Morgan Stanley Advisors Given Go-Ahead to Pitch Bitcoin ETFs to Investors

Investment behemoth Morgan Stanley on Friday said it will soon permit its financial advisors to actively promote Bitcoin ETFs to eligible clients, marking the first time a major Wall Street bank has taken such a step.

Starting next Wednesday, the firm's vast network of approximately 15,000 financial advisors will be authorized to pitch shares in BlackRock's iShares Bitcoin Trust and Fidelity's Wise Origin Bitcoin Fund to suitable investors.

CNBC first reported the news. A source familiar with the move confirmed to Decrypt that the reporting is accurate.

Highlighting the significance of this development, Rob Hadick, general partner at Dragonfly Capital, told Decrypt that the wealth management sector is the primary channel that was underserved by crypto products pre-ETF approval.

"Now that changes with Morgan Stanley, and we'll almost certainly see the other largest banks follow suit,” Hadick said. “That will expand the marketable assets under management by over $10 trillion in the near term and even a small recommended allocation will result in significant net new inflows into those products."

Wes Levitt, co-chief investment officer and head of Europe operations for Alpha Transform Holdings, concurred, noting Morgan Stanley's top raking among traditional Wall Street investment banks and its widely respected wealth management unit.

“It imparts credibility from one of the most respected names in finance, and makes it much more likely that the wealth management arms of Citi, Bank of America, JP Morgan, etc., now follow suit so that they aren't left behind,” Levitt said.

The development comes after the U.S. Securities and Exchange Commission's approval of 11 spot bitcoin ETFs in January, signaling a new era of accessibility for Bitcoin investments.

"This move is in response to client demand and our desire to keep pace with the evolving digital asset marketplace,” CNBC reported, quoting a source familiar with the bank’s policies.

However, Morgan Stanley, which had $1.4 trillion worth of assets under its management in 2023, is proceeding with caution. The Bitcoin ETFs will only be available to a select group of clients who meet specific criteria. 

"Only clients with a net worth of at least $1.5 million, an aggressive risk tolerance, and the desire to make speculative investments are suitable for Bitcoin ETF solicitation," CNBC's source explained.

This development is particularly noteworthy given the cryptocurrency market's tumultuous history, including major market fluctuations and the collapse of prominent exchanges like FTX. 

Despite criticism from financial heavyweights such as JPMorgan Chase CEO Jamie Dimon and Berkshire Hathaway CEO Warren Buffett, Bitcoin continues to gain traction in mainstream finance.

Morgan Stanley's approach includes safeguards to protect clients from overexposure to the volatile cryptocurrency market. The bank will closely monitor clients' crypto holdings and limit these investments to taxable brokerage accounts, excluding retirement accounts.

Shant Kevonian, CEO and Founder of EtherMail, said the move represents one of the strongest and most consequential institutional seals of approval for Bitcoin to date.

By reducing the perceived risks associated with direct investment in Bitcoin, this move could trigger further integration of digital assets within the TradFi sphere, potentially accelerating wider levels of mainstream adoption, according to Kevonian.