Morgan Stanley will be the first major Wall Street bank to permit its financial advisors to offer spot Bitcoin exchange-traded funds (ETFs), CNBC reported on Aug. 2, citing sources familiar with the matter.

This decision enables Morgan Stanley’s over 15,000 financial advisors to sell shares of BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC) — two of the most prominent ETFs with about $30 billion in total inflows — to select clients with a net worth of at least $1.5 million.

The move comes after months of due diligence since the lender has been considering allowing its brokers to actively promote Bitcoin ETFs since April. At the time, sources said the bank was contemplating the move due to growing client demand for these investment products. Previously, the bank’s clients had to initiate transactions to access these financial investments.

Client criteria

Apart from the client’s high net worth, Morgan Stanley stated that the interested investor must demonstrate a substantial risk tolerance and interest in speculative investments.

Furthermore, investments in these spot Bitcoin ETFs are restricted to taxable brokerage accounts and unavailable for retirement accounts.

The bank will also monitor clients’ crypto holdings to prevent excessive exposure to the asset class.

Bitcoin ETFs

Market analysts view Morgan Stanley’s move as a positive development for the crypto industry, especially following the success of the Bitcoin ETF.

Nate Geraci, president of ETF Store, emphasized the importance of this shift, noting the exceptional success of spot Bitcoin ETFs. He said:

“Spot Bitcoin ETFs have shattered industry launch records with one hand tied behind the back. These products are only starting to be made available at the largest financial advisory shops.”

Similarly, Bloomberg senior ETF analyst Eric Balchunas described the development as a “major deal” because the lender’s “advisors manage $5.7 trillion in client assets, the biggest of the warehouses.”

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The financial behemoth had initially greenlit BTC ETF purchases following approval earlier this year. However, these transactions were strictly initiated by customers, necessitating them to proactively engage with their advisors to delve into this asset class.

Now, the institution is contemplating a shift to allow its brokers to actively promote BTC ETFs, potentially amplifying demand for these investment vehicles. However, such a move also comes with added exposure to legal ramifications.

Meanwhile, the Wall Street giant is working on establishing clear guidelines, or “guardrails,” for solicited purchases. These guidelines may include risk tolerance assessments and allocation and trading frequency limits.

An unnamed Morgan Stanley executive reportedly said:

“We’re going to make sure that we’re very careful about it…we are going to make sure everybody has access to it. We just want to do it in a controlled way.”

The executives did not provide a specific timeline for when the bank would finalize its policy review.

Bitcoin ETFs