Morgan Stanley is working on a plan to add cryptocurrency trading to its E-Trade platform, in what would be the most significant move by a big U.S. bank to help everyday customers buy into the asset class since the Trump administration began removing regulatory barriers.
The project is nascent and executives envision offering the service sometime next year, according to people familiar with the matter. The firm is considering working with one or multiple established crypto firms as it sets up the mechanics for the brokerage's clients to buy and sell popular tokens including bitcoin and ether.
The firm's rival Charles Schwab said Thursday that it aims to proceed as early as this year with a previously disclosed plan for crypto trading.
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The moves come amid a dramatic shift in U.S. policy toward virtual assets. During his campaign, President Donald Trump hawked his own digital collectibles and soaked up campaign donations from crypto enthusiasts while vowing to make the U.S. the "crypto capital of the planet." His victory in November prompted the biggest banks to start rethinking their years-long posture of largely avoiding the notoriously volatile sector.
Inside Morgan Stanley, discussions on how to move into cryptocurrencies began gaining momentum late last year, the people said. E-Trade already offered access to crypto exchange-traded funds, ETF options and futures. And in January, after the Information reported the unit was exploring whether to offer crypto trading, CEO Ted Pick said Morgan Stanley aimed to talk with regulators about ways to do more with the asset class safely.
Ultimately, executives decided spot trading on E-Trade would be the ideal next step, the people said. A company spokesperson declined to comment.
The moves by Morgan Stanley and Schwab could boost competition for crypto incumbents including Robinhood Markets and Coinbase, depending in part on how Morgan Stanley's partnerships take shape.
Not 'a fad'
Big U.S. banks have mainly stayed on the sidelines as crypto has ebbed and flowed in popularity over the past decade. Proposals to help customers buy tokens quickly raised thorny questions about how to guard assets that are known for being prone to hacks and scams. Watchdogs were even uneasy about letting banks accept cash deposits from high-flying crypto ventures.
The financial industry had its own prominent skeptics, most notably JPMorgan CEO Jamie Dimon. Over the years, he has called bitcoin "worthless," "a fraud" and a "pet rock." Still, Dimon said last year that "I defend your right to do bitcoin," and his firm has embraced blockchain technology — with projects including JPM Coin — and engaged exchanges including Coinbase as clients.
Almost as soon as Trump took office, regulators started rolling back measures that discouraged banks from pushing into crypto. Days after his inauguration, the president issued an executive order aimed at promoting U.S. "leadership in digital assets and financial technology while protecting economic liberty." That same day, the Securities and Exchange Commission repealed accounting guidance that crypto firms had blamed for thwarting their ambitions to work with banks.
Last week, the Federal Reserve and the Federal Deposit Insurance withdrew 2023 guidance to banks on risks tied to the sector. The Bank Policy Institute, an influential trade group representing the biggest U.S. banks, applauded the move.
"It empowers regulated financial institutions to better serve their customers safely and invest in innovative new products and services," Paige Pidano Paridon, its co-head of regulatory affairs, said in a statement after the announcement.
The previous Morgan Stanley CEO, James Gorman, was ahead of many other chief executives in expressing interest in crypto, saying in 2017 that bitcoin was "more than just a fad."
Bank of New York Mellon has also stood out as something of an exception, pursuing plans to custody digital assets. Gary Gensler, who ran the SEC during Joe Biden's presidency, credited the firm with doing the "legwork," and the agency granted BNY a "non-objection" to the plan last year, a regulatory term that gives comfort to the bank that its structure doesn't run afoul of the agency's requirements.
For Morgan Stanley, offering crypto trading at E-Trade would ratchet up competition with the likes of Robinhood. That firm has let clients trade crypto for more than a half decade — a business that pulled in $626 million last year, or 21% of Robinhood's total net revenue. And as Trump's policy changes boosted trading, the company's first-quarter profit more than doubled.
The market is poised to get a lot more crowded.
SoFi Technologies CEO Anthony Noto said this week that, given the changing regulatory environment, his firm will consider adding crypto investing back to its platform after exiting that business in 2023.
And on Thursday, Schwab CEO Rick Wurster updated investors on the timing of his firm's plans. He had announced shortly after Trump's election that the company would look to add spot crypto trading once regulations changed.
Ideally, Schwab will introduce crypto this year, and certainly within next 12 months, he said. Asked if the light from regulators is green or yellow, he responded: "I'd call it pretty green."
— With assistance from Paige Smith
