Morgan Stanley and Citigroup are making bold moves to usher Bitcoin and cryptocurrencies into the mainstream banking sector, addressing the increasing demand for digital assets among institutional clients.
Morgan Stanley has filed for a de novo national trust bank charter with the Office of the Comptroller of the Currency (OCC), aiming to establish “Morgan Stanley Digital Trust, National Association.” This application, submitted on February 18, marks a pivotal step for the financial giant, enabling it to custody digital assets on behalf of clients.
The new subsidiary intends to facilitate activities such as purchases, sales, swaps, transfers, and crypto staking, thus integrating these services into traditional banking frameworks. The granting of a national trust bank charter allows Morgan Stanley to perform fiduciary activities like asset safekeeping and custody, specifically tailored for crypto assets.
This initiative is representative of Morgan Stanley’s rapid expansion into the digital asset space. Earlier this year, the bank appointed equity markets executive Amy Oldenburg to lead its crypto unit and submitted applications to launch spot Bitcoin and Solana ETFs, even following up with a filing for a staked Ether ETF.
With approximately $8 trillion in assets under management, Morgan Stanley is also rolling out spot crypto trading on the E*TRADE platform, actively exploring lending and yield products linked to digital currencies. The bank’s aggressive hiring for positions related to digital asset strategy further underscores its commitment to this burgeoning sector.
Citi’s Plans for Bitcoin Custody
Citigroup is not lagging behind in this crypto evolution, as it recently disclosed plans to introduce institutional Bitcoin custody services later this year. Nisha Surendran, the head of Citi’s digital asset custody efforts, shared insights into the initiative at the World Strategy Forum, emphasizing the aim of making “Bitcoin bankable.”
By integrating Bitcoin into the same custody and reporting frameworks used for traditional assets like equities and bonds, Citi intends to provide its clients with the ability to manage Bitcoin alongside U.S. Treasuries, foreign bonds, and tokenized money market funds within a single account. This novel structure would enable cross-margining between crypto and conventional assets.
Interestingly, a survey conducted by Citi among its institutional clientele revealed a strong preference against managing wallets and private keys, highlighting a desire for Bitcoin exposure within the security of familiar banking systems.
The Broader Banking Landscape Shifts
As major banks begin to embrace cryptocurrencies, the shift could reshape the financial landscape. Citi connects to over 220 payment and settlement networks worldwide and recently launched Citi Token Services, a continuous blockchain-based network designed for cash management.
Meanwhile, JPMorgan is also stepping into the digital asset domain with its JPM Coin product, aiming to further bridge the gap between traditional finance and cryptocurrencies. The New York Stock Exchange has plans for a 24/7 blockchain-based trading venue for tokenized assets, signaling widespread institutional interest in integrating cryptocurrencies into mainstream finance.
Last December, the OCC conditionally approved five crypto-related national trust bank applications, including for Fidelity Digital Assets and Paxos, demonstrating regulatory support for the burgeoning crypto services sector. Recently, Payoneer also submitted a national trust bank charter application, possibly paving the way for its own stablecoin and crypto service offerings.
The proactive steps being taken by Morgan Stanley and Citigroup reflect an urgent recognition of an evolving financial landscape where digital assets are increasingly sought after by institutional investors. As interest grows, traditional financial institutions are positioning themselves to become integral players in this exciting new market.
