explanation of NFTs. These tokens that are tied works of digital art operate on blockchain technology. And they’re minting new millionaires all over the place. Legendary auction house Christie’s has even gotten in on the action. They’re becoming a popular asset class in their own right. And that’s only helping push crypto as a whole further into the mainstream.
As NYDIG CEO Robert Gutmann pointed out in a press release, institutional adoption of Bitcoin is expanding. Despite this, financial advisors don’t have many options to add crypto to their clients’ portfolios. But Morgan Stanley is looking to change that. This could be a watershed moment for crypto – or more specifically Bitcoin. If and when other big banks start granting crypto exposure to everyday investors, regulators are going to come knocking. Maybe then government agencies will finally come up with a cohesive classification of crypto…
The Financial Crimes Enforcement Network doesn’t consider crypto to be legal tender. The SEC considers crypto to be a security. And the IRS views crypto as property. But at the same time, that’s kind of perfect for a decentralized digital token.
The Bottom Line on the Plan for Morgan Stanley to Offer Crypto
This news doesn’t mean much for most Investment U readers. At least not yet… but it could (should?) be just the impetus for those on the crypto fence to consider getting in on their own. The beauty and the blemish of Bitcoin is that most institutions didn’t want to have anything to do with it. That’s led to a lot of volatility (both up and down). And it’s scared investors away.
On top of that, there is a bit of a learning curve. Crypto novices have to navigate exchanges. Then they need to figure out the best crypto wallet to store their digital currency. But the learning curve is proving to be worth it. And it’s not a bad idea to get over that learning curve before the rest of the institutional money starts pouring in.
If you’re looking for latest crypto news while getting the tips and tricks needed to navigate these tricky waters, we suggest signing up for the free Manward Financial Digest e-letter. It has helped countless subscribers overcome these obstacles and start building significant wealth… via investment strategies of every stripe.
About Matthew Makowski
Matthew Makowski is a senior research analyst and writer at Investment U. He has been studying and writing about the markets for 20 years. Equally comfortable identifying value stocks as he is discounts in the crypto markets, Matthew began mining Bitcoin in 2011 and has since honed his focus on the cryptocurrency markets as a whole. He is a graduate of Rutgers University and lives in Colorado with his dog, Dorito.