The news: Morgan Stanley Investment Management has launched a Bitcoin exchange-traded product (ETP) that competes directly with existing spot Bitcoin ETFs. The Morgan Stanley Bitcoin Trust is positioned as a low-cost product, with an expense ratio of 0.14% versus BlackRock's nearly identical product that carries a 0.25% expense ratio.

The ETP mirrors existing ETFs, tracking a benchmark price based on major crypto exchanges.

Zoom out: Morgan Stanley is moving from distributing other firms’ crypto ETFs to an enterprise crypto strategy for institutional, wealth, and retail customers. It has applied for a national trust bank charter to custody crypto, enable trading, and offer staking. It also plans to offer direct retail trading of Bitcoin, Ethereum, and Solana via E*TRADE.

The Bitcoin ETF puts Morgan Stanley in closer competition with Fidelity, a company years ahead of the crypto curve: Fidelity started crypto operations in 2019 and is the only traditional asset manager to have received a (conditional) national trust charter. It launched crypto ETFs in 2024 and recently introduced Solana trading for US retail and institutional investors.

Implications for banks and brokerage firms: ETFs’ trading availability is crucial to brokerages that don’t have infrastructure to retain customers interested in alternative assets, especially Gen Zers. It’s also an important asset-gathering tactic for the asset managers that distribute the ETFs. Since the Securities and Exchange Commission approved spot Bitcoin ETFs in 2024, crypto ETFs have given investors crypto exposure distributed through traditional brokerages.

Crypto’s increasing acceptance as a part of investment vehicles continues to merge the traditional and decentralized financial systems. Bank of America, for example, is for the first time recommending that clients allocate up to 4% of their portfolios to crypto. The bank is also making crypto-based investments easily available through its brokerage services.