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Morgan Stanley Applies for National Trust Charter to Hold Clients’ Crypto

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Morgan Stanley has taken another step deeper into digital assets, filing for a new national trust bank charter that would allow the firm to custody cryptocurrencies and carry out related services for clients in the United States.

Key Takeaways:

  • Morgan Stanley applied for a national trust charter to custody crypto and provide trading and staking services.
  • The move is part of a broader institutional push for regulated digital asset infrastructure.
  • Approval would let the bank hold client crypto directly as it expands ETFs and wealth management offerings.

A public filing with the Office of the Comptroller of the Currency shows the application, submitted Feb. 18, is under the name Morgan Stanley Digital Trust, National Association.

The move would establish a newly created banking entity rather than an acquired institution.

Morgan Stanley Subsidiary to Offer Crypto Custody, Trading and Staking Services

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According to reports from Bloomberg and Forbes, the subsidiary would provide custody for selected digital assets and support investment activity through purchases, sales, swaps and transfers.

The filing also outlines plans to offer staking services, an increasingly common feature among institutional crypto platforms.

A national trust charter permits fiduciary operations such as asset safekeeping, custody and trust services. “De novo” status indicates the bank is being formed from scratch.

If approved, it would mark Morgan Stanley’s first trust charter dedicated specifically to crypto.

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The application comes amid a broader push by financial institutions to secure federal oversight for digital asset operations.

More recently, payments firms and trading platforms, among them Stripe-owned Bridge and Crypto.com, have also pursued similar approvals.

The race reflects growing demand from institutional clients seeking regulated custody and trading infrastructure following years of market volatility and high-profile exchange failures.

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Morgan Stanley has been steadily expanding its presence in the sector. In January, the bank appointed equity markets executive Amy Oldenburg to lead a newly formed digital asset division.

Job postings indicate the firm is hiring additional specialists across strategy and product roles tied to crypto services.

The investment bank has also filed to launch spot Bitcoin and Solana exchange-traded funds, followed by a proposed staked Ether ETF.

Together, the filings suggest a wider strategy aimed at integrating digital assets into traditional wealth management offerings.

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If regulators approve the charter, Morgan Stanley would be able to directly safeguard client holdings instead of relying on third-party custodians, potentially positioning the firm as a full-service provider for institutional crypto investors.

OCC Grants Trust Bank Charters to Major Crypto Firms

The OCC approved national trust bank charters in December for a slate of crypto and digital asset firms, including BitGo, Fidelity Digital Assets, Circle, Ripple and Paxos, widening the on ramp for tokenized finance.

Trust banks sit in a narrower lane than full-service banks, since they generally cannot take deposits or make loans.

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Even so, the model can still open doors for stablecoin issuers that want to custody assets and run conversion and settlement services without relying entirely on third-party providers.

Earlier this year, World Liberty Financial also filed for a US national banking charter as stablecoins shift from a trading tool into payment infrastructure.

The post Morgan Stanley Applies for National Trust Charter to Hold Clients’ Crypto appeared first on Cryptonews.

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Crypto World

Aave’s TVL Falls $8B After $293M Kelp DAO Hack

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Aave’s TVL Falls $8B After $293M Kelp DAO Hack

Total value locked on decentralized lending protocol Aave dropped by nearly $8 billion over the weekend after hackers behind the $293 million Kelp DAO exploit borrowed funds on Aave, leaving roughly $195 million in “bad debt” on the protocol and triggering withdrawals.

Data from DeFiLlama shows that Aave’s TVL fell from about $26.4 billion to $18.6 billion by Sunday, losing the top spot as the largest DeFi protocol. 

Aave v3’s lending pools for USDt (USDT) and USDC (USDC) are now at 100% utilization, meaning that more than $5.1 billion worth of stablecoins cannot be withdrawn until new liquidity arrives or borrows are repaid. 

$2,540 is available to be withdrawn from the $2.87 billion USDT pool on Aave v3 at the time of writing. Source: Aave

Aave’s TVL fall shows how rapidly risk from a single security incident can spread throughout the broader, interconnected DeFi lending market, potentially leading to a severe liquidity crisis.

The incident began on Saturday when hackers stole 116,500 Kelp DAO Restaked ETH (rsETH) tokens worth about $293 million from Kelp DAO’s LayerZero-powered bridge and used them as collateral on Aave v3 to borrow wrapped Ether (wETH).

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Crypto analytics platform Lookonchain said the move created about $195 million in “bad debt” on Aave, which contributed to the Aave (AAVE) token tanking nearly 20% from $112 on Saturday at 6:00 pm UTC to $89.5 about 25 hours later. 

Lookonchain noted that some of the largest crypto whales to withdraw funds from Aave were the MEXC crypto exchange and Abraxas Capital at $431 million and $392 million, respectively.

Source: Grvt

Several crypto networks and protocols tied to rsETH or the LayerZero bridge have paused use of the bridge until the problem is resolved, including DeFi platform Curve Finance, stablecoin issuer Ethena and BitGo’s Wrapped Bitcoin (WBTC).

Aave has frozen several rsETH, wETH markets

Shortly after the Kelp DAO exploit, Aave said it froze the rsETH markets on both Aave v3 and v4 to prevent any suspicious borrowing and later stated that rsETH on Ethereum mainnet remains fully backed by underlying assets.

WETH reserves also remain frozen on Ethereum, Arbitrum, Base, Mantle and Linea, Aave said.

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This incident marks the first significant stress test of Aave’s “Umbrella” security model, which was introduced in June 2025 to provide automated protection against protocol bad debt while enabling users to earn rewards.

Related: Aave DAO backs V4 mainnet plan in near-unanimous vote

Earlier this month, the Bank of Canada found that Aave avoided bad debt in its v3 market by using overcollateralization, automated liquidations and other strategies that shifted risk to borrowers.

In comments to Cointelegraph, Aave defended its liquidation-based model, framing it as a core safety mechanism that protects lenders while limiting downside for borrowers.

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It comes as Aave parted ways with its longest-standing DeFi risk service provider, Chaos Labs, on April 6, following disagreements over the direction of Aave v4 and budget constraints.

Magazine: Are DeFi devs liable for the illegal activity of others on their platforms?