Morgan Stanley Ethereum and Solana ETFs Launch at 0.14%: What MSSE and MSOL Actually Deliver

Last updated: July 29, 2026, 9:00 a.m. ET

Morgan Stanley Investment Management began trading two spot digital-asset exchange-traded products on NYSE Arca on Tuesday, July 28, 2026: the Morgan Stanley Ethereum Trust, ticker MSSE, and the Morgan Stanley Solana Trust, ticker MSOL. Each carries a unitary sponsor fee of 0.14% of net asset value, each tracks a CoinDesk 4 p.m. New York settlement benchmark, and each intends to stake a portion of its holdings and route the resulting rewards to shareholders rather than to the sponsor. Morgan Stanley did not retain any share of the staking rewards for itself, a structural choice that separates the two funds from most of the competition.

That is the confirmed news, and it answers the question most readers arrive with. The more useful question is what the launch means for a category that has quietly become one of the most aggressive fee wars in American asset management, and whether a 0.14% headline number tells investors what they will actually earn.

It does not, entirely. The filings behind the two products contain details that the press release does not: a 5% cut of gross staking rewards paid to custodians and validators, a validator activation queue on Ethereum that stood at roughly 2.71 million ether and an estimated 47-day wait as of July 6, 2026, and a deliberate decision to leave between one-fifth and one-half of MSSE’s ether unstaked at any given time for liquidity reasons. On the same day Morgan Stanley claimed the lowest fee in both categories, a competitor cut its Solana sponsor fee to zero for twelve months. None of that makes the launch unimpressive. It does mean the marketing number and the investor’s realized return are two different things, and the gap between them is where the story lives.

Key Takeaways

• Main development: Morgan Stanley Investment Management launched the Morgan Stanley Ethereum Trust (NYSE Arca: MSSE) and Morgan Stanley Solana Trust (NYSE Arca: MSOL) on July 28, 2026, becoming the first U.S. bank-affiliated asset manager to issue spot ether and SOL exchange-traded products.
• Key figure: Both products charge a unitary delegated sponsor fee of 0.14% of net asset value, accrued daily — matching the fee on the firm’s Morgan Stanley Bitcoin Trust (MSBT), which launched in April 2026 and held more than $381 million in assets under management through July 16, 2026, according to the launch announcement.
• The staking detail that matters: Morgan Stanley Investment Management retains none of the staking rewards, but the prospectuses disclose that staking services providers and custodians are expected to receive an aggregate 5% of gross rewards. MSSE intends to stake 50% to 80% of its ether; MSOL may stake up to 100% of its SOL.
• Market backdrop: The funds launched into a deep drawdown. Ether traded near $1,922 and SOL near $74 on July 28, 2026, roughly 61% and 75% below their respective cycle peaks, with the Federal Open Market Committee mid-meeting and the Senate having shelved the crypto market-structure bill days earlier.
• What comes next: Watch creation activity beyond the roughly $1 million seed in each trust, the share of ether MSSE actually manages to stake while Ethereum’s activation queue clears, and the timing of the first staking-reward distribution.

What Morgan Stanley Actually Listed

The two trusts are structurally conventional by the standards of the 2026 crypto ETP market, which is itself a statement about how quickly those standards formed. Each is a passive vehicle that holds a single digital asset, values itself once a day against a published benchmark rate, and creates and redeems shares in blocks through authorized participants.

MSSE seeks to track the price of ether as measured by the CoinDesk Ether Benchmark 4PM NY Settlement Rate, adjusted for the trust’s expenses and other liabilities and reflecting rewards from staking a portion of its holdings. MSOL does the same for SOL against the CoinDesk Solana Benchmark 4PM NY Settlement Rate. Net asset value is struck daily at 4:00 p.m. Eastern.

