How will Morgan Stanley’s entry into crypto trading affect major exchanges?

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

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

If this move is implemented, it will be a shot in the arm to establish E-Trade as one of the largest traditional financial institutions to enter the digital space, creating direct competition for major crypto exchanges like Coinbase, and it would be a turn out to be a huge entry. point for regular investors interested in trading these assets.

Crypto’s participation in traditional brokers

While E-Trade isn’t 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 offer 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 showed a 165% increase in crypto revenue year-over-year, to $61 million. Additionally, 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 revenue in the third quarter of 2024, mostly from crypto trading.

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Crypto momentum from Morgan Stanley

Morgan Stanley led the way among traditional asset managers in adopting crypto. In August, the company allowed 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 considered premium Bitcoin ETFs.

With $3.75 trillion in assets under management, 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 this example, other institutions such as Goldman Sachs are also diving in search of clear crypto rules. Recently, after hesitations and restrictions on crypto, European financial institutions are also shifting their focus on crypto with the implementation of the Markets in Crypto-Assets (MiCA) regulations.