OCC Approves Morgan Stanley Digital Trust With Conditions

Morgan Stanley Digital Trust National Association has received conditional OCC approval for a national trust bank charter, giving the bank a regulated path for digital-asset trust services under a list of capital, liquidity and governance limits.

Banking Dive reported that the approval was signed on June 18 and made public last week.

Banking Dive said the date came four months after Morgan Stanley applied for the charter.

Morgan Stanley Digital Trust will be a wholly owned subsidiary headquartered in Purchase, New York.

The OCC approval says its main activities will include custody of certain digital assets and banking-related activities such as purchase, sale, swap and transfer of digital assets to support client investment.

Charter Covers Custody, Staking And Collateral Administration

The trust can also facilitate staking of digital assets on a fiduciary basis.

The OCC approval also allows it to act as a collateral administrator for a digital-asset lending offering by an affiliate.

Banking Dive connected the trust to Morgan Stanley's partnership with digital-asset infrastructure provider Zerohash for crypto trading on the bank's E*Trade platform.

Zerohash has also applied for a charter, according to the article.

The approval puts a large wealth-management bank inside a charter path that has recently drawn interest from crypto firms and nonbank applicants.

The OCC said Morgan Stanley's application generated one trade-group comment that questioned whether the proposed activities were permissible for a national trust bank and raised safety-and-soundness concerns over concentration in digital-asset services.

Capital And Liquidity Rules Limit The Launch

Banking Dive reported that Morgan Stanley Digital Trust must maintain at least $50 million in tier 1 capital for its first three years.

The OCC approval says at least half of that amount must be held as eligible liquid assets, and the trust must also hold eligible liquid assets equal to 180 days of operating expenses.

The OCC approval says the trust must assess capital and liquidity quarterly during the first three years and hire an independent external auditor for an annual audit.

It must also obtain the OCC's non-objection before appointing senior executive officers or directors during that period.

The OCC waived residency requirements for three proposed directors.

The trust must notify the OCC at least 60 days before a significant deviation from its business plan or operations, limit operations to trust-company and related activities, and comply with the Genius Act.

Morgan Stanley Digital Trust has conditional approval, but the OCC decision did not disclose an opening date, first client assets, a trading launch date or approval for any later business-plan change.