Creation and redemption happen in baskets of 10,000 shares. Authorized participants deliver or receive the underlying asset — or cash, depending on the order type — and the quantity of ether or SOL attributable to each share is calculated net of accrued but unpaid sponsor fees and any accrued extraordinary expenses. That last clause explains a mechanical feature of every commodity-style trust that surprises first-time holders: absent staking income, the amount of ether behind each MSSE share declines slightly every day, because the fee is paid in kind out of the trust’s holdings. Staking rewards, when they arrive, offset that decay. Whether they fully offset it depends on how much of the portfolio is actually earning.

Neither trust is registered under the Investment Company Act of 1940. This is standard for spot crypto ETPs and it is not a technicality. Investors in a 1940 Act fund get a specific package of protections — board oversight, custody rules, limits on leverage and affiliated transactions, diversification requirements for funds that call themselves diversified. Holders of MSSE and MSOL get none of that statutory package. They get a Delaware statutory trust with a Cayman co-trustee, a delegated sponsor with operational authority, contractual custody arrangements, and the disclosure regime of the Securities Act and Exchange Act. Morgan Stanley says so plainly in its own risk language. It is worth reading the sentence rather than skimming past it.

The trustees are CSC Delaware Trust Company as Delaware trustee and AGS Trustees Limited as Cayman trustee, with substantially all day-to-day management delegated to Morgan Stanley Investment Management Inc. as delegated sponsor. Foreside Fund Services, LLC acts as marketing agent. The Bank of New York Mellon serves as cash custodian, and BNY and a Coinbase entity act as the digital-asset custodians.

The 0.14% Claim, Examined

Morgan Stanley priced all three of its digital-asset ETPs identically. Bitcoin, ether and SOL each cost 0.14% a year. The company’s explanation, offered by Global Head of ETFs Ally Wallace in an interview from the floor of the New York Stock Exchange on launch day, is that these are building-block vehicles — passive exposure with no security selection, no active risk budget, nothing that justifies a premium price. On that logic the fee should sit close to the cost of running the operation, and the sponsor should compete on distribution and operational quality instead.

That reasoning is sound as far as it goes. It is also the reasoning that has driven the fee on plain-vanilla U.S. equity index ETFs to three basis points and below over two decades. The crypto wrapper is following the same curve, compressed into thirty months.

The claim that 0.14% is “the cheapest on the market” was accurate as a comparison of standing sponsor fees at the moment of launch. Grayscale’s Ethereum Mini Trust had been the ether floor at 0.15%. On the Solana side, Grayscale’s GSOL sits at 0.19% after a June 2026 reduction, Bitwise’s BSOL at 0.20%, 21Shares’ TSOL at a headline 0.21%, Fidelity’s FSOL at 0.25% and VanEck’s VSOL at 0.30%.

Two qualifications belong next to that claim.

First, 21Shares announced on July 28, 2026 — the same day — that it would waive TSOL’s 0.21% sponsor fee entirely, taking it to 0.00% from July 28, 2026 through July 27, 2027. A twelve-month waiver is not the same thing as a permanently low fee, and waivers expire in ways that catch inattentive holders. But for an investor comparing today’s cost of owning Solana exposure, zero is lower than fourteen basis points, and the coincidence of timing suggests the competitive response to Morgan Stanley’s arrival was already loaded and waiting.

Second, sponsor fees are not the whole cost of ownership in a staking product, and in some cases they are not even the largest component. A fund that charges 0.10% and keeps 20% of gross staking rewards is, on a 6% gross yield, extracting roughly 1.2 percentage points a year from the reward stream alone — nearly ten times the headline expense ratio. BlackRock’s iShares Ethereum Trust has run a promotional 0.12% fee for assets up to a $2.5 billion threshold before stepping to 0.25%, and the firm’s staking-enabled ether product reduced its proposed cut of gross staking rewards from 18% to 10%. Grayscale’s aggregate Solana staking cost reverted to 23% of gross staking consideration when a waiver lapsed in February 2026, before the firm cut it to 7%.

