Morgan Stanley refers clients to Galaxy for crypto-to-ETP lending

Morgan Stanley announced that eligible wealth-management clients can now work with Galaxy Digital to convert client-held Bitcoin, Ethereum and Solana into spot exchange-traded product (ETP) shares that can be used as collateral for loans or margin. Galaxy will arrange in-kind ETP creations with an authorized participant and deliver shares directly into clients’ brokerage or private-banking accounts, avoiding a taxable sale of the underlying coins.

Galaxy expects the referral onboarding to be faster than previous processes that exceeded four weeks, with timelines shrinking by up to 75%. For Morgan Stanley-referred clients, Galaxy lowered the minimum transaction size from $25 million to $5 million. Morgan Stanley has limited its role to client referral and education while Galaxy handles onboarding and bears the operational exposure tied to crypto custody and transfers.

The arrangement uses a regulatory change from the U.S. Securities and Exchange Commission in July 2025 that allows spot crypto ETP shares to be created and redeemed in kind using the underlying tokens. That approval removed the prior requirement to convert coins to cash when creating shares and enabled a direct coin-for-share workflow.

Under the program, crypto holdings previously held in self-custody or on exchanges can be moved into bankable portfolios. Once converted into ETP shares, those holdings become marginable and reportable and can be made eligible for securities lending and private-banking infrastructure that supports other registered securities. Clients receive share exposure to the underlying token through familiar brokerage account structures.

The Morgan Stanley–Galaxy arrangement follows a wider set of institutional approaches to integrating crypto into bank lending and collateral practices. One model uses ETP shares as collateral because banks already have processes for custody, pricing, margining and liquidation of registered securities; JPMorgan has accepted BlackRock’s IBIT shares as collateral for institutional lending. A second model treats crypto itself as pledged collateral, with reported plans to allow institutional clients to pledge BTC and ETH directly against loans using third-party custodians. Under that approach, a loan originated at 50% loan-to-value would reach about 71% LTV after a 30% drop in Bitcoin’s price and would hit full collateral wipeout after a 50% drawdown.

A third approach uses tokenized Treasuries, money market funds or deposit tokens as the collateral leg while keeping crypto as the traded risk asset. On April 28, OKX, BlackRock and Standard Chartered launched a framework to allow a tokenized Treasury fund to serve as margin collateral on a trading venue, with Standard Chartered acting as a global-systemically-important bank custodian. HSBC expanded tokenized deposit services to U.S. clients in April 2026.

Market flows show U.S.-traded spot Bitcoin ETFs had $4.4 billion in net outflows over 13 consecutive weeks through early June, and Bitcoin fell roughly 53% from an October 2025 high near $126,200, briefly touching about $60,000 in early June. Industry estimates put crypto-collateralized lending at $73.59 billion in the third quarter of 2025, and a tokenization report projects roughly $17 billion in tokenized assets today with a bull-case estimate of $8.2 trillion by 2030. The Morgan Stanley referral channel moves externally held crypto into bank-managed portfolios where it can be financed, reported and integrated into institutional lending infrastructure.