BUSINESS | Mar 19, 2021 | WOZINGA NEWS
Why Morgan Stanley is the first U.S. bank to accept Bitcoin?
Economist Saifedean Ammous said, “Today is the day the big banks entered bitcoin. ”
By Marielle Petere Wozinga Journalist
Morgan Stanley is the first US bank to respond to its clients’ demand on cryptocurrency as a legitimate asset class; however, only affluent clients can access Bitcoin funds.
On March 17, CNBC reported the multinational investment and financial services company, Morgan Stanley, as the ‘first big U.S. bank offer access to bitcoin funds.’
After the demand of the unidentified clients, another scheme of the bank promotes Bitcoin as an investment in marketable securities.
Crypto investment is a high demand
Bitcoin, as a digital currency, surpasses its value for the past months in the market even without bank intervention. Now, some investors consider crypto as trading security and as a marketable investment.
Meanwhile, Bitcoin is a volatile asset and a risky investment. But, the principle of risk-return tradeoff is applicable. The rationale is the higher the risk, the higher the potential returns – either in the short term or the long term.
Three bitcoin funds for Morgan Stanley’s wealth management clients are from Galaxy Digital (Galaxy Institutional Bitcoin Fund LP and Galaxy Bitcoin Fund LP), and the combined effort from asset manager FS Investments and New York Digital Investments Group (FS NYDIG Select Fund).
The first bitcoin fund on offer is the Galaxy Institutional Bitcoin Fund LP which has a $5 million minimum investment. Galaxy Bitcoin Fund LP and FS NYDIG Select Fund require a $25 thousand minimum investment.
Bank’s restrictions for Bitcoin funds
To avoid inherent risk, Morgan Stanley offers access to Bitcoin funds only to its high-end clients. However, the bank provides restrictions for the aggressive investors
Affluent clients must have a minimum of $2 million assets as their average daily balance; while, investment firms must have a minimum of $5 million in bank accounts for at least six months.
For Bitcoin investment, Morgan Stanley will limit up to 2.5% of the client’s total net worth.
If a client has $5 million in funds for 6 months as a depositor, he is allowed to access Bitcoin funds. Since it limits only to 2.5% of net worth; he can only invest $125,000 for a Bitcoin transaction. However, if he has a $4 million liability, he is not qualified because he has only $1 million total net worth.
Rather than being left behind as a traditional bank, this financial services company moves ahead with its timely development.
Michael Saylor, CEO of Microstrategy, stated “Morgan Stanley is the first bank to offer bitcoin, they won’t be the last.”