Against that backdrop, the more meaningful Morgan Stanley number is not 0.14%. It is the combination of 0.14% and a sponsor-level staking take of zero — the second figure being the one competitors will find harder to match, because for several of them the staking cut is a deliberate revenue line rather than an accident of pricing.

How the Staking Machinery Actually Works

Staking is the feature that distinguishes this generation of crypto ETPs from the spot bitcoin funds that opened the category in January 2024. Bitcoin uses proof of work; there is nothing to stake. Ethereum and Solana both use proof of stake, which means holders can commit assets to the network’s validation process and receive newly issued tokens and transaction fees in return. An ETP that simply holds the asset and does nothing else leaves that income on the table.

The mechanics disclosed in the MSSE prospectus are worth walking through, because they explain both the opportunity and the constraints.

The trust’s ether sits in segregated custody accounts at the ether custodians, which hold the private keys in offline storage. When the delegated sponsor decides to stake, it instructs a custodian to move a specified quantity into Ethereum’s protocol staking deposit contract. The custodian designates a staking services provider as the validator for that tranche, which lets the provider generate validator keys and run the validator software that performs the actual consensus work. Critically, the custodian designates the trust’s own cold vault balance as the withdrawal address — for both the staking rewards and the principal. The staking provider never holds the keys that can move the assets.

Three firms serve as staking services providers: Figment Inc., Galaxy Blockchain Infrastructure LLC and Coinbase Canada, Inc. All three are described in the filing as unrelated to the delegated sponsor and the trustees. Spreading the validator set across three independent operators is a sensible design choice; it reduces the chance that a single operator’s software bug or configuration error affects the entire staked position.

The providers exercise no discretion over how much is staked or when. That decision belongs to Morgan Stanley Investment Management, and it is governed by what the filing calls a utilization rate — an internal model that sets a target staked percentage based on unbonding periods, historical and stressed redemption patterns for listed exchange-traded products, trust size, provider reliability, secondary-market liquidity and prevailing market conditions.

The output of that model, for MSSE, is a target range of 50% to 80% of the trust’s ether under normal conditions, with 80% treated as a ceiling. MSOL, operating on a network with materially faster exit mechanics, may stake up to the full 100% of its SOL.

That asymmetry is not a stylistic preference. It is a direct consequence of how the two blockchains handle entry and exit from the validator set, and it is the single most important operational difference between the two funds.

The 47-Day Problem

Ethereum limits how many validators can join and leave the active set in each epoch. Epochs run roughly six and a half minutes — 32 slots of 12 seconds each — and the protocol’s churn limits scale with the size of the validator set. The MSSE prospectus spells out the arithmetic: following recent parameter changes, up to eight validators may activate per epoch, and a maximum of 256 staked ether can be activated per epoch, which works out to roughly 57,600 ether a day across the entire network.

When there is no queue, a new validator can reach the active set in about fourteen hours, plus a four-epoch delay of roughly 25 minutes before rewards begin accruing. That is the best case, and it has rarely been the case in 2026.

Morgan Stanley’s own filing discloses the actual condition of the queue: as of July 6, 2026, roughly 2,710,876 ether were waiting to activate, an estimated 47-day wait. Ether sitting in that queue earns nothing.

The implication for a fund launching on July 28 is direct. MSSE’s ether does not begin earning consensus rewards the moment a creation basket settles. It joins a line. If the queue length holds, ether deposited at launch would not start accruing until roughly mid-September. During that window the trust still accrues its 0.14% sponsor fee, paid in kind, with no staking income to offset it. An investor who bought MSSE on day one expecting an immediate yield uplift over a non-staking ether product will not see one for weeks.

This is not a Morgan Stanley failing. Every ether staking ETP faces the same queue, and a fund that already holds staked positions from an earlier launch is simply further along the line. It is, however, a reason to treat advertised ether staking yields as a description of the network rather than a forecast of the fund’s near-term distribution. The prospectus is explicit that while queued, unbonding, or in the withdrawal process, staked ether generally does not accrue rewards, and that in periods of elevated exit activity the un-staking process may take weeks or months.

