Morgan Stanley, an American multinational investment bank and financial services company, plans to offer trading complex derivatives involving the largest and major cryptocurrency in the market: Bitcoin. The movement succeeded the footsteps of other Wall Street firms in creating ways for clients to enter the cryptocurrency market.
LAUNCHING AND LIMITATIONS
The firm is currently reserving their statements. One spokesperson declined to comment about their future plans, but according to “people familiar with the matter”, the company will initially deal in contracts that give investors synthetic exposure to the performance of Bitcoin. Additionally, “investors are given the opportunity to go long or short using the so-called price return swaps, and Morgan Stanley will charge a spread for each transaction.” The bank is ready to offer the Bitcoin swap trading to the public once there is a proven institutional client demand and after they finalize the internal approval process.
It is worth noting, however, that Morgan Stanley Chief Executive Officer James Gorman said earlier this year that the bank wouldn’t let customers buy and sell cryptocurrencies directly through Morgan Stanley, but would instead build a trading platform to support various derivatives tied to digital assets. The trading swaps are tied to Bitcoin futures contracts.
Many banking giants are planning ahead to offer global derivatives tied to digital assets even if many cryptocurrencies collapses in value halfway through the year. Here are some of the companies preparing for new products tied to Bitcoin:
Goldman Sachs Group Inc. – a giant firm headquartered in New York City. Last year, the company’s CFO, Martin Chavez, says that they are working on a Bitcoin derivative for clients. The derivatives are settled in U.S dollars and the reference price is the Bitcoin-U.S. dollar price established by a set of exchanges.
Citigroup Inc. – a company formed by the merger of banking giant Citicorp and financial conglomerate Travelers Group. Citigroup is planning to launch crypto trading by issuing receipts. It will solely act as an agent issuing Digital Asset Receipts (DARs) to enable trading by proxy without direct ownership of the underlying coins. The structure is designed to fall within existing regulatory regimes.