Key insights
- Morgan Stanley is positioning itself as a reserve manager for the stablecoin industry by launching MSNXX, a treasury management tool. This could consolidate stablecoin treasury management under a major financial institution, potentially increasing stability and legitimacy in the crypto space. The move leverages high Treasury yields to generate revenue, mirroring strategies employed by companies like Tether and Circle.
In today's episode of 'The Daily Wolf' podcast, host Scott Melker discusses Morgan Stanley's (MS) new bet on stablecoins as it positions itself as the reserve standard for the stablecoin industry."The Daily Wolf with Scott Melker" airs on Yahoo Finance every day at 12:00 p.m. Tune in for your daily dose of all things crypto.Make sure to also check out Yahoo Finance's new crypto hub to find the latest crypto-related news.
Now I've been talking quite a bit about stable coins and the battle between cryptocurrency companies and the banks surrounding the Genius Act and the Clarity Act that's coming. Well now we have a deft move by Morgan Stanley. This is the headline right here.
Morgan Stanley is positioning itself as the reserve manager for the stable coin industry. So, Morgan Stanley is launching effectively a mutual fund called MSNXX, say that 10 times fast. M S S S S S S S S S S.
MSNXX which will act as a treasury management tool for stable coins. So if you don't know how stable coins work, here's the layman's description. Let's say you're Tether or Circle, Circle with USDC.
Every time that you want to create a token, there has to be a dollar to back it. BlackRock in the case of USDC manages that Treasury for them. Tether, we don't know ne- necessarily know who manages the Treasury.
And then for Circle, BNY Melon custodies those assets. And every time someone wants to redeem a coin, they sell some of those assets or they take some of the cash on hand and they give those people the money back. And that's how the supply of stable coins is basically managed.
And they're backed largely by Treasuries which are earning a yield, which is how a company like Tether, which only has about 100 employees can make billions and billions and billions of dollars a year, more than BlackRock. Because yields are high and they are getting paid to hold that money.
So what Morgan Stanley is effectively doing here is taking all of that and saying we can be a one-stop shop. We can manage your Treasury, we'll have high liquidity, we'll always have cash available for redemptions and for people to create new tokens, and you'll have it all in one centralized place.
So this is interesting because we know that the banks have been fighting against stable coins, but if Morgan Stanley can actually gain traction with something like this behind the scenes, then they can basically go around all of that and get the control of the plumbing for the stable coins in general.
Now, I'm not going gonna bet that a Circle or a Tether would come and use something like this. They've already got these systems worked out. But if we know that stable coins are going to become commoditized and then every institution is going to have their own stable coin, I would bet that most of them for better or for worse are going to go to a Morgan Stanley
and offload all the response responsibility of Treasury management to them because it's a name that they trust, you know, Morgan Stanley.
I think that this is a huge story. I am skeptical as to how much adoption it will get, but it could be could be a very good way for banks to get around all of the stablecoin laws that they don't like.