Morgan Stanley Files SEC S-1 for Bitcoin Trust: Is Wall Street Preparing to Invest?

Summary:
Morgan Stanley has filed a Form S-1 registration statement with the U.S. Securities and Exchange Commission to establish a spot bitcoin exchange-traded fund (ETF). Named the Morgan Stanley Bitcoin Trust, this fund aims to track bitcoin’s price directly and signifies a shift towards in-house crypto products.

Key Takeaways

Morgan Stanley is looking to launch a bitcoin ETF named the Morgan Stanley Bitcoin Trust.
The trust will operate as a passive ETF, directly holding bitcoin and mimicking its price in U.S. dollars.
Retail investors will trade shares on the secondary market rather than redeeming them directly.
This move highlights Morgan Stanley's broader strategy to integrate crypto investments into mainstream portfolios.

Morgan Stanley Files SEC S-1 for Bitcoin Trust: Is Wall Street Preparing to Invest?

Morgan Stanley's Bitcoin ETF Filing with the SEC

On January 6, Morgan Stanley made a significant move into the cryptocurrency market by submitting a Form S-1 registration statement with the U.S. Securities and Exchange Commission (SEC). This step positions the bank to potentially introduce a spot bitcoin exchange-traded fund (ETF) if it receives the necessary approval.

Proposed Product Aims for Direct Price Tracking

The planned Morgan Stanley Bitcoin Trust is designed as a passive ETF that mirrors bitcoin’s price performance in U.S. dollars, excluding fees and operational costs. Unlike other products that might use leverage or trading strategies, this trust will hold bitcoin directly.

Bitcoin ETF Concept

The trust’s net asset value will be calculated on a daily basis, based on a pricing benchmark that consolidates data from leading spot bitcoin exchanges. While shares are anticipated to be listed on a national securities exchange, the specific ticker has yet to be announced and is subject to SEC approval.

Morgan Stanley Investment Management will be the trust’s sponsor, and established service providers will oversee custody and operations. Only authorized participants will be able to create and redeem shares, either in cash or physical bitcoin.

In cases of cash transactions, third-party bitcoin counterparties will handle trades for the trust, with the related costs incurred by the authorized participants. Retail investors will trade shares on secondary markets via brokerage accounts, where prices may not always align perfectly with the net asset value due to market conditions.

Growing Market for Spot Bitcoin ETFs

This filing comes at a time when spot bitcoin ETFs are experiencing rapid growth in the U.S. market. Recent data indicates that these products now hold over $123 billion in net assets, which accounts for about 6.6% of Bitcoin’s total market cap.

Spot Bitcoin ETFs

Since the start of the year, net inflows have surpassed $1.1 billion, with Bitcoin's price hovering around $93,800 as of January 5. Notably, BlackRock’s spot bitcoin ETF has become a significant contributor to its revenue, with allocations approaching $100 billion, underscoring the income potential for such products.

Morgan Stanley’s Commitment to Crypto Investments

Morgan Stanley's recent actions are not limited to bitcoin. The firm has also filed for a Solana-tracking trust, indicating a broader strategy to delve into crypto-linked investment vehicles. Currently, Solana trusts have accumulated over $1 billion in total net assets, with nearly $800 million in inflows.

Morgan Stanley Solana Trust

These filings reflect Morgan Stanley’s aim to enhance its share of the cryptocurrency economics by developing its own products rather than relying on external firms. Unlike other asset managers that primarily focus on fund distribution, Morgan Stanley manages the largest wealth management division globally, overseeing around $8.2 trillion in client assets.

The timing of this SEC filing corresponds with a significant shift in regulatory and commercial landscapes. Additionally, Morgan Stanley is preparing to initiate direct crypto trading for Bitcoin, Ether, and Solana through its E-Trade platform, pending regulatory clearance from the Federal Reserve.

The bank has noted a more supportive regulatory environment in the U.S. as a crucial factor motivating its expansion into digital assets. For investors, this proposed trust will offer a regulated way to gain exposure to bitcoin, using familiar brokerage infrastructure and alleviating the burdens of self-custody.

Similar to other spot ETFs, this structure is created to keep the share prices closely linked to the underlying asset. Daily creation and redemption processes will help avoid issues faced by earlier models, which often traded at prices that diverged from actual values.