Morgan Stanley Just Launched New Ethereum and Solana ETFs. Here’s What It Could Mean for Crypto Investors.

Morgan Stanley (MS +0.72%), one of the largest investment banks, made waves when it launched the Morgan Stanley Bitcoin Trust in April. It was the firm’s first crypto ETF and offered a 0.14% expense ratio, lower than the competition. Most Bitcoin ETFs charge 0.20% to 0.25% per year.

On July 28, Morgan Stanley announced two new ETFs for Ethereum and Solana (SOL +0.89%), both with the same 0.14% expense ratio. Here’s whether these single-crypto ETFs are worth buying and what this news means for crypto investors.

Why buy a spot crypto ETF?

A spot crypto ETF aims to track the performance of the underlying coin, minus fees. Given that you could just buy the cryptocurrency itself through a crypto exchange or a broker that offers crypto trading, this might initially seem a waste.

However, there are a few notable advantages of opting for a crypto ETF over cryptocurrency. For one, crypto ETFs are the easiest way to get crypto exposure in an IRA or a Roth IRA. The latter can be particularly beneficial for investors because of Roth IRA tax benefits, including tax-free withdrawals in retirement if you wait until you’re at least 59 1/2 and have had the account at least five years. This is a valuable perk with any type of investment, but especially volatile cryptocurrencies that have the potential to deliver high returns.

If you buy Solana itself on an exchange and later sell it for a profit, you may need to pay taxes on the gains. If you buy a Solana ETF through a Roth IRA, any gains would be tax-free, provided you take qualified withdrawals. While it has experienced massive ups and downs, Solana is up about 165% over the last five years (as of July 29), demonstrating the kind of long-term gains that successful cryptocurrencies can deliver.

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Crypto ETFs can also simplify tax reporting. You’ll receive standard brokerage forms and won’t need to use crypto tax software or keep track of complex crypto tax rules.

A positive sign for crypto investors

Considering Morgan Stanley is one of the largest wealth management platforms, its growing list of crypto ETFs is welcome news. The company’s more than 16,000 financial advisors can now offer Ethereum and Solana ETFs to clients, potentially attracting new investors to two of the top cryptocurrencies.

Crucially, these are among the best crypto ETFs on the market. They charge lower fees than the competition, and both the Ethereum and Solana ETFs integrate staking, with 95% of staking rewards expected to pass through to shareholders. The staking providers take 5% — Morgan Stanley doesn’t retain any.

The caveat is that cryptocurrency is in a bear market right now, and a couple of ETF launches won’t change that. It may also take some time for ETF inflows to pick up steam, given the current rough patch. Still, Morgan Stanley’s move is another signal of cryptocurrencies’ legitimacy and provides more high-quality crypto investment options.