Cryptocurrencies began as a rebellion against the centralized banking system. They continue to go mainstream, however, as large banks including Citigroup and Morgan Stanley increasingly embrace them.
The announcements from Citigroup and Morgan Stanley come as several other banks push for greater cryptocurrency integration.
Citi, the nation’s third-largest bank by assets, told CNBC Monday that it was working on a crypto custody service, which it plans to launch in 2026. A spokeswoman for the bank confirmed the plans to Barron’s Advisor and added that Citi hasn’t ironed out all of the details. She said the bank is looking at developing an in-house custody service as well as potential partnerships with third parties.
Morgan Stanley is also modifying its stance on cryptocurrencies. Starting Wednesday, the bank will allow its financial advisors to recommend crypto funds to any of their clients, according to a person familiar with the situation. In the past, only clients with aggressive risk tolerances and a minimum of $1.5 million in assets were eligible. Clients will also be permitted to put crypto funds in any of their accounts, including retirement accounts. Previously, they could hold them only in taxable brokerage accounts. CNBC earlier reported on the changes.
For now, Morgan Stanley advisors will be able to pitch only Bitcoin funds run by BlackRock and Fidelity. But that may soon change as well: The bank is considering whether to offer more funds and more coins beyond Bitcoin, the person confirmed.
On Sept. 23, Morgan Stanley also revealed a partnership with start-up Zerohash to allow retail clients of E*trade, a unit of Morgan Stanley, to trade popular coins. In an interview with Bloomberg News, a Morgan Stanley executive noted the bank’s next step would be to build a full wallet solution for its clients.
Crypto assets are “highly speculative and may result in a loss of the entire investment,” wrote Lisa Shalett, Morgan Stanley wealth management’s chief investment officer, in a client note. The bank’s global investment committee recommended a portfolio allocation of up to 4% for the most opportunistic investors.
The announcements from Citigroup and Morgan Stanley come as several other banks push for greater cryptocurrency integration. JPMorgan Chase, the nation’s biggest bank, is working with Coinbase to allow its customers to connect their bank accounts to Coinbase wallets starting next year. And several banks — including Citi, Bank of America, and JPMorgan — have revealed plans to use stablecoin-like products.
Why now? For years, infrastructure concerns kept banks away from serving as custodians for digital assets. Because blockchain transactions are irreversible, cryptocurrencies are highly vulnerable to cybersecurity threats. The coins also settle 24/7, require constant monitoring, are highly volatile, and are subject to strict auditing, safekeeping, and anti-money-laundering standards — all headaches that banks have been slow to overcome.
But regulatory hurdles have historically been the biggest barrier to banks getting involved in crypto. Under the Biden administration, various authorities tried to dissuade traditional banks from getting entangled with digital assets. The SEC issued a bulletin in 2022 suggesting that banks report custodied crypto assets as liabilities on their balance sheets — potentially subjecting them to higher capital requirements.
“On-balance sheet treatment will preclude highly regulated banking organizations from providing a custodial solution for digital assets at scale,” wrote the American Bankers Association, Bank Policy Institute, and other trade groups in a letter to the SEC in 2024 that called for the bulletin to be changed.
The Trump administration has taken a much more friendly approach. The SEC rescinded the bulletin at the start of this year, paving the way for traditional institutions to custody crypto. President Donald Trump has also vowed to create a “strategic crypto reserve” and Congress is in the process of passing a series of crypto-friendly bills.