Solana’s mechanics are gentler. The MSOL prospectus puts the bonding period at roughly two to three days, which is why the fund can contemplate staking essentially everything it holds while still meeting redemptions. Ethereum’s historical unbonding range, by contrast, has run one to five days, with the caveat that network conditions can extend it considerably.

That difference cascades into economics. If SOL’s gross network staking yield runs in the region of 6% to 8% and roughly all of MSOL’s holdings are earning it, the reward stream is large relative to a 0.14% fee. If ether’s gross yield runs in the region of 2% to 3% and only 50% to 80% of MSSE’s holdings are earning it — less than that during the initial queue period — the fee consumes a meaningfully larger share of a meaningfully smaller income stream. Both products are cheap. They are not equally productive.

What “100% of Staking Rewards” Means, Precisely

Morgan Stanley’s most differentiated marketing claim is that it passes the entire staking reward back to investors. In its launch announcement the firm put it this way: “MSIM will not retain any portion of the rewards earned by either ETP for itself.” Wallace made the same point in her launch-day interview, adding the qualifier “outside of any custodial fees.”

Both statements are accurate. Neither is complete on its own, and the qualifier is doing real work.

The prospectus is unambiguous: “The Staking Services Providers and Ether Custodians are expected to receive an aggregate of 5% of the staking rewards (the ‘Staking Fee’), with the remainder being retained by the Trust. The Delegated Sponsor will not receive or retain any portion of the staking rewards earned by the Trust.”

So the correct description is that Morgan Stanley takes nothing, and the plumbing takes 5%. On a 3% gross ether yield, that 5% is about 15 basis points of the reward stream — coincidentally close to the sponsor fee itself. On a 7% gross SOL yield it is roughly 35 basis points.

Is 5% competitive? Against Grayscale’s 7% aggregate Solana staking fee after its June 2026 reduction, yes, modestly. Against BlackRock’s reduced 10% cut of gross ether staking rewards, clearly. Against the 23% that Grayscale’s Solana product reverted to when a waiver lapsed in February 2026, dramatically. Against 21Shares’ TSOL, which reported an estimated net staking yield of approximately 4.29% as of July 20, 2026 and has now zeroed its sponsor fee for a year, the comparison depends entirely on what the underlying network delivers and how much of the portfolio is working.

The honest framing is that Morgan Stanley has removed one layer of extraction — its own — while leaving the operational layer intact. That is a real improvement in investor economics and a defensible competitive position. It is not the same as investors receiving every token the network mints.

How Shareholders Receive the Rewards, and What the IRS Made Possible

Staking rewards accrue to the trust in kind — as additional ether or SOL. They do not reach shareholders that way. Reporting on the prospectuses indicates the trusts intend to make cash distributions of staking income on a monthly basis, and at minimum quarterly, funded by selling tokens.

That structure is a direct product of tax engineering, and it is worth understanding because it shapes the after-tax experience of holding these funds.

Spot crypto ETPs are structured as grantor trusts for U.S. federal income tax purposes. Each shareholder is treated as owning an undivided interest in the trust’s assets and as directly realizing a pro rata share of its income, gains, losses and deductions. The advantage of that structure is simplicity and the avoidance of an entity-level tax. The constraint is that grantor trusts are meant to be passive. Activities that look like a business — and staking, which involves selecting validators, running an allocation model and earning a return on capital, arguably looks like one — historically threatened that classification.

The Internal Revenue Service resolved the question on November 10, 2025 with Revenue Procedure 2025-31, which established a safe harbor permitting exchange-traded products to stake digital assets without jeopardizing their status as investment trusts and grantor trusts. The safe harbor set a window for trusts to amend their agreements to authorize staking, running to August 10, 2026. Morgan Stanley’s products were built inside that framework from the start; the funds it competes with, in many cases, had to be retrofitted.

