Morgan Stanley Moonlights with Crypto ETFs
Multinational investment bank Morgan Stanley submitted their new S-1 with the SEC for their Ethereum and Solana ETFs (Exchange Traded Funds). The revised S-1 adds to the list of institutions racing to create legal products for crypto investing within the US markets. This is another artifact of the growing institutional investment in the US for legal products to invest in crypto within the US markets.
The revised S-1 was submitted to the SEC for their Morgan Stanford Ethereum Trust and Morgan Stanford Solana Trust on May 20, 2023. This submission follows the trend within the Wall Street investment community selecting investment vehicles for Solana, and other altcoins, beyond the Bitcoin investment products.
ETF Names will be MSSE and MSOL
From the revised S-1, Morgan Stanley intends to list their Ethereum ETF as MSSE, and their Solana ETF as MSOL. Morgan Stanley hopes to expand their digital asset ETFs by creating a separate vehicle for Ethereum and Solana. This naming convention follows Morgan Stanley’s strategy to launch their Spot Bitcoin ETF in April 2023.
Ethereum ETF Staking Services
One of the intriguing aspects of the Ethereum ETF that Morgan Stanley is proposing is that it will offer staking services. The ETF will offer exposure to the spot price of Ethereum as well as hold and stake Ethereum in the Trust.
What the ETF aims to do is track performance while bringing in yields from staking.
The ETF may appeal to institutional investors looking for a passive way to hold crypto, while earning yield. The approval of crypto ETFs is usually focused on staking, as it helps investors earn rewards for validating the blockchain without actually owning the tokens directly.
Solana ETF Focuses on Spot Price of SOL
Morgan Stanley used the same wording in the Solana ETF filing. According to the filing, The Solana Trust would track the spot price of SOL and stake some of the assets in the trust to earn staking rewards.
The filing also pointed to some of the inadequate aspects of Solana’s architecture and the Proof of History consensus and its network structure. These types of risks are common in crypto ETF applications, especially in relation to newer blockchain ecosystems.
The filing pointed to a growing certainty among investors and an increased demand for other types of investment products in the crypto space.
Uncertainty Remains as to Fee Structure and Timeline for the Launch
In spite of the updated filings, Morgan Stanley remained unclear on management fees, expense ratios, or an official launch for these ETFs. These types of details are only going to be revealed in future filings or final approval documentation.
The filings confirmed that operational tasks would be performed by a delegated sponsor structure, with cash creations and cash redemptions allowed by the trusts to designated participants.
The Crypto ETF Industry Has Become Highly Competitive
The filings from Morgan Stanley are being made in the context of tougher competition in the U.S. spot crypto ETF industry.
Following this year’s successful launch of spot Bitcoin ETFs, the top three U.S. asset management firms have been competing to be the first to launch Ethereum-linked ETFs. Other digital asset products are also anticipated to debut soon.
Concurrently, Grayscale Investments modified BNB coin ETF proposal filings, illustrating that interest in altcoin ETFs is gaining traction within the U.S. market.
Conclusion
The updated S-1 for Morgan Stanley’s Ethereum and Solana ETFs demonstrates the rapid, widespread acceptance of digital assets by institutional clients in the United States. Morgan Stanley is the first major financial institution offering spot-based ETFs, which include staking. With Symbols MSSE and MSOL, along with staking and cash redemption features, the ETFs illustrate advancements in the complexity and diversity of staking ETFs.
While management fees and launch dates are absent from the disclosures, these filings are groundbreaking from a regulatory perspective for Ethereum and Solana. With Grayscale Investments and other companies pursuing alternative coin ETFs, the U.S. crypto ETF market race is expected to begin in 2026.
