Morgan Stanley's Crypto ETF Gambit: Why Ethereum Was Left on the Sidelines
Morgan Stanley's decision to exclude Ethereum from its crypto ETF lineup despite record inflows into rival funds raises urgent questions about institutional priorities in the digital asset space.
The bank filed with the SEC to launch Bitcoin (BTC) and Solana (SOL) ETFs, with the latter incorporating staking rewards distributed quarterly. This structural divergence highlights how Morgan Stanley is navigating the evolving regulatory landscape while prioritizing assets with distinct operational mechanics.
The Bitcoin ETF will track BTC prices via spot exchange trades, offering a straightforward exposure model.
In contrast, the Solana ETF introduces complexity through its staking mechanism, which involves risks like technical failures or malicious actions by staking providers.
This operational nuance reflects the broader debate over how to balance innovation with risk management in crypto financial products.
Regulatory tailwinds have enabled these filings. The SEC's September rule changes for commodity-based trust listings and the OCC's December guidance permitting banks to act as crypto intermediaries have created a clearer framework. Matt Hougan, Bitwise CIO, said:
"Institutions are charging at crypto full-speed and see it as a key business priority."
Despite Ethereum's $340M in January inflows and XRP ETFs accumulating $1B in two months, Morgan Stanley chose to exclude both.
The strategic rationale remains opaque, though the bank plans to launch a crypto trading service on E*Trade in H1 2026. This timeline suggests a phased approach to crypto integration, prioritizing assets with more predictable regulatory outcomes.
ā ļø LEGAL DISCLAIMER: This article is for informational purposes only and does not constitute financial or investment advice.
Look, the exclusion of Ethereum underscores a broader tension between market demand and regulatory uncertainty. While inflows suggest strong appetite for ETH-based products, Morgan Stanley's choice to focus on SOL and BTC may signal a calculated bet on assets with clearer compliance pathways in the current regulatory climate.