For the individual holder, the practical consequences are straightforward and mostly unfavorable relative to price-only exposure. Staking rewards are generally treated as ordinary income when received and when the recipient establishes dominion and control. That income arrives whether or not the underlying token has appreciated, and it is taxed at ordinary rates rather than long-term capital gains rates. A holder in a taxable brokerage account owning MSOL during a year when SOL falls 30% can still owe ordinary income tax on the staking distributions. The MSSE prospectus notes that the trust expects to sell ether to fund staking-related distributions to shareholders, which itself creates realization events inside the trust.

This is not a criticism of the product. It is a reason these funds may behave very differently in a tax-deferred retirement account than in a taxable one, and a reason the phrase “additional yield” deserves the qualifier “pre-tax.” Readers with specific circumstances should consult a qualified tax professional; the treatment described here reflects general U.S. federal guidance as of July 2026 and says nothing about any individual’s situation.

The Custody Pairing and What It Signals

Morgan Stanley split custody between a traditional bank and a crypto-native specialist. The Bank of New York Mellon holds the trusts’ cash and serves as one of the digital-asset custodians; a Coinbase entity serves as the other. Wallace described the pairing as deliberate — a U.S. bank custodian alongside a traditional cryptocurrency custodian — and called the combination powerful.

The filings support the idea that the two are not interchangeable. The prospectus discloses that BNY currently produces a SOC 1 Type 1 report while the Coinbase custodian produces SOC 1 Type 2 and SOC 2 Type 2 reports. Those are meaningfully different attestations. A Type 1 report tests whether controls are suitably designed at a point in time. A Type 2 report tests whether they operated effectively over a period. In this specific dimension the crypto-native custodian’s attestation regime is the more rigorous of the two, which cuts against the reflexive assumption that the bank is automatically the safer half of the pair.

Both custodians hold private keys in offline hardware vaults, use multiple keys with layered encryption, and maintain audit trails over wallet movements that the prospectus says are audited annually by an independent external firm. That is the industry-standard description and it appears in nearly every crypto ETP filing. What varies between issuers is the depth of the attestations behind it and the identity of the counterparties, which is why the SOC detail is worth reading rather than skipping.

One claim from the launch-day interview deserves independent scrutiny. Wallace said that most of the entities offering ether and SOL ETPs are “unregulated entities,” positioning Morgan Stanley’s regulated status as a value proposition alongside price.

That characterization is too broad. The competing spot ether and Solana products come from BlackRock, Fidelity, Franklin Templeton, VanEck, Grayscale, Bitwise and 21Shares, among others. Every one of those issuers is subject to SEC oversight of the registered offering itself, and several are SEC-registered investment advisers running trillions or hundreds of billions of dollars across conventional fund ranges. Fidelity operates a national trust bank for digital assets. Calling that field unregulated is not supportable on the plain meaning of the word.

What is defensible — and is almost certainly what Wallace meant — is narrower and still consequential: Morgan Stanley Investment Management is an affiliate of a bank holding company supervised by the Federal Reserve, which subjects it to a layer of prudential oversight, internal risk governance and new-product approval that a standalone asset manager does not face. Amy Oldenburg, head of digital asset strategy at Morgan Stanley, framed the same idea more precisely in the launch announcement, describing the goal as delivering digital-asset solutions while “adhering to Morgan Stanley’s standards for governance, infrastructure and risk management.”

Whether bank affiliation makes a passive trust holding one token safer is genuinely arguable. It does not change the volatility of ether. It does not change slashing risk. It does not change what happens if a custodian fails. What it plausibly changes is the probability of a governance failure at the sponsor level, and the ease with which a compliance department at a wirehouse or an RIA can get the product onto an approved list. For a distribution-led business, the second point may matter more than the first.

Morgan Stanley’s Custody Ambitions Are Closer Than the Interview Suggested

Asked on launch day whether Morgan Stanley intended to custody digital assets itself, Wallace said it was not planned “anywhere in the near future,” pointing to the value of keeping custody external and split between a bank custodian and a crypto custodian.

