Anika Begay
Former SEC Internet Enforcement Chief John Reed Stark said Morgan Stanley’s latest move to introduce a broad offering of Bitcoin exchange-traded funds (ETFs) to its clients will likely lead to increased regulatory scrutiny for the U.S. bank. This development comes amid widespread praise for Morgan Stanley from the cryptocurrency community for 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 begin offering spot Bitcoin ETFs to clients. Specifically, Morgan Stanley will grant clients access to invest in BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC).
This offering is reserved for 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 described Morgan Stanley’s Bitcoin ETF offering as a death wish in terms of regulatory oversight and compliance.
With two decades of experience in the Division of Oversight, the former SEC chief believes Morgan Stanley may have exposed itself to one of the most extensive measures of scrutiny by the Commission and also by the Financial Industry Regulatory Authority (FINRA).
With Morgan Stanley’s large-scale Bitcoin ETF offering, Stark says these regulators will have near-instant access to all of the bank’s Bitcoin sales data to retail clients. That includes all forms of information, including documents, emails, text messages, voicemail, and phone conversations. Interestingly, this “treasure trove of evidence” is not only accessible to the SEC and FINRA upon request, but can also be requested for on-site inspections of Morgan Stanley offices.
Given the enormous amount of information that the SEC and FINRA will have in their possession, John Reed Stark believes that Morgan Stanley’s compliance officers will have a daunting task, as it will be as easy for U.S. regulators to spot potential violations by the Wall Street giant as shooting a “fish in a barrel.”
Morgan Stanley, the first of many?
While John Reed Stark’s concern about Morgan Stanley’s Bitcoin ETF offering is valid, the bank has gained notoriety by launching a major step forward in Bitcoin adoption. Alongside them, Wells Fargo, another Wall Street titan, is expected to start offering select investors exposure to some Bitcoin ETFs.
Overall, this indicates a growing interest in Bitcoin from the traditional financial sector, which is critical to mainstream adoption of the cryptocurrency. With spot BTC ETFs still in their first year of trading, more commercial and investment banks may consider listing these hedge funds in the future, which translates into a higher price for Bitcoin due to increased demand.
At the time of writing, Bitcoin continues to trade at $60,600, down 1.0% over the past day.
Featured image from Forbes, chart from Tradingview
