Morgan Stanley Partners with Galaxy to Expand Access to Crypto Lending

Morgan Stanley is expanding its crypto asset offerings by allowing qualifying clients to borrow against holdings tied to Bitcoin exchange-traded products (ETPs). The new arrangement permits eligible investors to access loans worth up to half the value of their Bitcoin-linked ETP positions.

The initiative forms part of a wider strategy by Morgan Stanley Wealth Management to incorporate digital assets into established financial services.

Under a partnership announced on June 5 with Galaxy Digital, approved clients can transfer crypto assets such as Solana, Bitcoin, and Ether to Galaxy. In exchange, they receive shares in spot crypto ETPs, which are then deposited directly into their brokerage accounts. Among the available products is Morgan Stanley’s Bitcoin investment vehicle, the MSBT trust.

Converting digital assets into an exchange-traded structure allows for the treatment of holdings in a manner akin to conventional securities. This opens access to services commonly available in traditional brokerage accounts, including securities lending, margin financing, and unified account reporting.

The lending feature allows investors to secure loans equal to as much as 50% of the value of their Bitcoin ETP shares. While that loan-to-value level may appear cautious compared with many conventional lending products, Bitcoin’s history of sharp price swings presents additional risk considerations.

Morgan Stanley has also lowered the minimum investment requirement for clients entering through the Galaxy referral program to $5 million. The company says onboarding has become considerably faster, with processing times reportedly reduced by 75%.

The improvement follows regulatory changes made possible after the U.S. Securities and Exchange Commission approved in-kind creation and redemption mechanisms for crypto ETPs in 2025.

Launched on April 8, Morgan Stanley’s Bitcoin Trust carries a management fee of 0.14%, placing it among the lower-cost options available in the spot Bitcoin ETP market. The fund follows the CoinDesk BTC Benchmark Rate and had accumulated approximately $252 million in assets under management as of June 9.

The approved in-kind structure enables investors to exchange cryptocurrency directly for ETP shares instead of first liquidating their holdings for cash. This approach can help investors avoid triggering a taxable transaction that would typically occur through a sale.

Risk remains a key consideration. For example, a borrower taking a $500,000 loan against $1 million in BTC ETP holdings could see leverage levels rise sharply if Bitcoin prices fall. A 30% decline would reduce collateral value to roughly $700,000, pushing the effective loan-to-value ratio above 70%, a level that could prompt a margin call in many lending systems.

The efforts that major financial institutions like Morgan Stanley are taking to incorporate crypto products into their operations and services are a welcome development for many blockchain companies like Bit Digital Inc. (NASDAQ: BTBT) because they show that cryptos are expanding their penetration of the mainstream financial ecosystem.

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