What to know:
- Crypto ETPs gain a new channel through Morgan Stanley and Galaxy’s new referral deal.
- Morgan Stanley will educate eligible clients before sending them to Galaxy for execution.
- Galaxy cuts the lending minimum to $5 million for Morgan Stanley-referred clients.
Crypto ETPs gained a new institutional channel after Morgan Stanley and Galaxy Digital announced a referral arrangement. The plan connects direct crypto holdings with regulated crypto ETPs. It targets eligible high-net-worth investors seeking structured crypto exposure through a formal process.
Morgan Stanley Wealth Management will provide education on digital assets to eligible clients. It will then refer clients to Galaxy Digital for execution. Galaxy will be responsible for lending and settlement related to the arrangement.
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Galaxy Process Links Crypto Loans to Spot Crypto ETPs
The structure enables clients to loan cryptocurrencies like Bitcoin, Ether, and Solana to Galaxy. In return, they may receive shares of spot crypto ETPs. They include the Morgan Stanley Bitcoin Trust that is offered by Morgan Stanley Investment Management.
The setup provides a path for direct tokens to regulated investment products for clients. It does not require them to fully exit their crypto positions. Rather, it connects qualified assets with ETP shares via a structured market mechanism.
Once a client submits the eligible crypto assets, Galaxy reviews the proposed loan. It then determines whether the role can be resolved via the ETP development. If approved, Galaxy works with an authorized participant to complete an in-kind creation.
Upon completion of this process, the ETP shares are deposited into the client’s designated account. This helps ensure that the transaction is covered by a formal investment vehicle. It also eliminates the need for clients to deal with wallets or private keys.
The companies said onboarding time has been an issue in similar transactions. The process can usually take more than four weeks. That could be shortened by up to 75% under the new deal.
Crypto ETPs Move Deeper Into Wealth Management
Galaxy reduced its minimum lending size for Morgan Stanley-referred clients. The threshold was reduced from $25 million to $5 million. The change promotes greater participation of qualified investors but is available only to qualified clients.
The setup involves crypto ETPs as part of a larger wealth management offering. Digital assets can be incorporated into a similar framework for clients utilizing portfolio tools, margin services, and lending products. This enables a more integrated crypto exposure.
Morgan Stanley noted that the move is an extension of its digital asset efforts. Alison Nest, Head of Investment Solutions Products at Morgan Stanley Wealth Management, said the firm is supporting a referral capability with Galaxy.
She said the service provides clients with an institutional path to incorporate digital assets into their portfolio.
Nest further explained that the deal will facilitate a bridge between traditional and decentralized finance. She also noted that it provides smoother access to diversification tools for investors.
The comments illustrate the progress of large financial companies in building new links between direct crypto ownership and crypto ETPs.
The partnership arrives amid a landscape of regulated products that continue to drive institutional access to digital assets. Crypto ETPs offer investors access via traditional market accounts.
The Morgan Stanley and Galaxy deal brings another connection between wealth management, crypto lending, and creating spot ETPs.
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