How Will Morgan Stanley’s Entry Into Crypto Trading Impact Major Exchanges?

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Morgan Stanley, the biggest global asset manager, has shown bullish interest in cryptocurrency in its E-Trade platforms, breaking an age-old barrier. According to a report by The Information, this decision aligns with expectations of a more crypto-friendly regulatory environment under incoming US President Donald Trump. The move shows how banks are getting serious about crypto assets with the changing crypto scenario in the US.

Trump in his election campaign pledged to position the US as a global crypto hub, promising to appoint industry-friendly leaders to regulatory agencies and to create a Bitcoin Reserve to stabilize the US economy. This anticipated policy shift has encouraged Morgan Stanley to explore crypto trading, potentially bringing digital assets to the 5.2 million accounts on E-Trade, which collectively hold around $360 billion.

If implemented, the move will be a hit-and-trial to establish E-Trade as one of the largest traditional financial institutions to enter the digital space, giving direct competition to big crypto exchanges like Coinbase and would turn out to be a massive entry point for mainstream investors interested in trading these assets.

Crypto’s entry in Traditional Brokerages

Though E-Trade is not alone in the race, competitors such as Robinhood, Fidelity, and Interactive Brokers already offer crypto trading, with Charles Schwab planning to join the fray this year. However, these platforms typically provide access to a more limited selection of tokens compared to crypto-native exchanges like Coinbase.

The profitability of crypto trading is undeniable. Robinhood’s Q3 2024 results revealed a 165% surge in crypto revenue year-over-year, reaching $61 million. Plus, Robinhood’s $200 million acquisition of Bitstamp in June expanded its capabilities to serve institutional investors in the US. Meanwhile, Coinbase reported $1.2 billion in Q3 2024 revenue, primarily from crypto trading.

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Morgan Stanley’s Crypto Momentum

Morgan Stanley has been ahead of the curve among traditional wealth managers in adopting crypto. In August, the firm authorized its 15,000 financial advisors to recommend Bitcoin ETFs to clients. These include BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund, both regarded as premium Bitcoin ETFs.

With $3.75 trillion in managed assets, including $1 trillion in self-directed accounts, Morgan Stanley’s move to integrate crypto trading into E-Trade could significantly broaden access to digital assets.

Following the suit, other institutions like Goldman Sachs are also diving for clear crypto rules. Recently after hesitations and restricting crypto European Financial institutions are also shifting their focus on crypto with the implementation of the Markets in Crypto-Assets (MiCA) regulation.