Morgan Stanley Wealth Management on Friday announced a partnership with crypto firm Galaxy Digital. The aim of this partnership is to allow eligible clients lof the bank use their crypto assets for lending directly to Galaxy. In return, the participating clients will be able to rope-in the shares of exchange-traded products (ETPs) that track the price of spot crypto. These ETPs include the Morgan Stanley Bitcoin Trust (MSBT) that tracks BTC prices and is managed by the bank itself.
ETPs essentially allow traditional bank users to get exposure to the crypto ecosystem via a regulated brokerage account and without them having to actually invest in crypto assets.
So under this partnership, Morgan Stanley users will lend their crypto holdings to Galaxy, which will lend it to hedge funds, short sellers, or institutional traders at high interest rates — which will be pocketed by Galaxy itself.
For Morgan Stanley users, the arrangement will let them convert their raw crypto tokens into institutional ETP shares and give them the option to later use these ETP shares as collateral to access loans or weave them into broader estate and wealth management strategies.
“Morgan Stanley has been investing in the DeFi space for some time, and we are proud to support a referral capability with Galaxy to provide Wealth Management clients with an institutionalized pathway that helps integrate digital assets into their portfolio,” said Alison Nest, Head of Investment Solutions Products, Morgan Stanley Wealth Management.
For the Wall Street giant, this marks another pivotal step in integrating digital assets into traditional finance opening up diversification alternatives to its clients.
Galaxy, to make the most out of this deal, lowered its entry barrier for Morgan Stanley clients. It slashed its minimum crypto loan requirement from $25 million to $5 million specifically for Morgan Stanley clients. This directly expands the list of qualified clients who meet the eligibility requirements.
At a time when the U.S. is making strides in rgeulating the crypto space and normalizing the engagement of banks with these digital assets, many traditional banking giants have started offering crypto-related services.
Morgan Stanley’s launched its MSBT product just two months ago. Within the first month of going operational, the BTC spot ETF managed to grab $194 million in inflows and zero days of outflows. The bank also recently piloted its crypto trading feature on its E*Trade platform.
For Galaxy, this marks a major step into the turf of traditional banks handling big-value clients. The company that went public on NASDAQ last year, is rapidly expanding its crypto footprint in the U.S. — especially among institutional investors.
Earlier in May, Galaxy secured a BitLicense and Money Transmission License from the New York State Department of Financial Services. With this, the platform can offer regulated digital-asset services to institutional clients across the state.
