John Reed Stark, former head of the Securities and Exchange Commission’s (SEC) Internet Enforcement Division, said Morgan Stanley’s latest move to launch a large-scale offering of bitcoin-based exchange-traded funds (ETFs) will likely result in increased regulatory scrutiny of the US bank. The development comes amid much praise for Morgan Stanley from the cryptocurrency community for implementing a policy that could prove crucial for cryptocurrency adoption.

Morgan Stanley’s Move Towards Bitcoin ETF Is a Death Wish, Stark Says

Earlier this week, the Wall Street giant announced plans to allow 15,000 licensed financial advisors to begin offering clients spot Bitcoin ETFs. Specifically, Morgan Stanley will grant clients access to invest in BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC).

This offer is restricted to high net worth individuals of $1.5 million and above with a high risk tolerance who have expressed an interest in investing in volatile assets. Commenting on this development, John Reed Stark has Described Morgan Stanley’s Bitcoin ETF offering is doomed to failure in terms of regulatory oversight and compliance.

With two decades of experience in the SEC’s Enforcement Division, the former SEC chief believes Morgan Stanley may have exposed itself to one of the most comprehensive enforcement actions ever conducted by the Commission and the Financial Industry Regulatory Authority (FINRA).

With Morgan Stanley’s large-scale Bitcoin ETF offering, Stark says regulators will have near-instant access to all data related to the bank’s Bitcoin sales to retail customers. This includes all forms of information, including documents, emails, text messages, voicemails, and phone calls. Interestingly, not only does the SEC and FINRA have access to this “evidence-rich” document upon request, but they can also request it in order to conduct on-site inspections at Morgan Stanley’s offices.

Given the huge amount of information that the SEC and FINRA will have access to, John Reed Stark believes Morgan Stanley’s compliance officers will have a tough job, as detecting possible violations by the Wall Street titan will be as straightforward for US regulators as shooting “fish in a barrel.”

Morgan Stanley – the first of many?

While John Reed Stark’s concerns about Morgan Stanley’s Bitcoin ETF offering are justified, the bank has gained traction by taking a major step toward Bitcoin adoption. Alongside them, Wells Fargo, Another Wall Street giant is expected to begin offering select investors shares in some bitcoin-based ETFs.

Overall, this all points to growing interest in Bitcoin from the customary financial sector, which is a critical factor for widespread adoption of the cryptocurrency. Since spot BTC ETFs are still in their first year of trading, more investment and commercial banks may look to include these investment funds in the future, which would translate into a higher Bitcoin price due to increased demand.

At the time of writing, Bitcoin is still trading at $60,600, down 1.0% in the past 24 hours.

Featured image from Forbes, chart from Tradingview