Morgan Stanley Faces Heightened Regulatory Risks Following Bitcoin ETF Offer

Former
SEC
Chief
of
Internet
Enforcement
John
Reed
Stark
has
stated
that
Morgan
Stanley’s
latest
move
to
introduce
a
wide-scale
offer
of
Bitcoin
exchange-traded
funds
(ETFs)
to
its
clientele
will
likely
result
in
higher
regulatory
scrutiny
for
the
American
bank.

This
development
comes
amidst
several
commendations
of
Morgan
Stanley
from
the
crypto
community
in
implementing
what
could
be
a
significant
pro-adoption
policy.

Morgan
Stanley’s
Bitcoin
ETF
Move
Is
A
Death
Wish,
Stark
Says

Earlier
this
week,
the
Wall
Street
giant
announced
plans
to
allow
15,000
of
its
licensed
financial
advisors
to
start
pitching
the
Bitcoin
spot
ETFs
to
clients.
Specifically,
Morgan
Stanley
will
grant
customers
access
to
investing
in
BlackRock’s
iShares
Bitcoin
Trust
(IBIT)
and
Fidelity’s
Wise
Origin
Bitcoin
Fund
(FBTC). 

This
offer
is
restricted
to
high
net-worth
individuals
of
$1.5
million
and
above,
with
high-risk
tolerance,
who
have
expressed
interest
in
investing
in
volatile
assets.
Commenting
on
this
development,
however,
John
Reed
Stark
has
described
Morgan
Stanley’s
Bitcoin
ETF
offer
as
a
death
wish
in
terms
of
regulatory
scrutiny
and
compliance. 

With
two
decades
of
experience
in
the
Enforcement
Division,
The
former
SEC
Chief
believes
Morgan
Stanley
may
have
opened
itself
to
one
of
the
most
comprehensive
enforcement
sweeps
by
the
Commission
and
also
the
Financial
Industry
Regulatory
Authority
(FINRA). 

With
Morgan
Stanley’s
large-scale
Bitcoin
ETF
offer,
Stark
says
these
regulators
will
gain
near-instantaneous
access
to
all
data
on
the
bank’s
Bitcoin
sales
to
retail
customers.
This
covers
all
forms
of
information
including
documents,
email,
texts,
voicemail,
and
phone
conversations. Interestingly,
this
“treasure
trove
of
evidence”
is
not
only
accessible
to
the
SEC
and
FINRA
by
request
but
can
also
be
demanded
for
on-site
inspections
at
Morgan
Stanley’s
offices. 

Considering
the
massive
amount
of
information
that
SEC
and
FINRA
will
be
privileged
to,
John
Reed
Stark
believes
Morgan
Stanley’s
compliance
officers
face
an
uphill
task
as
detecting
possible
violations
by
the
Wall
Street
Titan
will
be
as
easy
as
shooting
“fish
in
the
barrel”
for
the
US
regulators.

Morgan
Stanley,
First
Of
Many?

While
John
Reed
Stark’s
concern
about
Morgan
Stanley’s
Bitcoin
ETF
offer
is
valid,
the
bank
has
gained
prominence
by
launching
an
important
step
in
Bitcoin
adoption.
Alongside
them,
Wells
Fargo,
another
Wall
Street
titan
is
expected
to
start
offering
select
investors
exposure
to
some
Bitcoin
ETFs. 

In
general,
this
all
indicates
a
rising
interest
in
Bitcoin
from
the
traditional
financial
sector,
a
factor
critical
to
the
mainstream
adoption
of
the
cryptocurrency.
With
the
BTC
spot
ETFs
still
in
their
first
year
of
trading,
more
investment
and
commercial
banks
may
look
to
onboard
these
investment
funds
in
the
future,
translating
into
a
higher
price
for
Bitcoin
due
to
a
rise
in
demand.

At
the
time
of
writing,
Bitcoin
continues
to
trade
at
$60,600
reflecting
a
1.0%
decline
in
the
last
day.

Featured
image
from
Forbes,
chart
from
Tradingview