The full picture is more advanced than that answer implies, and the distinction between the asset manager and the parent firm is what reconciles them.

Morgan Stanley filed with the Office of the Comptroller of the Currency for a national trust bank charter for a digital-asset entity, Morgan Stanley Digital Trust, National Association. The application was received on February 18, 2026. The OCC granted conditional approval on June 18, 2026. The proposed entity would be wholly owned by Morgan Stanley Capital Management, would hold digital assets on behalf of clients, and would conduct related activities including buying, selling, swapping and transferring tokens in support of investment strategies — and would facilitate staking services on a fiduciary basis. Conditions attached to the approval include maintaining at least $50 million in tier 1 capital for the first three years, with at least half held in eligible liquid assets.

Morgan Stanley is therefore building precisely the capability that its ETPs currently outsource. Wallace’s answer is defensible in its own terms — MSIM’s trusts are not switching custodians imminently, and a conditionally approved charter is not an operating trust bank. But readers should understand that the firm’s stated preference for external custody sits alongside an active effort to bring that function in house at the parent level, which the OCC has already conditionally blessed.

The charter itself is part of a broader shift. The OCC under Comptroller Jonathan Gould moved quickly through a queue of digital-asset charter applications, granting conditional approvals in December 2025 to Circle’s First National Digital Currency Bank, Ripple National Trust Bank, BitGo, Fidelity Digital Assets and Paxos Trust Company, followed in early 2026 by Stripe’s Bridge National Trust Bank, Crypto.com and Protego. Morgan Stanley’s application arrived after crypto-native firms had already normalized the path — an inversion of the usual sequence, in which banks set the template and startups follow.

Why the Index Choice Is Not a Footnote

Both trusts price against CoinDesk benchmarks: the CoinDesk Ether Benchmark 4PM NY Settlement Rate and the CoinDesk Solana Benchmark 4PM NY Settlement Rate. Morgan Stanley’s bitcoin product uses the CoinDesk Bitcoin Benchmark Rate. Wallace said the firm surveyed the market, conducted diligence across index providers, and found CoinDesk cited as best in class by its partners, with pricing capability the deciding factor.

Index selection in a single-asset trust looks trivial and is not. The benchmark determines the net asset value that creations and redemptions settle against, the value at which the sponsor fee is calculated in kind, and the number every performance comparison will be measured from. A benchmark that is thinly sourced, easy to manipulate near the fixing window, or governed opaquely transmits those weaknesses straight into shareholder returns.

The CoinDesk settlement rates are constructed as a one-hour volume-weighted average price of the underlying spot benchmark rates, sourcing from a minimum of three exchanges and using U.S. dollar and USD Coin denominated pairs, with exchange volume as an input. A one-hour VWAP window is materially harder to push around than a single-instant snapshot, because moving it requires sustained volume rather than a burst of prints at the fix.

CoinDesk Indices is regulated in the United Kingdom by the Financial Conduct Authority as a benchmark administrator, states adherence to IOSCO principles, and holds ISO 27001 certification along with SOC 1 Type II and SOC 2 Type II attestations. For a bank-affiliated sponsor that needs a defensible answer to its own model-risk and vendor-risk committees, an FCA-authorized administrator with a documented methodology is a much easier internal sale than an unregulated price feed.

One structural detail from the filing is worth flagging for holders: the delegated sponsor may change the pricing benchmark or the benchmark provider without shareholder approval, disclosing the change on its website and in a Form 8-K. That is standard in this product class. It is also a reminder that the index arrangement is a contractual choice the sponsor retains the right to revisit.

The Bitcoin Precedent Everyone Is Extrapolating From

The strongest argument for MSSE and MSOL is not the fee. It is MSBT.

