Morgan Stanley Teams Up with Coinbase and Citi to Custody Bitcoin Spot ETF

Morgan Stanley recently updated its application for the proposed Morgan Stanley Bitcoin Trust, officially designating Coinbase Custody Trust Company and The Bank of New York Mellon as the fund's Bitcoin custodians. The trust plans to list on NYSE Arca and will closely track the CoinDesk Bitcoin Benchmark 4 pm New York Settlement Price. It will adopt a direct Bitcoin holding structure, without using leverage or derivatives, aligning with other spot Bitcoin ETFs that entered the U.S. market in 2024.

In terms of functional division, The Bank of New York Mellon will simultaneously serve as the fund administrator, transfer agent, and cash custodian. Coinbase, in addition to providing Bitcoin custody, will also act as a market maker broker, coordinating transaction processes and asset security. Investors can subscribe and redeem ETF shares in cash or in-kind through authorized participants, and the fund will buy and sell Bitcoin accordingly to maintain share balance. All transaction costs incurred from cash redemptions will be borne by the authorized participants, aiming to minimize tracking errors and enhance operational transparency.

Currently, Coinbase has become the preferred custodian for most spot Bitcoin ETFs in the United States, with only a few institutions like Fidelity choosing to build their own custody systems. This trend reflects the tendency of traditional financial institutions to rely on mature, regulatory-approved service providers to meet compliance and risk control requirements when deploying digital assets. Notably, among the approximately 20 ETFs managed by Morgan Stanley, only two products explicitly bear the "Morgan Stanley" brand name. The launch of this Bitcoin Trust marks a strategic breakthrough for the bank in the digital asset space, demonstrating its determination to shift from indirect participation to directly issuing crypto-related products. As the sixth-largest financial institution in the United States by total assets, Morgan Stanley had previously been cautious in the crypto asset sector. However, with spot Bitcoin ETFs continuing to attract huge inflows of funds—such as the BlackRock iShares Bitcoin Trust, which quickly surpassed $10 billion in assets after listing in January 2024—traditional asset management giants are accelerating their deployment in this emerging market.