Morgan Stanley has set up a Digital Asset Lab to test technologies including stablecoins, tokenization and decentralized finance applications as the Wall Street bank explores how blockchain-based systems could be used across its business.
The initiative is part of Morgan Stanley’s existing network of innovation labs, which give employees dedicated facilities to explore emerging technologies without putting the bank’s core systems at risk, Megan Brewer, who leads market innovation and labs at the firm, said in an interview.
The move comes as banks and other financial firms deepen their investments in digital assets and the technology underpinning them, particularly as efforts to bring traditional assets onto blockchains gather pace. Tokenization involves creating blockchain-based versions of assets such as stocks, bonds and cash, potentially allowing them to be traded and transferred more quickly and around the clock.
Morgan Stanley’s innovation labs have so far focused on areas including electronic trading, cybersecurity and machine learning. The labs are staffed by permanent teams that work alongside specialists from across the bank to test new technologies before they are allowed to interact with the firm’s systems, Brewer said.
“It’s where technology earns the right to scale at the firm,” Brewer said, adding that the bank runs up to 270 projects a year through the labs. “We want to give teams an environment where they can learn and build, and that allows us to make more evidenced-based decisions.”
The labs — overseen by the bank’s innovation team — work closely with specialized groups across the firm, including Morgan Stanley’s digital-asset team, headed by Amy Oldenburg. They occupy a total of 20,000 square feet across cities including New York, Glasgow and Bangalore, with facilities that resemble data centers.
“The digital-asset lab will give us a secure, compliant and segregated environment to be able to test and explore some of these new areas of digital assets,” Oldenburg said. Her team also plans to test various forms of digital money or cash equivalents, including tokenized deposits, central-bank digital currencies and tokenized money market funds.
Wall Street firms have been experimenting with blockchain for a decade, but a more favorable US regulatory environment under President Donald Trump and growing efforts to move traditional financial markets onto these networks have accelerated activity.
One area of particular interest is decentralized-finance vaults, Oldenburg said.
Vaults are pools of assets that use blockchain-based software to automatically deploy capital according to a predetermined strategy. Investors deposit assets — often stablecoins or other digital tokens — into a vault, which then puts them to work across a range of decentralized markets. Investors typically receive a token representing their share in the vault. Operators can charge fees for managing the strategy.
For asset managers, the attraction is that vaults resemble investment funds that automate elements of portfolio management and administration. That could allow firms to create new investment products, automate strategies and operate them around the clock.
“There is a very reasonable path to see vaults being part of the future going forward,” Oldenburg said. “But we need to understand how that technology works — it is too nascent, we cannot put the rest of the platform at risk.” This makes them a good candidate for testing in the lab, she explained.
Earlier this year, Morgan Stanley rolled out cryptocurrency trading on its E*Trade platform, as part of its broader roadmap in the sector.