Financial services industry consultant John Reed Stark has raised concerns about Morgan Stanley’s recent decision to allow its wealth management advisors to recommend spot Bitcoin ETFs to their clients. Stark, who is the president of the Bethesda, Maryland-based consulting firm, warned that the decision could result in significant regulatory scrutiny. In a post on X, Stark suggested that Morgan Stanley’s move could result in “the largest SEC and FINRA investigation in history” as the firm’s 15,000 advisors would now be able to recommend certain spot Bitcoin ETFs to their clients.
Different opinions on Bitcoin ETFs
Morgan Stanley’s decision to allow advisors to offer two of its nine existing spot Bitcoin ETFs—the $9.7 billion Fidelity Wise Origin Bitcoin Fund (FBTC) and the $19 billion iShares Bitcoin Trust (IBIT)—has sparked controversy. Advisors will only offer these ETFs to clients with at least $1.5 million in investable assets. Critics like Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, have questioned Stark’s stance, noting that Stark has consistently been skeptical of cryptocurrencies. Balchunas argues that Stark’s concerns lack specifics about how advisors might confront the problem.
On the other hand, some experts, such as Svetlin Krastev, founder of Black Sea Gold Advisors, believe that spot Bitcoin ETFs will not require any additional unique oversight, as they have already undergone extensive regulatory scrutiny. Krastev argues that offering an SEC-approved product should not create additional regulatory issues.
Potential for increased regulatory oversight
Noah Damski, CEO of Marina Wealth Advisors, expressed concern that regulators could see Bitcoin ETFs as “easy targets” due to market volatility. Damski pointed to Bitcoin’s significant price swings, noting that last week Bitcoin fell 6% while the Nasdaq fell 3%. This volatility raises concerns about whether these investments are suitable for the average investor.
Adam Gana, a New York-based securities attorney at Gana Weinstein, also sees potential problems. Gana predicts that arbitration cases will increase as Bitcoin becomes more accessible to Main Street investors, and warns that the industry may look back critically on such moves in the future.
Rick Edelman, founder of the Digital Assets Council of Financial Professionals, disputes Stark’s claims, arguing that financial advisors should not be swayed by Stark’s criticisms. Edelman argues that Stark’s views are biased, and advises that advisors should focus on their clients’ best interests despite Stark’s warnings.
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