The Office of the Comptroller of the Currency has conditionally approved a national trust bank charter for a Morgan Stanley digital-asset subsidiary, according to documents made public last week.
The green light, signed off on June 18, came precisely four months after the bank applied for the charter.
Morgan Stanley Digital Trust National Association’s main activities will be custody of certain digital assets and the conduct of certain activities incidental to the business of banking, including the purchase, sale, swap and transfer of digital assets to support client investment, according to the approval. The trust will also facilitate the staking of digital assets on a fiduciary basis and act as a collateral administrator to support digital asset lending offering by an affiliate, the regulator said.
The trust presumably will support a partnership Morgan Stanley forged last September with digital-asset infrastructure provider Zerohash to allow crypto trading on the bank’s E*Trade platform. Zerohash, incidentally, also applied for a charter.
Among conditions for approval, the trust must maintain at least $50 million in tier 1 capital for its first three years – and at least half of that must be held as eligible liquid assets, the OCC said. The trust must also keep, in eligible liquid assets, an additional sum equal to 180 days of operating expenses.
Also, during its first three years, the trust must assess its level of capital and liquidity quarterly and engage an independent, external auditor to perform an audit annually, the OCC said.
The trust must obtain the OCC’s non-objection before appointing senior executive officers or directors during its first three years of operation. The regulator granted Morgan Stanley’s request to waive residency requirements for three proposed directors.
The trust must alert the OCC at least 60 days ahead of any intent to significantly deviate from its business plan or operations, the regulator said.
Additionally, the trust must limit its operations to those of a trust company and related activities. It also must comply with the Genius Act, the OCC said.
Morgan Stanley’s application generated one comment to the OCC from a trade group representing banks, the regulator said. The comment questioned whether the bank’s activities were permissible for a national trust bank.
The trade group also raised concerns as to whether the OCC could resolve the trust if it were to fail. The commenter also noted safety and soundness concerns over the trust’s concentration in digital-asset services.
The concerns raised, however, are not grounds for denying the application, the OCC said.
While national trust bank charters have seen a spike in interest under OCC chief Jonathan Gould, most applications have come from crypto firms and entities that aren’t offshoots of established banks.
Jasper Sneff Nanni, a managing principal at consulting firm FS Vector, told American Banker that Morgan Stanley’s conditional approval “will create a sense of urgency for wealth management competitors who want to stay on equal footing.”
“This is probably less about broadening the services offered and more about reducing reliance on third-party custodians and exchanges,” he said. “This will allow them to control costs and enforce consistency and reliability in client delivery.”
Morgan Stanley Digital Trust National Association will be a wholly owned subsidiary of the bank and be headquartered in Purchase, New York.
