Morgan Stanley launches fund for stablecoin issuers under GENIUS Act compliance

Morgan Stanley has launched the Stablecoin Reserves Portfolio, a government money market fund built for stablecoin issuers, structured to comply with the GENIUS Act’s 100% reserve backing requirement. The market for USDC depegging by December 31, 2027, sits at 2.9% YES.

The USDC depegging market holds at 2.9% YES, showing minimal trader concern about a depeg event. The GENIUS Act requires stablecoin issuers to maintain 100% reserve backing, and Morgan Stanley’s fund gives issuers a compliant vehicle to park those reserves in government money market instruments, directly addressing one of the main structural risks behind depegging.

Volume in the stablecoin depegging market is effectively zero, with no face value traded recently. There is no active speculation around stablecoin instability. Morgan Stanley’s entry into the reserve custody space adds a layer of institutional infrastructure that didn’t previously exist for compliant issuers.

This matters because a top-five U.S. bank is now offering a product specifically designed to hold stablecoin reserves under federal rules. The GENIUS Act’s reserve mandate, combined with a Morgan Stanley fund purpose-built for compliance, removes a category of risk that could otherwise lead to depegging. Buying YES at 3¢ pays $1 if USDC depegs, a 33.3x return, a bet that requires significant regulatory or operational failure to pay off.

Watch for State Street and Goldman Sachs, both of which have filed similar offerings. If multiple major banks compete to custody stablecoin reserves, the structural risk of a depeg drops further, and odds on this market could compress toward zero.

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