Morgan Stanley Enters Stablecoin Reserve Management… "Capturing Financial Plumbing"

MSNXX fund aims to challenge Tether and Circle… Positioned to benefit from institutional stablecoin era

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Morgan Stanley (MS) has embarked on a strategic move to position itself as the reserve manager for the entire stablecoin industry. Scott Melker from Yahoo Finance's crypto podcast 'The Daily Wolf' analyzed on the 24th (local time) that "Morgan Stanley is positioning itself to become the standard reserve manager for the stablecoin industry."

Morgan Stanley's MSNXX fund is a dedicated money market fund for reserve management by stablecoin issuers. This fund, composed of U.S. Treasuries, cash, and repos, is designed with high liquidity and immediate redemption capabilities as core features.

Understanding How Stablecoins Work

Every time Tether (USDT) or Circle (USDC) issues a token, there must be $1 worth of real assets backing it. The key question is who manages these reserves. Circle's (USDC) reserves are managed by BlackRock and custodied by BNY Mellon. Tether's reserve manager has not been officially disclosed.

This structure is precisely why Tether, with only about 100 employees, generates billions of dollars in annual revenue. In an environment of high Treasury yields, investing hundreds of billions in reserve funds in Treasuries means the interest becomes pure profit for Tether.

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Morgan Stanley's Target: Institutional Stablecoins

Melker believes it's unlikely that Tether or Circle would immediately transfer their reserve management to Morgan Stanley, as they already have their own established systems. However, the real target lies elsewhere: institutional stablecoins expected to emerge en masse following the GENIUS Act passage.

When banks, financial institutions, and corporations begin issuing their own stablecoins, it would be rational to entrust reserve management to specialized institutions. Morgan Stanley's strategy is to capture this new demand first.

When stablecoins become commoditized, most institutions will entrust their reserve management to Morgan Stanley. The trust factor that comes with the Morgan Stanley name will be the decisive factor.

Scott Melker, Host of 'The Daily Wolf'

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A Clever Way to Circumvent Legislation

This move is particularly noteworthy as it's also seen as a regulatory response strategy. U.S. banks have openly opposed stablecoin legislation like the GENIUS Act, concerned that stablecoins could replace bank deposits.

However, Morgan Stanley chose a different approach instead of direct opposition. The strategy is to control the 'plumbing' of stablecoins - the reserve management infrastructure itself. This creates a structure where they can legally oppose stablecoins while providing core infrastructure behind the scenes and capturing profits.

While banks oppose stablecoin legislation, Morgan Stanley chose to gain control from the periphery.

Scott Melker