Morgan Stanley launched the Morgan Stanley Bitcoin Trust on April 8, 2026, priced at 0.14% — then the cheapest spot bitcoin sponsor fee available. It gathered roughly $34 million on its first day and passed $100 million within a week, which the firm described as its strongest ETF launch. By July 16, 2026 it held more than $381 million in assets under management, according to Morgan Stanley’s own launch announcement for the new products. The asset manager’s product page put net assets at approximately $392 million as of July 24, 2026.

Bloomberg senior ETF analyst Eric Balchunas, writing on launch day about the ether and Solana products, noted that both charge 0.14%, “instantly making them the cheapest in each category,” and that the firm’s bitcoin ETF was “up to $400m in 4mo despite launching in middle of winter,” which he read as a good sign.

The arithmetic behind that read is genuinely impressive in one respect and worth qualifying in another.

The impressive part: MSBT grew roughly elevenfold in 99 days during a period when bitcoin fell hard and the broader complex saw repeated stretches of net outflows. Attracting several hundred million dollars into a new bitcoin wrapper while the asset was cutting toward a 21-month low is not a trivial commercial achievement, and it says something real about the firm’s ability to place product.

The qualifying part: $381 million is roughly 2.7% of Morgan Stanley Investment Management’s $14 billion-plus exchange-traded suite, and a rounding error against BlackRock’s iShares Bitcoin Trust, which has run in the tens of billions. Measured against the firm’s own reach — Morgan Stanley’s wealth business includes roughly 16,000 financial advisers overseeing more than $9 trillion in client assets — MSBT’s asset base after nearly four months represents a very small allocation rate. The launch worked. It did not saturate the channel.

There are two ways to read that. The optimistic reading is that penetration is early and the runway is enormous: if advisers eventually place even a fraction of a percent of client assets into the digital-asset ETP suite, the absolute numbers become large. The skeptical reading is that MSBT’s growth may have drawn on a finite pool of already-convinced allocators, that the marginal adviser is unconvinced rather than merely unaware, and that a bear market is a poor environment in which to convert the unconvinced.

The ether and Solana funds will test which reading is right, because they are the same distribution machine pointed at less familiar assets in worse market conditions.

Distribution Is the Real Product

Strip away the fee and the staking design and what remains is a distribution story, which is the only durable competitive advantage available in a business where the product itself is a commodity.

Morgan Stanley’s second quarter of 2026 gives the scale. The firm reported net revenues of $21.3 billion for the quarter ended June 30, 2026, up from $16.8 billion a year earlier, with net income applicable to Morgan Stanley of $5.6 billion, or $3.46 per diluted share, against $3.5 billion and $2.13 a year earlier. Wealth Management produced record net revenues of $8.86 billion, up 14% year over year, at a pre-tax margin of 30.5%. The segment added $148.1 billion in net new assets during the quarter, more than double the $59.2 billion added in the same quarter of 2025 — though the firm noted that just over half of that increase reflected inflows tied to initial public offerings of certain clients in its workplace channel, a one-time-ish source that should not be annualized. Total client assets across Wealth and Investment Management reached $10 trillion.

Morgan Stanley Investment Management itself reported more than 1,300 investment professionals and $2 trillion in assets under management or supervision as of June 30, 2026. Its exchange-traded business, launched in 2023, has grown to more than $14 billion across 22 products: five Calvert ETFs, three Parametric ETFs, eleven Eaton Vance fixed income ETFs and three digital-asset ETPs.

The final piece arrived two weeks before the ETP launch. On July 15, 2026, E*TRADE from Morgan Stanley completed the rollout of spot digital-asset trading, letting eligible clients buy, sell and hold bitcoin, ether and Solana directly on the platform in partnership with the infrastructure provider Zerohash.

Consider what that combination means in practice. A Morgan Stanley wealth client can now hold ether through an adviser-recommended ETP inside a managed account, or buy spot ether directly through E*TRADE, and the firm captures the relationship either way. A self-directed E*TRADE customer who wants staking exposure without managing a wallet has an in-house product at fourteen basis points. Advisers who could not previously recommend digital assets because of internal approval constraints now have three vehicles that passed the firm’s own product governance.

