Morgan Stanley Reportedly On the Ball With Bitcoin Derivatives
As Wall Street’s biggest players continue to flirt with bitcoin, Morgan Stanley is reportedly prepared to offer bitcoin-based price return swaps. The derivatives contracts would mark only the latest financial instruments via which Wall Street appears, at least in fits and bursts, interested in BTC’s possibilities.
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Bitcoin Swap Trading Apparently in the Wings
Last week, reports pegged Goldman Sachs as prioritizing its cryptocurrency custodian service and bitcoin derivatives. Days later, it came to light Citigroup was working on digital asset receipts, or DARs. Now, Morgan Stanley is the latest in crypto’s headlines, as the powerhouse Wall Street firm is practically ready to launch bitcoin swaps, a source in the know told Bloomberg.
Ready in practice is not imminently ready, however — the launch of the instruments is contingent upon further in-house vetting and increased institutional appetite for such derivatives, the source said.
The bitcoin-centric derivatives contracts would reportedly give Morgan Stanley a cut of each trade as investors use the swaps to bet on the bitcoin price, shorting or longing the genesis cryptocurrency.
In swaps, one end of the swap is pegged while the other end is variable — in the case of Morgan Stanley’s bitcoin price return swaps, the variable would apparently be bitcoin futures contracts.
Morgan Stanley Not at the Back of Wall Street’s Crypto Pack
The timeline of Morgan Stanley’s alleged bitcoin swaps is up in the air for now. But what is clear is that the financial services titan is increasingly diverting attention to the cryptoverse.
In August 2018, the firm tapped CFA Andrew Peel from Credit Suisse as their Head of Digital Asset Markets. It wasn’t clear at the time if the position was a new one in the company or whether it had been around for a while, just under wraps.
Peel spent years as a Derivatives Trader Vice President at Credit Suisse, so his arrival and the potential dawn of bitcoin swaps at Morgan Stanley appears to link up. Derivatives are his forte, after all.
May Report Examined Crypto and Central Banking
Back in May, Morgan Stanley strategist Sheena Shah and a team of in-house researchers issued a report focused on possible cryptocurrency applications in the operations of the world’s central banks.
Among numerous findings, the analysts notably found that a digital currency could facilitate negative interest rates. They wrote:
“Freely circulating paper notes and coins (cash) limits the ability of the central banks to force negative deposit rates. A digital version of cash could theoretically allow negative deposit rates to be charged on all money in circulation within any economy.”
With that said, whatever ends up happening, it’s clear Morgan Stanley’s done their homework on crypto. At least in a preliminary sense. And, from Peel’s hiring alone, one can reasonably conclude they’ve liked some of what they’ve seen.
What’s your take? Does Wall Street have the bitcoin bug? Let us know if that’s good or bad in the comments below.
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