Morgan Stanley and Citigroup Advance Bitcoin and Crypto Integration into Mainstream Banking

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TLDR

  • Morgan Stanley has applied to the OCC for a national trust bank charter to provide crypto asset custody services for its clients.
  • The planned subsidiary, named “Morgan Stanley Digital Trust,” will facilitate crypto custody, trading, swaps, staking, and transfers.
  • Citigroup intends to introduce institutional bitcoin custody services later this year, integrating them with existing traditional asset frameworks.
  • Citi aims to enable clients to manage bitcoin alongside securities and cash within a single account, offering cross-margining capabilities.
  • Both financial institutions are enhancing their crypto infrastructure in response to increasing client demand for digital assets within conventional banking systems.

Morgan Stanley has submitted an application to the Office of the Comptroller of the Currency (OCC) for a de novo national trust bank charter. The application, received on February 18, was filed under the name “Morgan Stanley Digital Trust, National Association.”

This charter would empower Morgan Stanley to hold digital assets on behalf of its clients. The subsidiary is expected to support the purchase, sale, swapping, transfer, and staking of cryptocurrencies.

A national trust bank charter grants a financial institution the authority to perform fiduciary duties, such as safeguarding and holding assets. This marks Morgan Stanley’s inaugural trust charter specifically dedicated to cryptocurrency.

Morgan Stanley has been actively expanding its presence in the digital asset sector. In January, the bank appointed equity markets executive Amy Oldenburg to lead its new crypto division and filed for the launch of spot and Solana ETFs, followed by a filing for a staked Ether ETF.

The bank, which manages approximately $8 trillion in assets, is also deploying spot crypto trading capabilities on its E*TRADE platform. Furthermore, it is exploring the development of lending and yield products linked to digital assets.

Job postings indicate that Morgan Stanley is actively recruiting for positions such as digital assets strategy director and digital assets product lead. The bank is also investigating wallet technology for its wealth management platform.

Citi Plans Institutional Bitcoin Custody

Citigroup has announced its intention to launch institutional bitcoin custody services later this year. Nisha Surendran, who heads Citi’s digital asset custody development, detailed the plan at the World Strategy Forum on Thursday.

Surendran articulated the objective as making “bitcoin bankable.” Citi aims to incorporate bitcoin into its existing custody, reporting, and tax processes that are currently used for traditional assets like equities and bonds.

Clients will have the option to initiate transactions through SWIFT, APIs, or user interfaces. Citi will manage all clearing and settlement operations internally.

The bank also plans to allow clients to hold bitcoin in the same safekeeping account as U.S. Treasuries, foreign bonds, and tokenized money market funds. This arrangement will enable cross-margining between crypto and traditional assets.

Citigroup’s survey of its institutional clients revealed that they prefer not to manage wallets and private keys themselves. Instead, they desire exposure to bitcoin within familiar banking systems.

The Broader Push by Major Banks

Citigroup is connected to over 220 payment and settlement networks globally. The bank has introduced Citi Token Services for cash, a real-time, 24/7 blockchain-based network used for transferring funds within its global system.

JPMorgan Chase has pursued a similar strategy with its JPM Coin product. Additionally, the New York Stock Exchange has announced plans for a 24/7 blockchain-based trading venue for tokenized stocks and ETFs later this year.

In December, the OCC granted conditional approval to five crypto-related national trust bank applications, including those from Ripple, BitGo, Fidelity Digital Assets, and Paxos. Stablecoin platform Bridge, owned by Stripe, and Crypto.com have since received conditional approvals.

Payoneer also filed for a national trust bank charter this month, which could enable it to issue a stablecoin and offer cryptocurrency services.