Morgan Stanley Seeks Approval for Spot Bitcoin ETF as Senate Republicans Push Crypto Legislation Forward

The cryptocurrency industry is witnessing significant developments on both the institutional and regulatory fronts, as Morgan Stanley seeks to launch its own spot bitcoin exchange-traded fund while lawmakers race to finalize comprehensive digital asset legislation.

First Major Bank to File for Spot Bitcoin ETF

Morgan Stanley has submitted a filing with the Securities and Exchange Commission to launch a spot bitcoin exchange-traded fund, representing the first time a major U.S. bank has pursued approval to issue an ETF directly tracking bitcoin's price ^[1].

The proposed Morgan Stanley Bitcoin Trust would hold bitcoin directly rather than using futures, derivatives, or leverage, according to the registration statement ^[1]. The fund would be sponsored by Morgan Stanley Investment Management, with shares created and redeemed in large blocks by authorized participants, either in cash or in kind ^[1].

The fund's net asset value would be calculated daily using a pricing benchmark derived from activity across major spot bitcoin exchanges, with retail investors able to trade shares through standard brokerage accounts on a secondary market ^[1].

Shifting Banking Landscape

This filing represents a notable shift by large banks from merely distributing third-party crypto products toward issuing their own ^[1]. U.S. banks had previously limited their involvement to custody and brokerage services due to regulatory uncertainty and risk controls, but that position has evolved as federal agencies provided clearer guidance on digital asset engagement ^[1].

In December, the Office of the Comptroller of the Currency stated that banks may act as intermediaries for crypto transactions, while the SEC has adjusted listing standards for spot crypto ETFs, creating a smoother approval process for new issuers ^[1].

The move builds on Morgan Stanley's October decision to expand crypto investment eligibility to all clients and account types across its wealth management business ^[1]. By offering a proprietary bitcoin ETF, the firm can integrate the product directly into client portfolios and retain management fees that would otherwise flow to competing issuers ^[1].

The U.S. spot bitcoin ETF market has grown substantially since regulators approved the first products in early 2024, with these funds now managing more than $120 billion in assets ^[1]. Spot bitcoin funds have become among the fastest-growing products in the U.S. ETF industry, with BlackRock's bitcoin ETF emerging as one of the firm's top revenue contributors within its first year ^[1].

Senate Republicans Accelerate Legislative Efforts

Simultaneously, Senate Republicans are intensifying efforts to advance crypto market structure legislation, delivering what they characterized as a "closing offer" to Democratic negotiators as Banking Committee Chair Tim Scott moves toward a committee markup potentially as soon as next week ^[2].

Senate Banking Committee Republicans transmitted a document Monday night detailing proposed changes to the bill in advance of a bipartisan member meeting Tuesday ^[2]. The document includes more than 30 revisions to Title I, which addresses the legal classification of digital assets, plus two new titles focused on investor protections and combating illicit finance ^[2].

The proposal came from Scott and fellow GOP senators Cynthia Lummis, Bill Hagerty, and Bernie Moreno ^[2]. Senator John Kennedy told Punchbowl News that the Banking Committee is targeting January 15 for the markup, though the committee would likely need to release an updated bill draft beforehand ^[2].

Remaining Obstacles

Despite the momentum, significant disagreements persist. Democrats continue pressing for concessions including ethics provisions preventing elected officials from profiting from crypto businesses, guarantees regarding Democratic appointments to leadership roles at the SEC and CFTC, and debates over whether crypto firms should be permitted to offer yield-bearing products that could compete with traditional banks ^[2].

Senator Catherine Cortez Masto, a moderate Democrat on the Banking Committee involved in negotiations, said she "definitely" expects a markup next week, describing talks as "very productive" and open on both sides ^[2]. However, lawmakers face a compressed legislative calendar with a January 30 federal spending deadline looming ^[2].