'Not Going to Stop at Bitcoin': Morgan Stanley Weighs Tokenization, Tax Solutions in Crypto Push

In brief

• Amy Oldenburg, head of digital-asset strategy at Morgan Stanley, sees a tokenized money-market fund as a natural path forward for its crypto roadmap.
• What’s more, the investment bank with $9.3 trillion in client assets could explore tax-lost harvesting strategies for digital assets via the subsidiary Parametric.
• The firm has an army of more than 15,000 wealth advisors that gained the ability to pitch third-party spot Bitcoin ETFs to eligible clients last year.

The debut of Morgan Stanley’s spot Bitcoin ETF marked a major milestone on Wednesday for the investment bank with $9.3 trillion in client assets, but the financial powerhouse is already weighing what could be next when it comes to crypto. The firm filed applications in January for exchange-traded funds tracking Ethereum and Solana, but it’s doubtful that the company will stop there, Amy Oldenburg, head of digital-asset strategy at Morgan Stanley, told Decrypt in an interview this week. “We’re not going to stop at just Bitcoin,” she said in reference to Morgan Stanley’s spot Bitcoin ETF, which has generated approximately $46 million in net inflows since debuting Wednesday, according to Farside Investors. “It’s really about the longer-term journey, and there’s quite a long way to go.”

Last year, Morgan Stanley became the first major wirehouse to allow its army of more than 15,000 wealth advisors to pitch third-party spot Bitcoin ETFs to eligible clients, green-lighting products offered by asset managers Fidelity and BlackRock. And Morgan Stanley’s next moves could resemble steps those competitors have taken, Oldenburg said.  She described a tokenized money-market fund as “definitely a path forward” for Morgan Stanley’s product roadmap, highlighting opportunities across other asset classes that the investment bank could tap for creating digital representations of real-world assets. Franklin Templeton pioneered the format for yield-bearing tokens that are backed by U.S. Treasuries in 2021, but that asset manager’s product has since been supplanted by BlackRock’s BUIDL, which has grown to $2.3 billion, according to RWA.xyz. Fidelity’s Digital Interest Token, meanwhile, has garnered a total value of roughly $172 million.

Parametric, a Morgan Stanley subsidiary, has established a plethora of rules-based investment strategies for clients, including tax-loss harvesting. Helping clients offset capital gains tax liabilities with digital assets represents “something to also explore,” Oldenburg said. The investment bank has already telegraphed other moves: Last year, it confirmed plans to offer crypto trading via E*TRADE in a team-up with infrastructure provider Zerohash. In February, Oldenburg said Bitcoin-based yield and lending services are also being explored. Morgan Stanley’s Bitcoin Trust may struggle to grow past BlackRock’s $53 billion spot Bitcoin ETF, but it’ll likely put pressure on the industry-leading alternative, Bloomberg Senior ETF analyst Eric Balchunas told Decrypt this week. Aside from Morgan Stanley’s ability to drive in-house distribution, Balchunas pointed to the product’s expense ratio. Undercutting most competitors at 0.14% in fees was a considerable move within the “Terrordome” of asset managers dueling to make products cheap, he said. Oldenburg indicated that fee compression is not a new concept for Morgan Stanley, and as time goes on, the newly launched ETF will likely serve as a commercial funnel. “We had the opportunity to really focus on how efficiently we can deliver that product from a fee perspective, and not make it solely about making money,” she said. “Now, let’s see some more interesting products continue to develop around that.”