Morgan Stanley, Galaxy launch crypto-to-ETP service for wealth

Morgan Stanley Wealth Management has launched a new service allowing its high-net-worth clients to convert cryptocurrency holdings into regulated investment products through a partnership with Galaxy Digital. The referral arrangement enables eligible clients to lend Bitcoin, Ether, or Solana to Galaxy and receive shares of spot crypto exchange-traded products (ETPs) in return, including the Morgan Stanley Bitcoin Trust (MSBT).

The process utilizes an in-kind creation mechanism, where Galaxy coordinates with an authorized participant to deliver ETP shares directly into a client’s brokerage account. Because the digital assets are lent rather than sold, this structure can allow clients to avoid triggering a taxable disposal event that would occur with a conventional cash liquidation. The specific tax implications for any client depend on individual circumstances and require professional counsel.

Accessibility and speed are central features of the new offering. Galaxy has reduced the minimum lending transaction size for clients referred by Morgan Stanley from $25 million to $5 million, broadening the pool of eligible investors. The firms also stated that the streamlined process...