Former SEC Internet Enforcement Chief John Reed Stark has stated that Morgan Stanley’s latest decision to introduce a large-scale offering of bitcoin exchange-traded funds (ETFs) to its clientele will likely result in increased regulatory scrutiny for the US bank. This development comes amid several praises for Morgan Stanley from the crypto community for implementing what could be an important pro-adoption policy.
Stark says Morgan Stanley's move toward a bitcoin ETF is a death wish
Earlier this week, the Wall Street giant announced plans to allow 15,000 of its licensed financial advisors to begin offering spot bitcoin ETFs to their clients. Specifically, Morgan Stanley will grant clients access to investing in BlackRock’s iShares bitcoin Trust (IBIT) and Fidelity’s Wise Origin bitcoin Fund (FBTC).
This offering is restricted to high net worth individuals of $1.5 million or more, with a high risk tolerance, who have expressed interest in investing in volatile assets. However, commenting on this development, John Reed Stark has x.com/JohnReedStark/status/1821924270638796847″ target=”_blank” rel=”noopener nofollow”>described Morgan Stanley's bitcoin ETF offering is a death wish in terms of regulatory scrutiny and compliance.
With two decades of experience in the Division of Enforcement, the former SEC chief believes Morgan Stanley may have exposed itself to one of the most comprehensive enforcement raids by the Commission and also the Financial Industry Regulatory Authority (FINRA).
Stark says that with Morgan Stanley’s large-scale bitcoin ETF offering, these regulators will gain near-instant access to all data on the bank’s bitcoin sales to retail clients. This covers all types of information, including documents, emails, text messages, voicemails and phone conversations. Interestingly, this “treasure trove” is not only accessible to the SEC and FINRA upon request, but can also be requested for on-site inspections at Morgan Stanley offices.
Given the vast amount of information the SEC and FINRA will have access to, John Reed Stark believes Morgan Stanley's compliance officers face an uphill task as spotting potential violations by the Wall Street titan will be as easy as shooting “fish in a barrel” for U.S. regulators.
Morgan Stanley, the first of many?
While John Reed Stark's concern about Morgan Stanley's bitcoin ETF offering is valid, the bank has gained prominence by taking a major step in bitcoin adoption. Alongside them, x.com/AP_Abacus/status/1821157426873184290″ target=”_blank” rel=”noopener nofollow”>Wells Fargo, Another Wall Street titan is expected to begin offering select investors exposure to some bitcoin ETFs.
Overall, all of this indicates a growing interest in bitcoin from the traditional financial sector, a critical factor for the cryptocurrency’s mainstream adoption. Since btc spot ETFs are still in their first year of listing, it is possible that more commercial and investment banks will look to incorporate these investment funds in the future, which will translate into a higher price for bitcoin due to an increase in demand.
At the time of writing, bitcoin continues to trade at $60,600, reflecting a 1.0% drop over the past day.
Featured image from Forbes, chart from Tradingview
