Morgan Stanley plans to handle cryptocurrency custody internally

Morgan Stanley has submitted an application to the Office of the Comptroller of the Currency (OCC) to obtain a national trust bank charter, with the aim of internalizing its digital asset operations. The proposed entity, known as Morgan Stanley Digital Trust, National Association, is set to handle direct crypto custody, fiduciary staking, and token trading services for clients. Situated in Purchase, New York, this trust bank will function as a wholly owned subsidiary, ensuring the safeguarding of crypto assets on the firm’s regulated balance sheet. This move signals Morgan Stanley’s most significant structural progression into digital assets thus far.

Currently, a notable portion of client crypto holdings is managed by third-party providers, leading to a level of dependency on external infrastructure. By acquiring a trust charter, the bank intends to consolidate custody and settlement processes under its direct supervision, therefore decreasing operational reliance and enhancing control over these critical aspects. The bank has emphasized its commitment to ensuring the reliability of its crypto custody operations with a “no-fail” approach, underscoring the strategic significance it places on operational resilience and fiduciary responsibility.

In contrast to solely competing on trading volumes, major institutions like Morgan Stanley are increasingly directing their focus towards custody, settlement, and token servicing. These areas are akin to the roles of clearing houses and custodial banks in traditional markets, generating more stable and recurring revenues. This strategic shift builds upon Morgan Stanley’s broader digital asset strategy, following its application to the US Securities and Exchange Commission for the introduction of crypto-linked ETFs, a pioneering move by a major US bank.

The proposed funds are designed to track the prices of Bitcoin and Solana, offering investors indirect exposure to these assets through traditional brokerage accounts rather than direct ownership of the underlying tokens. This setup serves to mitigate custody and operational risks. The trajectory of Morgan Stanley’s digital asset initiatives points towards a holistic approach that embraces various facets of the crypto ecosystem, aiming to fortify the bank’s foothold in this evolving landscape. With a national trust bank charter on the horizon, Morgan Stanley is poised to navigate the realm of digital assets with increased autonomy and fortitude, aligned with its strategic vision for sustained growth and innovation.