Morgan Stanley Reportedly Sees 'Reasonable Path' For DeFi Vaults, Six Months After Bitcoin ETF Debut

In an interview with Bloomberg, Morgan Stanley said it has set up a Digital Asset Lab for stablecoins, tokenization, and DeFi applications.

• Morgan Stanley's digital assets head told Bloomberg there is a "very reasonable path" for DeFi vaults to become a part of the bank’s future.
• She said the technology is "too nascent" to risk the wider platform, so testing comes first.
• The financial firm launched its Bitcoin ETF in April, the first spot Bitcoin ETF from a major U.S. bank.

Morgan Stanley (MS) stock traded relatively flat in morning trade on Tuesday after the bank reportedly singled out decentralized finance (DeFi) vaults as an “area of particular interest,” and has set up a Digital Asset Lab to test the new technology.

"There is a very reasonable path to see vaults being part of the future going forward," Amy Oldenburg said, Bloomberg reported on Tuesday. "But we need to understand how that technology works - it is too nascent; we cannot put the rest of the platform at risk."

Why Asset Managers Are Still Cautious About Crypto Vaults

Vaults are pools of assets that automatically put capital to work depending on a predefined strategy via blockchain-based software. Investors deposit assets, often stablecoins or other digital tokens, and the vault puts them to work across decentralized markets. Investors typically receive a token representing their share, and operators can charge fees for managing the strategy.

The appeal for asset managers has been that vaults resemble investment funds while automating parts of portfolio management and administration, according to the report. That could let firms create new products, automate strategies and run them around the clock.

MS stock edged 0.5% lower in morning trade amid a mixed broader market. On Stocktwits, retail sentiment around MS remained in the ‘bullish’ zone, while chatter stayed at ‘normal’ levels over the past day.

Inside The Digital Asset Lab

Since the technology has not been tested at the bank, it will go into a lab first. Morgan Stanley has set up a Digital Asset Lab to trial stablecoins, tokenization and decentralized finance applications, Bloomberg reported.

"The digital-asset lab will give us a secure, compliant and segregated environment to be able to test and explore some of these new areas of digital assets," Oldenburg said. Her team also plans to test tokenized deposits, central bank digital currencies and tokenized money market funds.

The facility joined Morgan Stanley's existing network of innovation labs, which give employees dedicated space to explore emerging technologies without putting the bank's core systems at risk, said Megan Brewer, who leads market innovation and labs at the firm.

"It's where technology earns the right to scale at the firm," Brewer said, adding that the bank runs up to 270 projects a year through the labs. The facilities occupy 20,000 square feet across cities including New York, Glasgow and Bangalore, and resemble data centers. Earlier labs focused on electronic trading, cybersecurity and machine learning.

Building On MSBT

The lab follows a year in which Morgan Stanley moved directly into crypto products. The bank launched MSBT in April, the first spot Bitcoin (BTC) ETF from a major U.S. bank and rolled out cryptocurrency trading on its E*Trade platform earlier this year.

BTC’s price was trading around $84,100, up 0.5% in the last 24 hours. On Stocktwits, retail sentiment around BTC dropped to the ‘bearish’ zone from the ‘neutral’ zone, accompanied by ‘normal’ chatter levels over the past day.

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