In a move that could potentially disrupt the cryptocurrency trading landscape, Morgan Stanley, one of the world’s largest asset managers, is reportedly considering adding cryptocurrency trading to its E-Trade online brokerage platform. According to a January 2 report by The Information, the wealth manager cited expectations of a friendlier crypto regulatory environment under United States President-elect Donald Trump as a key consideration.
Trump’s Promise for a Friendlier Crypto Regulatory Environment
Donald Trump has promised to appoint industry-friendly leaders to key regulatory agencies and make the US "the world’s crypto capital." This promise is seen as a significant development, as it could pave the way for increased adoption of cryptocurrency trading in the United States. The plans to add cryptocurrency trading to E-Trade would make it one of the biggest traditional retail brokerages to offer support for crypto trading, potentially creating meaningful competition for incumbent platforms such as Coinbase.
Morgan Stanley’s Acquisition of E-Trade
Morgan Stanley acquired E-Trade in 2020. The brokerage’s 5.2 million accounts collectively hold approximately $360 billion, according to The Information. Adding cryptocurrency trading to the platform could bring crypto to millions of investors who currently do not have access to it.
Crypto Trading on Traditional Retail Brokerages
Other traditional retail brokerages offering crypto trading include Robinhood, Fidelity, and Interactive Brokers. Charles Schwab reportedly plans to add crypto trading this year, according to Bloomberg. However, the available tokens on these platforms are generally more limited than those found on crypto-native centralized exchanges such as Coinbase.
The Lucrative Business of Crypto Trading
Crypto trading has been a lucrative business for online brokerages. Robinhood’s Q3 2024 results show that crypto trading volume and revenue soared by 112% and 165% year-on-year, respectively, coming to $14.4 billion and $61 million. In June, Robinhood agreed to acquire the Bitstamp crypto exchange in a $200 million deal that would enable it to serve institutional investors in the United States.
Coinbase’s Dominance
Incumbent Coinbase clocked revenues of $1.2 billion in the third quarter of 2024, primarily from its crypto trading businesses. While Coinbase remains the dominant player in the cryptocurrency trading space, the addition of more traditional retail brokerages offering crypto trading could potentially disrupt its market share.
Morgan Stanley’s Early Mover Advantage
Morgan Stanley has been an earlier mover in crypto compared with other traditional wealth managers. In August, Morgan Stanley authorized its 15,000 financial advisers to start recommending Bitcoin exchange-traded funds (ETFs) to clients. As one of the largest wealth managers in the US, Morgan Stanley’s advisory network manages some $3.75 trillion, including $1 trillion in self-directed client accounts.
Recommendations from Morgan Stanley Advisers
Morgan Stanley advisers have been recommending BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC), both of which are widely considered "blue chips" among Bitcoin exchange-traded funds. The recommendation to clients is seen as a significant development, as it suggests that Morgan Stanley is serious about offering crypto trading services.
The Implications for the Cryptocurrency Market
The addition of more traditional retail brokerages offering crypto trading could potentially disrupt the market share of incumbent platforms such as Coinbase. However, the available tokens on these platforms are generally more limited than those found on crypto-native centralized exchanges. Nevertheless, the increased adoption of cryptocurrency trading by traditional retail brokerages is seen as a significant development, as it could lead to increased mainstream acceptance and adoption of cryptocurrencies.
Conclusion
Morgan Stanley’s consideration of adding cryptocurrency trading to its E-Trade platform is a significant development in the world of cryptocurrency. The potential disruption to the market share of incumbent platforms such as Coinbase is a major topic of discussion among industry experts and investors alike. While the available tokens on these platforms are generally more limited than those found on crypto-native centralized exchanges, the increased adoption of cryptocurrency trading by traditional retail brokerages is seen as a positive development for the industry.
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