Morgan Stanley and Galaxy Digital Launch In-Kind Crypto ETP Conversion Service

Highlights:

• Morgan Stanley and Galaxy launched a referral model for eligible clients seeking spot crypto ETP shares.
• Clients may lend Bitcoin, Ether, or Solana to Galaxy and receive crypto ETP shares.
• Galaxy lowered the minimum transaction size for referrals from $25 million to $5 million.

Morgan Stanley Wealth Management and Galaxy Digital announced a new referral arrangement on Friday to help eligible clients move certain crypto holdings into spot crypto exchange-traded products (ETPs). The companies said the service will allow qualified clients to lend cryptocurrency to Galaxy and receive shares of crypto ETPs, including the Morgan Stanley Bitcoin Trust (MSBT), in return.

The firms said the model is designed for clients seeking a more efficient way to connect their digital assets to traditional investment accounts. Instead of selling crypto for cash first, eligible clients may use an in-kind process. In-kind means assets move from one form to another without first being converted into cash.

Under the arrangement, Morgan Stanley Wealth Management will provide educational resources about digital assets and refer eligible clients to Galaxy. Galaxy will handle onboarding and execution. Morgan Stanley said it will not control Galaxy’s process and will not receive compensation from the referral or transaction.

JUST IN: Morgan Stanley Wealth Management partners with Galaxy Digital to let clients convert BTC/ETH/SOL into spot crypto ETFs for use as collateral, with a $5M minimum. Could fuel institutional ETF flow. $BTC $ETH $SOL pic.twitter.com/p9dUI3XBex

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How the New Crypto ETP Process Works

Galaxy’s model allows a client to lend selected digital assets, such as Bitcoin, Ether, or Solana, to Galaxy. If Galaxy determines that the loan can be settled in ETP shares, it will coordinate an in-kind creation with an Authorized Participant. After that, Galaxy will deliver the ETP shares to the client’s chosen account.

An Authorized Participant is usually a large financial institution that can create or redeem shares of an exchange-traded product. This role helps keep the ETP running smoothly and supports market liquidity.

Morgan Stanley and Galaxy said current onboarding timelines for these types of transactions can take more than four weeks. With this referral capability, onboarding time may fall by up to 75% in some cases. Galaxy will also reduce its lending transaction minimum for Morgan Stanley-referred clients from $25 million to $5 million.

That lower minimum could make the service available to more qualified wealth management clients. However, the companies made clear that clients must meet eligibility requirements and should consult their financial advisors.

Morgan Stanley Says the Model Connects Crypto and Portfolios

Alison Nest, Head of Investment Solutions Products at Morgan Stanley Wealth Management, said Morgan Stanley has been investing in the decentralized finance space for some time. She said the referral capability with Galaxy gives wealth management clients an “institutionalized pathway” to help integrate digital assets into their portfolios.

Zane Glauber, Global Head of Distribution at Galaxy, said the arrangement offers “an efficient and secure path” to access spot crypto ETPs. He added that faster onboarding and lower transaction minimums can make it easier for clients to use digital assets alongside traditional investments.

Spot crypto ETPs give investors exposure to the price of crypto assets, such as Bitcoin, without directly holding the asset in their own wallet. However, the announcement also included strong risk warnings. Morgan Stanley said it has not registered the Morgan Stanley Bitcoin Trust under the Investment Company Act of 1940, so the trust does not offer the same protections as registered mutual funds or traditional ETFs. The company also warned that digital assets remain highly volatile and that investors could lose all or most of their investment.