Morgan Stanley, the biggest wealth manager in the U.S., is facing potential regulatory scrutiny after allowing its financial advisers to recommend spot Bitcoin exchange-traded funds (ETFs) to clients.
On August 9, John Reed Stark, a former U.S. Securities and Exchange Commission (SEC) official voiced his concerns on social media platform X (formerly Twitter), saying
“By unleashing its legion of 15,000 brokers to pitch Bitcoin, Morgan Stanley has just voluntarily subjected themselves to what will likely become the largest SEC and FINRA examination sweep in history.”
Stark, who has been critical of cryptocurrency in the past, believes the company’s decision could lead to significant regulatory challenges.
He pointed out that both the SEC and the Financial Industry Regulatory Authority (FINRA) will now have easy access to Morgan Stanley’s internal communications, including documents, emails, and phone calls related to Bitcoin ETF sales. He also noted that regulators could quickly obtain this information either through a request or during an unannounced inspection.
The criticism comes after reports that Morgan Stanley authorized its 15,000 financial advisers to start recommending spot Bitcoin ETFs to high-net-worth clients on Aug 7. The firm is currently backing two specific ETFs: BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund.
Experts in the industry think that Morgan Stanley’s decision could lead to increased investments in Bitcoin. Haseeb Qureshi, a managing partner at the crypto venture fund Dragonfly, mentioned that we could see a rise in investment inflows later this year.