US Banks Will Eventually Hold Bitcoin Assets, Predicts Morgan Stanley Expert

In a significant development, Morgan Stanley is anticipating the eventual inclusion of bitcoin on US bank balance sheets, with the firm's head of digital asset strategy, Amy Oldenburg, highlighting the ongoing efforts to expand its digital asset business in response to growing client demand. Oldenburg, who took the reins as head of digital-asset strategy earlier this year, shared her insights at the recent Bitcoin Conference in Las Vegas, where she emphasized the need for a more supportive regulatory environment to facilitate the firm's digital asset ambitions.

According to Oldenburg, who is scheduled to speak at CoinDesk's Consensus Miami conference, US banks may ultimately hold bitcoin on their balance sheets, but several obstacles, including Federal Reserve regulations, Basel rules, and the requirement for coordination among multiple global regulators, must be overcome. This is not an isolated sentiment, as Robin Vince, CEO of BNY, expressed similar views in March, stating that large financial institutions will drive the next phase of crypto adoption by bridging the gap between traditional finance and digital assets, albeit with the caveat that regulatory clarity is essential for widespread adoption.

Morgan Stanley is actively pushing forward in the digital asset space, with Oldenburg noting that the launch of MSBT, a bitcoin-backed exchange-traded product, has been a significant milestone. The product, which is the first of its kind to be offered by a US-chartered bank, attracted over $100 million in investments within its first six days of trading, with all inflows coming from self-directed clients. This notable uptake underscores the strong demand for such products among clients, with Oldenburg highlighting the existing gap between the products offered by advisors and client demand.

Notably, Morgan Stanley recommends a 2%-4% bitcoin allocation to clients, but the slow adoption among advisors is largely attributed to a lack of education, according to Oldenburg. To address this issue, the bank has initiated internal training programs to bring financial advisors up to speed. Furthermore, the fact that 80% of ETP exposure on the wealth platform is self-directed suggests that clients are eager to access regulated bitcoin exposure, as evidenced by the impressive $61 billion in assets amassed by BlackRock's IBIT since its launch in January 2024.

In a bid to further expand its digital asset offerings, Morgan Stanley is pursuing an OCC digital trust charter, which would enable the bank to custody crypto directly and offer spot crypto trading on its wealth platform. The MSBT product currently uses Coinbase and BNY Mellon as dual custodians, demonstrating the firm's commitment to navigating the complex regulatory landscape and capitalizing on the growing demand for digital assets.