Whatever the colloquialism – main street or mainstream – cryptocurrency is garnering more of it and that much was on display Thursday following another big announcement from another traditional brokerage firm.
Morgan Stanley reportedly will roll out cryptocurrency trading services next year on its popular E*Trade platform. The bank hasn’t confirmed the rumor and it was initially reported by Bloomberg, citing unidentified sources with knowledge of the matter.
“The project is nascent and executives envision launching the service sometime next year, according to people familiar with the matter,” according to Bloomberg. “The firm is considering partnering with one or multiple established crypto firms as it sets up the mechanics for the brokerage’s clients to buy and sell popular tokens including Bitcoin and Ether.”
Morgan Stanley has yet to comment on the matter, but the rumor was significant enough that it was a drag on shares of some E*Trade rivals that generate sizable revenue from crypto trading fees courtesy of retail traders.
Why It Matters
Alone, another $1 trillion+ asset manager making its way into the world of digital currencies can be viewed as an endorsement of the still young asset class, but there’s more to the story.
E*Trade, which Morgan Stanley acquired in early 2020, is a retail investing powerhouse as highlighted by an estimated 5.5 million accounts. That doesn’t include roughly 2.2 million workplace accounts. So while the platform has already been offering crypto ETFs, speculation that it will provide access to spot bitcoin and the like is significant.
The report also comes on the heels of rival Charles Schwab (NYSE: SCHW) saying last week that it plans to launch spot crypto trading on its highly popular platform next year as well. Fidelity, long cryptocurrency-progressive, has permitted spot trading in bitcoin and ethereum for some time.
Assuming the E*Trade rumor proves accurate, that would mean five of the nine largest US-based brokerage firms as ranked by assets allow or soon will permit spot cryptocurrency trading in some form. Giants Vanguard, J.P. Morgan and Merrill Lynch are still in the “no” camp.
Advisors Should Take Note
For advisors, there are implications in another retail-heavy broker such as E*Trade making spot cryptocurrency trading available to customers. As advisors know, many clients have discretionary accounts on the side and many of them, particularly those in younger demographics, are crypto-enthusiastic.
That doesn’t imply that advisors should become babysitters of clients’ crypto habits when those trades are outside the advisor’s purview. On the other hand, it cannot be ignored that with Fidelity already in the game, Schwab confirming it will join and E*Trade potentially following suit, clients across all age groups have increasing access to cryptocurrency and that can lead to temptation.
So there’s a niche/value-add for advisors to fill and that’s displaying interest in clients’ crypto habits, providing education, upon request, regarding the asset class’s knack for volatility and helping clients to not be seduced by cryptocurrency fairy tales and scams.
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