Morgan Stanley applies for crypto trust charter subsidiary

• Key insight: Morgan Stanley’s application for a national trust charter for a proposed subsidiary is in support of the investment bank’s bid to partner with Zerohash to let E-Trade clients trade popular crypto coins. 
• What’s at stake: The application comes amid persistent bank concern about a slew of national trust charter applications from fintechs and crypto companies, whom banks fear will compete with them for banking activities without similar oversight. 
• Forward look: The Office of the Comptroller of the Currency has approved several national trust charter applications in recent months. 

WASHINGTON — Morgan Stanley has applied to create a national trust bank focused on crypto, according to a document released Friday by the Office of the Comptroller of the Currency. 

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The trust, called the Morgan Stanley Digital Trust National Association, would be a wholly owned subsidiary of Morgan Stanley, and would be headquartered in Purchase, New York. The organizers submitted the application Feb. 18.  

The trust would be in support of an initiative announced in September, where Morgan Stanley said it would partner with a crypto infrastructure provider called Zerohash to let its E-Trade brokerage clients trade popular cryptocurrencies, a person familiar with the application said. 

In the application, the Morgan Stanley Digital Trust National Association’s organizers said that it would provide “a comprehensive array of financial services and solutions to individual investors, small- to medium-sized businesses and larger institutions.” 

Over the three-year de novo period the trust intends to custody certain digital assets, and “conduct certain activities incidental to the business of banking, including the purchase, sale, swap and transfer of digital assets to support client investment activities, and facilitate customer staking of digital assets on a fiduciary basis,” according to the application. 

This comes amid a flurry of crypto-related trust applications, and a general widening in scope of them. The Morgan Stanley-related application stands out though, as it represents the deepening of interest of one of the largest banks in the country that have jumped into the crypto game. 

The OCC on Friday finalized a proposal that codifies the idea that national trusts may engage in “business of banking activities,” including non-fiduciary custody. They did so over the objections of bank lobbying groups, who worry that crypto companies with national trust charters could compete with banks without the same kind of strict bank regulatory oversight. 

The OCC has also authorized trust charters at a fast clip under Comptroller Jonathan Gould. The agency gave approval in December to First National Digital Currency Bank, Ripple National Trust Bank, BitGo Bank & Trust, Fidelity Digital Assets and Paxos Trust Company, and just a few days ago to Crypto.com.