Financial services consultant John Reed Stark has issued a stark warning to Morgan Stanley regarding its recent decision to permit wealth advisors to recommend spot bitcoin ETFs to clients. Stark, who leads a consulting firm in Bethesda, Md., cautioned that this move could trigger an unprecedented level of regulatory scrutiny from the SEC and FINRA.
In a post on X last week, Stark claimed that Morgan Stanley’s action—allowing its 15,000 advisors to suggest two specific spot bitcoin ETFs, the $9.7 billion Fidelity Wise Origin Bitcoin Fund (FBTC) and the $19 billion iShares Bitcoin Trust (IBIT)—will likely lead to the most extensive examination in history by regulatory bodies. Stark’s critical stance on cryptocurrency, highlighted in his 2016 book, ‘The Cybersecurity Due Diligence Handbook,’ has sparked debate within the industry.
Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, dismissed Stark’s warnings, suggesting that Stark’s consistent opposition to cryptocurrency undermines his credibility. Balchunas pointed out that Stark has not specified how advisors might face regulatory trouble, only suggesting that it is possible.
Morgan Stanley, based in New York, did not provide a comment for this story. The firm has restricted the bitcoin ETF offerings to clients with a minimum of $1.5 million in investable assets.
Balchunas speculated that Stark’s concerns might stem from the fact that bitcoin, unlike traditional investments, does not generate income or dividends. However, he noted that many crypto investors are more focused on protection against government interference than on income generation.
Svetlin Krastev, founder of Black Sea Gold Advisors, contended that since spot bitcoin ETFs have already undergone rigorous scrutiny during their approval process, they should not be subject to additional regulatory oversight.
Noah Damsky of Marina Wealth Advisors expressed concern that increased volatility in the crypto market could attract regulatory attention, particularly when bitcoin experiences sharp declines compared to other assets like Nasdaq.
Securities lawyer Adam Gana of Gana Weinstein anticipated a surge in arbitration cases as more retail investors engage with bitcoin, predicting that future scrutiny will validate current concerns.
Ric Edelman, founder of the Digital Assets Council of Financial Professionals, refuted Stark’s claims on his podcast, urging advisors to disregard Stark’s warnings. Edelman argued that Stark’s position reflects a broader anti-crypto bias rather than a factual critique of Morgan Stanley’s decision.
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