Morgan Stanley Builds Crypto Lab to Test Stablecoins, Tokenization and DeFi at Scale

Key Takeaways:

• Morgan Stanley has opened a Digital Asset Lab dedicated to blockchain technologies.
• The test is to be applied to the stablecoins, the tokenized assets and DeFi applications.
• This lab allows employees to try things that they don’t want to do to the bank’s core systems.

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Morgan Stanley has given its crypto research a boost with a new blockchain lab, dedicated to joining blockchain-based infrastructure into its financial business toolkit.

The initiative gives the Wall Street bank a controlled environment to study digital money, tokenized products and decentralized finance tools before considering wider deployment.

The new lab will focus on blockchain based financial infrastructure and stablecoins, tokenized deposits, central bank digital currencies and tokenized money-market funds.

Morgan Stanley is also looking at deFi apps that might find their way into automating financial activity outside normal market hours.

A specific area of interest is how software-based systems can continuously handle investment strategies, with transactions recorded on the blockchain and investment rules executed as they are generated.

The lab will be part of Morgan Stanley’s existing innovation labs. Staff have the opportunity to trial new technology in a testing environment, minimising the impact on the bank’s primary systems.

Read More: South Korea Targets 2027 Tokenized Securities Launch with Stablecoin Settlement Vision

Another technology that is being considered is DeFi vaults. A smart contract could automate investment strategies or asset management functions as per programmed conditions within these systems. Morgan Stanley is investigating the possibility of combining the model with the standard available financial products.

The bank also plans to examine the differences between tokenized bank deposits and stablecoins. Unlike stablecoins which are backed by a different reserve asset, tokenized deposits are a claim against money that is held by a bank.

It is hoped that learning how both models can fit within institutional finance will be an integral aspect of the lab’s tasks.

Morgan Stanley is not entering digital assets from scratch. It already hosts Bitcoin, Ether and Solana on its E*TRADE platform for eligible clients and has also introduced cryptocurrency-based investment products.

The bank took the stablecoin industry in its stride too. The Morgan Stanley Investment Management government money-market portfolio was launched partly for the purpose of using it to hold a reserve of stablecoins.

That product focuses on reserve assets such as cash, short-term U.S. Treasurys and Treasury-backed repurchase agreements.

The new Digital Asset Lab is for a different purpose. It’s not another product on the market, It’s a test about how blockchain can be applied to financial operations.

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As major financial institutions show increased interest in tokenization of assets and blockchain settlement systems, Morgan Stanley’s research echoes the trend.

The bank is also exploring the banks of digital finance, from the underlying infrastructure of the system, like blockchain-based programmable assets and automated investment services, to custody.

For its part, the financial firm’s proposed trust platform is said to be part of Morgan Stanley’s plans to launch a crypto infrastructure, including custody and services provided by outside parties.

For now, the technologies being tested in the Digital Asset Lab remain experimental. Products such as tokenized deposits and DeFi vaults are research areas rather than services currently available to Morgan Stanley clients.

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