In a significant move that could further legitimize cryptocurrency trading in the traditional finance world, Morgan Stanley, one of the largest asset managers globally, is reportedly considering adding cryptocurrency trading to its E-Trade online brokerage platform. According to a January 2 report by The Information, this decision comes as part of expectations for a friendlier crypto regulatory environment under United States President-elect Donald Trump.
A Shift in Regulatory Landscape
Trump has promised to appoint industry-friendly leaders to key regulatory agencies and make the US "the world’s crypto capital." This shift in regulatory landscape could pave the way for traditional financial institutions like Morgan Stanley to venture into cryptocurrency trading. By adding cryptocurrency support, E-Trade would become one of the biggest traditional retail brokerages to do so, potentially creating meaningful competition for incumbent platforms such as Coinbase.
E-Trade’s Significance
Morgan Stanley acquired E-Trade in 2020, bringing with it a substantial customer base of approximately 5.2 million accounts collectively holding around $360 billion. This scale and reach could bring cryptocurrency trading to millions of investors who have not previously had access to these assets.
Broader Trend in Traditional Finance
This move by Morgan Stanley follows a broader trend among traditional retail brokerages embracing cryptocurrency trading. Other notable platforms that offer crypto trading include Robinhood, Fidelity, and Interactive Brokers. Charles Schwab has also reportedly planned to add crypto trading this year, according to Bloomberg.
Comparison with Cryptocurrency-Native Exchanges
While these platforms have limited token offerings compared to crypto-native centralized exchanges like Coinbase, they are still significant players in the market. The decision by Morgan Stanley and E-Trade could further legitimize cryptocurrency trading among mainstream investors.
Lucrative Business for Online Brokerages
Crypto trading has proven to be a lucrative business model for online brokerages. Robinhood’s Q3 2024 results show that crypto trading volume and revenue soared by 112% and 165% year-on-year, respectively, reaching $14.4 billion and $61 million. This trend underscores the growing interest in cryptocurrency trading among investors.
Institutional Players Enter the Scene
Robinhood’s acquisition of Bitstamp in June for a reported $200 million deal further highlights the trend towards institutional players entering the crypto space. This move would enable Robinhood to serve institutional investors in the United States, expanding its market reach and opportunities.
Early Mover Advantage
Morgan Stanley has been an early mover in cryptocurrency compared to other traditional wealth managers. In August, Morgan Stanley authorized its 15,000 financial advisors to start recommending Bitcoin (BTC) exchange-traded funds (ETFs) to clients. This move reflects the significant market potential of cryptocurrency trading and the efforts by traditional financial institutions to adapt to this changing landscape.
Recommendations and Market Impact
Morgan Stanley advisers have been recommending BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC), both widely considered ‘blue chips’ among Bitcoin exchange-traded funds. The recommendations of these blue-chip ETFs by Morgan Stanley indicate a growing acceptance of cryptocurrency trading within the traditional financial sector.
Future Outlook
The move by Morgan Stanley to add cryptocurrency trading to its E-Trade platform, if implemented, would be a significant step towards mainstream adoption of cryptocurrencies. It underscores the ongoing trend of traditional finance embracing digital assets and could potentially create more competition for established players like Coinbase.
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