Morgan Stanley has made a significant move in the digital asset space by filing with U.S. regulators to launch a spot bitcoin exchange-traded fund (ETF), marking a historic first for a major U.S. bank seeking approval to issue an ETF directly tied to the price of bitcoin. Concurrently, the American multinational investment bank also filed paperwork for a similar fund linked to Solana, further signaling its deepening commitment to the cryptocurrency market.

The proposed Morgan Stanley Bitcoin Trust, submitted to the Securities and Exchange Commission (SEC), is designed to meticulously track the price of bitcoin, net of its associated fees and expenses. A crucial aspect of this fund is its intention to hold bitcoin directly, deviating from methods that rely on futures, derivatives, or leverage, as outlined in its registration statement. This approach aligns Morgan Stanley with asset managers like BlackRock and Fidelity, who have already established a strong foothold in the bitcoin ETF market since the SEC approved the first U.S. spot products in early 2024. These existing funds collectively manage over $120 billion in assets, representing a substantial portion of bitcoin’s total market value, with a significant share of this growth flowing into bitcoin-only products.

Morgan Stanley's foray into issuing its own proprietary crypto products represents a pivotal strategic shift for large banks. Traditionally, U.S. banks have largely confined their roles to providing custody and brokerage services for digital assets, citing regulatory uncertainties and stringent internal risk controls. However, this cautious stance has begun to evolve as federal agencies have provided clearer guidance on how banks can interact with digital assets. Notably, the Office of the Comptroller of the Currency (OCC) stated in December that banks are permitted to act as intermediaries for crypto transactions, thereby narrowing the historical divide between traditional finance and emerging digital markets. Complementing this, the SEC has also adjusted its listing standards for spot crypto ETFs, effectively streamlining the approval pathway for new issuers.

The operational framework of the proposed bitcoin trust outlines that it would be sponsored by Morgan Stanley Investment Management. Shares of the fund would be created and redeemed in large blocks by authorized participants, with transactions occurring either in cash or in kind. The fund’s net asset value (NAV) is slated to be calculated daily, leveraging a pricing benchmark derived from activity across major spot bitcoin exchanges. Retail investors, in turn, would be able to trade these shares on a secondary market through their standard brokerage accounts.

This initiative builds upon Morgan Stanley's broader strategy to expand crypto access across its wealth management business, following steps taken last year to widen eligibility for crypto investments to include all clients and account types in October. By offering a proprietary bitcoin ETF, the firm gains the advantage of integrating the product directly into client portfolios while retaining management fees that might otherwise be directed to rival issuers. This move also underscores the compelling economics of the bitcoin ETF market, where spot bitcoin funds have emerged as some of the fastest-growing products within the U.S. ETF industry, consistently attracting steady inflows even amidst periods of price volatility. BlackRock's bitcoin ETF, for example, rapidly became one of the firm’s top revenue contributors within its inaugural year.

While Morgan Stanley has also filed for a Solana exchange-traded fund, bitcoin remains the primary focus of institutional demand. The Solana fund aims to track the performance of SOL, the native digital asset of the Solana blockchain, as measured by a specific pricing benchmark, adjusted for expenses and liabilities. It plans to utilize third-party SOL custodians and engage in staking activities to earn rewards, which are expected to accrue to the product's net asset value (NAV). Despite this, the vast majority of assets within U.S. crypto ETFs are concentrated in bitcoin products, with funds linked to other tokens generally attracting more limited capital. Morgan Stanley's twin filings nonetheless signify a major endorsement from a Wall Street titan, accelerating the integration of digital assets into mainstream investment portfolios.