Wall Street under pressure to give wealthy clients access to Bitcoin

Morgan Stanley's plans to offer funds that will enable ownership of Bitcoin puts pressure on its competitors to go down a similar route. The company is the first major U.S. bank with plans to give its wealthiest clients exposure to cryptocurrencies.

Morgan Stanley has fired off the starting pistol in the race for Wall Street banks to offer wealth management clients access to Bitcoin. Morgan Stanley’s offering is expected to put pressure on the bank’s competitors to follow suit and offer access to Bitcoin in a similar manner, according to experts.

Morgan Stanley is the first major U.S. bank with plans to give wealthier clients access to funds that will enable ownership of Bitcoin, according to reports Wednesday. Two of the funds are run by crypto firm Galaxy Digital. The Galaxy Bitcoin Fund LP has a minimum investment of $25,000 and the Galaxy Institutional Bitcoin Fund LP has a $5 million minimum, according to details first reported by CNBC.

The third fund will be overseen by a new partnership announced Thursday between FS Investments and NYDIG. The fund, called FS NYDIG Select Bitcoin Fund, has a minimum investment of $25,000.

The partnership is also designed to leverage FS Investment’s marketing and educational tools alongside NYDIG’s regulated and insured custody to expand access to Bitcoin across the country — not only for major financial centers, said a person familiar with the matter.

While institutional adoption of Bitcoin continues to expand, advisers today have very few options for adding Bitcoin exposure to their clients’ portfolios.

However, tides are changing with giants like Morgan Stanley entering the space. On top of that, digital currency asset manager Grayscale, with more than $42.9 billion in assets under management, announced Wednesday that it launched five new digital currency investment trusts, bringing its total number of investment products to 14.

Just last Tuesday, JPMorgan Chase & Co. exposed plans to launch a structured note offering tied to a basket of Bitcoin-friendly stocks for investors interested in trading cryptocurrencies given there is no cryptocurrency backed ETF in the U.S.

Bitcoin’s rally, too, has put the pressure on Wall Street banks and larger institutions to consider getting involved with the thriving crypto market, which has a market cap at $1.8 trillion, according to CoinMarketCap. Bitcoin’s price has topped $58,000 this week.

Easy access from fintech tools like Coinbase and Robinhood, puts additional pressure on investment firms to embrace Bitcoin, or else wallet share may be lost, said Capco principal consultant Nikhil Sharma.

“Morgan Stanley’s offering also seems to provide a lead to the market on ‘how’ to formulate the Bitcoin offering — which is in line with how wealth firms have traditionally offered highly volatile alternative investments to certain high-net-worth clients with an aggressive risk appetite,” Sharma said in an email.

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With Morgan Stanley introducing this, it puts pressure on some of its competitors to go down a similar route, Sharma said. “Although offered primarily for the mass-market segment, we saw a similar chain reaction with the introduction of robo-advisers by a few financial institutions in 2015,” he said.

From this point forward, firms offering exposure to Bitcoin will become table stakes, and Morgan Stanley’s offering marks the acceptance for a new innovation cycle that has been building outside of the mainstream for over a decade, said Dan Eyre CEO of Blockchange.

“This is like the first steps on the moon,” he said. “Don’t be surprised if you see massive momentum behind migration to new blockchain-based infrastructure and tokenization of traditional asset classes. The starting pistol has fired.”