Bitcoin Just Became Easier for Wall Street to Work With, and the CLARITY Act Heads to the Senate Floor

Bitcoin’s adoption on Wall Street seems to have no end in sight, as Morgan Stanley and Galaxy Digital announce a new way to integrate Bitcoin into the TradFi product stack. There’s also more news on the regulatory front, with the CLARITY Act taking center stage again. 

TL;DR

• Morgan Stanley just made it possible for wealthy clients to lend Bitcoin directly to Galaxy Digital in exchange for spot ETP shares.

• The CLARITY Act is now on the Senate floor calendar, and Galaxy Research thinks there's a 60% chance it becomes law this year.

Morgan Stanley Just Made Bitcoin More Lendable 🏦

There's a recurring question I get from my TradFi friends whenever Bitcoin comes up: how do I actually hold this thing in a way that doesn't sit awkwardly outside the rest of my book?

This week, Morgan Stanley took a step toward solving that problem.

The Wall Street firm announced a referral partnership with Galaxy Digital that enables eligible wealth-management clients to lend their Bitcoin, Ethereum, or Solana to Galaxy, and Galaxy delivers them shares of a spot crypto ETP in return.

Galaxy coordinates an in-kind creation with an authorized participant, mints the ETP shares, and they land straight into the client's brokerage account. 

Here's why this is a bigger deal than the headlines make it out to be.

Once that BTC lives inside a Morgan Stanley account as ETP shares, it becomes marginable, reportable, and lendable, and shows up alongside the client's stocks, bonds, and other alternative assets in a single unified statement. 

Banks have always known how to margin a stock, lend against an ETF, and price collateral on a registered security. However, that is much harder to do with actual Bitcoin. 

Wrapping BTC in an ETP share solves that because Bitcoin now becomes much easier to deploy for lending or margin positions in the TradFi market.  

This week’s announcement isn’t Morgan Stanley’s only foray into digital assets. They launched the Morgan Stanley Bitcoin Trust earlier this year and rolled out a stablecoin money market fund. The firm is methodically wiring Bitcoin into every layer of its wealth-management stack, and it makes perfect sense. 

The CLARITY Act Is Now on the Senate Floor Calendar 📋

On June 1, the CLARITY Act was placed on the Senate Legislative Calendar, which means it’s now formally eligible for a full Senate floor vote.

If you are a regular Proof of Words reader, you know that the CLARITY Act is the bill that would give the US digital asset market its first real regulatory framework. We're talking about rules for Bitcoin, crypto exchanges, and a proper split of responsibilities between the SEC and the CFTC. 

However, Galaxy Research is putting the odds of it becoming law this year at 60%, with a possible presidential signature as early as the week of August 3. The bill still needs to be merged with a separate committee's framework, and it needs 60 Senate votes to clear the filibuster. 

Senator Lummis, one of the people who built this bill, said it herself after the committee vote: "Nobody is popping the champagne quite yet.”

But it cleared the Senate Banking Committee 15 to 9 on May 14, with two Democrats crossing the aisle. The White House has been pushing for it, and the likes of Coinbase, Circle, Ripple, and Andreessen Horowitz are all behind it.

I've said this before, but the single biggest reason most big institutions have sat on the sidelines isn't volatility or custody. It's that their lawyers couldn't tell them what was legal. Getting that answer from Congress would change a lot.

Elsewhere in Bitcoin 📖

A quick look at what else has been happening in Bitcoin:

• CFTC approves first US-regulated Bitcoin perpetual futures contract via Kalshi

• Charles Schwab launches 24/7 Bitcoin futures trading

• US lender closes the first Fannie Mae-backed mortgage with Bitcoin as an asset

• SEC includes digital assets as its first regulatory objective in its 2026 to 2030 Strategic Plan

Your fellow stacker in sats, 

Patrick Lowry

PS: If you want to see how the value of goods and services changes when priced in Bitcoin, check out the Samara Bitcoin CPI. It might give you a new perspective on holding Bitcoin on your company’s balance sheet or just as an individual.

Disclaimer: The opinions expressed in this newsletter are solely those of the author and do not necessarily represent the views of any associated company. This newsletter is for educational and informational purposes only and should not be construed as investment, financial, or any other professional advice. Nothing here is a solicitation, offer, or recommendation to buy or sell any asset or to use any service. Investing in cryptocurrencies is highly speculative and carries a significant risk of substantial financial loss, so you must conduct your own thorough research and consult with independent professional advisors before making any decisions.