John Reed Stark, former head of internet enforcement at the SEC, has said Morgan Stanley’s latest move to offer Bitcoin exchange-traded funds (ETFs) to its clients on a large scale will likely lead to increased scrutiny from the US banking regulator. This development follows several accolades from the crypto community to Morgan Stanley for implementing what could be a major pro-adoption policy.

Morgan Stanley’s Bitcoin ETF Move Is a Death Wish, Says Stark

Earlier this week, the Wall Street giant announced plans to allow 15,000 of its licensed financial advisors to begin pitching Bitcoin spot ETFs to clients. Specifically, Morgan Stanley will grant clients access to invest in BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC).

This offering is limited to high net worth individuals of $1.5 million and above, with a high risk tolerance, who have expressed interest in investing in volatile assets. However, John Reed Stark has commented on this development, describing Morgan Stanley’s Bitcoin ETF offering as a death wish in terms of regulatory oversight and compliance.

With two decades of experience in the enforcement division, the former SEC chief believes Morgan Stanley may have exposed itself to one of the most extensive enforcement actions from the Commission and also the Financial Industry Regulatory Authority (FINRA).

With Morgan Stanley’s massive Bitcoin ETF offering, Stark says, these regulators will have near-instant access to all data on the bank’s Bitcoin sales to retail clients. This includes all forms of information, including documents, email, text messages, voicemail and phone calls. Interestingly, this “treasure trove of evidence” is not only accessible upon request by the SEC and FINRA, but can also be requested for on-site inspections at Morgan Stanley’s offices.

Given the sheer amount of information that the SEC and FINRA will have access to, John Reed Stark believes that Morgan Stanley’s compliance officers will have a tough job, as detecting potential wrongdoing by the Wall Street giant will be as easy as shooting fish in a barrel for U.S. regulators.

Morgan Stanley, the first of many?

While John Reed Stark’s concerns about Morgan Stanley’s Bitcoin ETF offering are valid, the bank has gained notoriety for taking a major step in Bitcoin adoption. Alongside them, Wells Fargo, another Wall Street giant, is expected to offer select investors exposure to a few Bitcoin ETFs.

Overall, all of this points to a growing interest in Bitcoin from the traditional financial sector, a factor that is crucial for the cryptocurrency’s mainstream adoption. With BTC spot ETFs still in their first year of trading, more investment and commercial banks may consider accepting these mutual funds in the future, which would translate into a higher price for Bitcoin due to increased demand.

At the time of writing, Bitcoin is still trading at $60,600, down 1.0% over the past day.

Main image from Forbes, chart from Tradingview