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