From gatekeepers to issuers: why banks are the next front in the crypto ETF race
Morgan Stanley runs its own crypto ETFs, Vanguard has opened its platform and banks are adding custody. Distribution, not approvals, is now the main battleground.
ETFS & INSTITUTIONSFINTECHANALYSIS
Daniel Hartley
10/27/20263 min read
For the first two years of US spot crypto ETFs, the story was about approvals: which products the SEC would allow, and when. That phase is largely over. Bitcoin, ether, Solana and XRP funds trade every day, and generic listing standards have made new launches routine. The contest that matters now is about distribution: who controls access to the trillions of dollars run by advisers and banks, and how they choose to use it.
Banks move from shelf space to own-brand funds
Morgan Stanley offers the clearest example. In April it launched the Morgan Stanley Bitcoin Trust (MSBT) at a 0.14% fee, the first spot bitcoin ETF issued under the name of a major US bank. In July it added Ethereum and Solana trusts at the same fee, with part of their holdings staked. Instead of only routing clients into BlackRock or Fidelity products, the bank can now keep the management fee in-house and give its roughly 16,000 wealth advisers a product of its own. Bloomberg Intelligence's Eric Balchunas estimated that the bitcoin trust drew around $400 million in its first four months. That is modest next to IBIT's roughly $66 billion in net assets, but meaningful for a late entrant.
Others are opening doors without launching funds. Vanguard, which manages about $11 trillion and long refused to offer crypto products, began allowing its brokerage customers to trade crypto ETFs in December 2025. In Europe and the Gulf, banks are building the plumbing underneath: Deutsche Bank is weeks away from launching bitcoin and ether custody for corporate clients, and Standard Chartered now lets affluent clients in the UAE trade both assets directly from their bank accounts.
Self-directed money has led, advisers are next
So far much of the money has come from investors acting on their own. Speaking in March, Morgan Stanley's head of digital asset strategy, Amy Oldenburg, said about 80% of crypto ETF distribution on the bank's platform came through its self-directed business rather than adviser-managed accounts, and described adoption as still very early. Bitwise executives have pointed out that many large advisory and brokerage platforms only began offering these products to advisers in late 2025.
That points to the next phase. Advisers work from model portfolios, and guidance from large firms has moved crypto from forbidden to permitted. Morgan Stanley's investment committee has suggested up to 4% for its most aggressive portfolios, Bank of America supports a range of 1% to 4%, and BlackRock has called 1% to 2% in bitcoin a reasonable range. Even small allocations, applied across thousands of model accounts, can produce steadier and less price-sensitive flows than the self-directed money that dominates today.
What changes when banks control the pipe
Bank participation pushes fees down. Morgan Stanley's 0.14% undercut most incumbents in ether and Solana, and around the same time 21Shares cut the fee on its Solana fund to zero for a year. For investors that is welcome. For issuers without their own distribution it squeezes margins and raises the value of a place on the approved lists of large platforms.
It also changes the character of flows. Products sold through advisers are typically rebalanced on a schedule rather than traded on headlines. If the adviser channel grows, the kind of whipsaw seen in bitcoin funds this October, with swings of more than $600 million in either direction within days, could become less pronounced over time. The flip side is concentration: a handful of investment committees could shift billions of dollars of demand with a single change to their model weights.
Regulation is moving in the same direction. The SEC's October proposal on crypto custody for investment advisers and funds aims to set clearer rules for how regulated firms hold digital assets. That matters to banks deciding whether to build custody themselves or rely on specialists such as Coinbase, which currently safeguards the bitcoin of most US spot bitcoin ETFs.
Signals to watch
The next round of quarterly 13F filings will show whether advisers and institutions added exposure during the autumn price weakness. Announcements that crypto ETFs have entered model portfolios at large wirehouses would mark a real change in the distribution channel, as would further own-brand launches from banks. For a market used to measuring institutional adoption by daily flows, the more telling number may now be how many advisers are allowed, and willing, to recommend these funds.