Morgan Stanley partners with Galaxy Digital to enable crypto lending for spot ETF conversions

Jun 5, 2026

Morgan Stanley and Galaxy Digital have partnered to let wealthy clients lend crypto for spot ETF shares, a move enabled by new SEC rules. The deal lowers the investment minimum to $5M and cuts onboarding time by 75%. This initiative bridges traditional and decentralized finance, making crypto assets bankable as collateral, even as the broader Bitcoin ETF market has recently seen significant outflows.

Morgan Stanley Galaxy lending partnership

▪Morgan Stanley Wealth Management clients can lend Bitcoin, Ethereum, or Solana to Galaxy Digital in exchange for shares of spot crypto exchange-traded products.
▪The in-kind conversion process is expected to reduce onboarding times by up to 75% from a period that could previously take over four weeks.
▪The partnership is a referral arrangement where Morgan Stanley refers clients to Galaxy Digital on an unsolicited basis and receives no compensation.
▪For clients referred by Morgan Stanley, Galaxy Digital has lowered its minimum transaction size from $25 million to $5 million.
▪Once deposited in a client's brokerage account, the ETP shares can be used as collateral for margin and lending.

SEC in-kind creation redemption rules

▪The in-kind creation process allows clients to convert crypto to ETP shares without a taxable sale of the underlying asset.
▪The partnership was made possible by the SEC's July 2025 approval of in-kind creations and redemptions for crypto ETPs.

Bitcoin ETF outflows decline

▪The Morgan Stanley Bitcoin Trust (MSBT) completed its first month of operation without a single day of net redemptions.
▪US spot Bitcoin ETFs experienced $4.4 billion in net outflows over 13 consecutive days leading into early June 2026.

Institutional crypto collateral models

▪JPMorgan accepts shares of BlackRock's IBIT bitcoin ETF as collateral and reportedly planned to allow direct pledging of BTC and ETH by year-end 2025.
▪A third model involves using tokenized assets, like BlackRock's BUIDL Treasury fund, as yield-bearing margin collateral for crypto trading.
▪Three primary models for institutional crypto collateral are emerging: ETP collateral, direct crypto collateral, and tokenized collateral substitution.

Bank digital asset infrastructure

▪BNY Mellon is building a digital asset platform combining custody, collateral management, financing, and payments.
▪Morgan Stanley has applied for a national trust bank charter from the OCC to establish the "Morgan Stanley Digital Trust" for direct custody services.

Crypto leverage deleveraging risk

▪Galaxy Research estimated that crypto-collateralized lending reached $73.59 billion in the third quarter of 2025.
▪On June 3, 2026, the crypto market recorded $1.8 billion in forced liquidations, the largest single-day amount since February 2026.