As the anticipation for the potential approval of Bitcoin (BTC) spot exchange-traded funds (ETFs) applications in the United States by regulators intensifies, institutions such as Morgan Stanley are gearing up for what could be a game-changer not just for Bitcoin but for the entire crypto industry.
In line with these developments, evidence suggests that Morgan Stanley has filed a new N-CSR (annual shareholder report) for its traded Morgan Stanley Opportunity Fund, with new text allowing for a potential 25% allocation of the fund to Bitcoin through the Grayscale Bitcoin Trust (GBTC).
Morgan Stanley Seeks Bitcoin Potential
According to the report, the Fund has outlined its intention to invest up to $140 million of its total assets in a wholly-owned subsidiary called Europe Opportunity Cayman Portfolio, organized under the laws of the Cayman Islands.
The Subsidiary, in turn, may indirectly invest in Bitcoin through cash-settled futures or investments in the Grayscale Bitcoin Trust, a privately offered investment vehicle focused on Bitcoin.
The consolidated portfolio of investments and financial statements of the Fund will include the positions and accounts of both the Fund and the Subsidiary.
Moreover, all intercompany accounts and transactions between the Fund and the Subsidiary have been eliminated in consolidation, ensuring a cohesive view of the Fund’s holdings.
By investing in the Subsidiary, the Fund aims to gain exposure to commodity markets within the limitations set by Subchapter M of the Internal Revenue Code and recent Internal Revenue Service (IRS) revenue rulings.
These regulations stipulate that a mutual fund should receive no more than ten percent of its gross income from such investments to qualify for favorable tax treatment as a regulated investment company (RIC).
Regulatory Changes Could Impact Morgan Stanley’s BTC Investment?
It is important to note that the tax treatment of income received from the Subsidiary may be subject to changes in legislation, regulations, or other legally binding authorities.
Such changes could impact the character, timing, and amount of the Fund’s taxable income and distributions.
Per the report, in the event of such changes, the Fund may need to adjust its investment strategy significantly and recognize unrealized gains to maintain its qualification for RIC taxation, potentially affecting the Fund adversely.
But overall, Morgan Stanley’s move to explore indirect Bitcoin investment opportunities through its Opportunity Fund reflects the growing interest in cryptocurrencies among institutional invest.
The potential allocation to Bitcoin, facilitated by the wholly-owned subsidiary, demonstrates the institution’s recognition of the potential benefits and opportunities presented by the digital asset.
Bitcoin is trading at $45,100 following its peak of $45,900 on Tuesday, marking a one-year high. Additionally, the cryptocurrency has experienced a substantial surge of over 7% in the past seven days.
Featured image from Shutterstock, chart from TradingView.com