Rival issuers cannot replicate that. BlackRock has enormous distribution but no captive brokerage of comparable retail depth. Bitwise, 21Shares and Grayscale have product expertise and first-mover positions but must sell through platforms they do not own. Fidelity is the closest analogue and has been building the same stack for longer.

This is why the fee decision is rational even though it looks like value destruction. Fourteen basis points on $381 million is roughly $530,000 of annual gross revenue — immaterial to a firm earning $21.3 billion in quarterly net revenues. Morgan Stanley is not pricing these products to make money on them. It is pricing them to remove the last objection an adviser or a compliance officer might raise, and to keep client assets inside the firm rather than watching them leave for Coinbase or a competitor’s ETF. Judged as a fee business the products are trivial. Judged as an asset-retention tool they are cheap at the price.

A Timeline of Morgan Stanley’s Digital-Asset Build-Out

The July launch is the visible part of a sequence that has been running for eighteen months.

• September 17, 2025: The SEC approves proposed rule changes from three national securities exchanges adopting generic listing standards for exchange-traded products holding spot commodities, including crypto assets, removing the need for individual rule-change approval for qualifying products.
• November 10, 2025: The IRS releases Revenue Procedure 2025-31, establishing a safe harbor that lets exchange-traded products stake digital assets without threatening their investment-trust and grantor-trust tax status, with an amendment window running to August 10, 2026.
• December 2025: The OCC grants conditional national trust charter approvals to Circle’s First National Digital Currency Bank, Ripple National Trust Bank, BitGo, Fidelity Digital Assets and Paxos Trust Company.
• February 18, 2026: The OCC receives Morgan Stanley’s application for a national trust bank charter for Morgan Stanley Digital Trust, National Association.
• April 8, 2026: The Morgan Stanley Bitcoin Trust (MSBT) begins trading on NYSE Arca at a 0.14% fee, the first crypto ETP from a U.S. bank-affiliated asset manager. It draws roughly $34 million on day one and passes $100 million inside a week.
• June 18, 2026: The OCC conditionally approves Morgan Stanley’s digital-asset trust bank charter, subject to capital and liquidity conditions.
• July 15, 2026: E*TRADE from Morgan Stanley completes the rollout of spot trading in bitcoin, ether and Solana in partnership with Zerohash. Morgan Stanley reports second-quarter 2026 results the same day.
• July 28, 2026: MSSE and MSOL begin trading on NYSE Arca at 0.14% each, with staking enabled and no sponsor-level cut of rewards. On the same day, 21Shares waives the sponsor fee on its Solana ETF to zero for twelve months.

Read as a sequence rather than a series of announcements, the pattern is a firm assembling every layer of the digital-asset stack it can own: the product, the pricing, the brokerage rails, and eventually the custody charter. The ETPs are the customer-facing surface of a much larger construction project.

Launching Into the Worst Crypto Tape Since the FTX Aftermath

Wallace acknowledged the environment directly in her launch-day interview, describing the market as being in a lull following drawdowns over the preceding months and arguing that the long-term value of the underlying technology justified bringing the products to market regardless of where prices stood.

“Lull” undersells it.

Bitcoin peaked around $126,000 in October 2025, opened January 2026 above $93,000, and ground down through the first half of the year to a 21-month low near $58,000 in late June — a decline of more than half from the top. It traded around $63,000 to $64,000 on July 28, 2026, the day MSSE and MSOL listed.

Ether has been worse. It changed hands near $1,922 on July 28, roughly 61% below its 2025 peak. Solana has been worse still: SOL peaked at $294.33 on January 19, 2025, printed nine consecutive down months, and traded near $74 on launch day — approximately 75% below that high.

Bitcoin dominance near 57% and a fear-and-greed reading in the low 30s in the run-up to the launch both point the same direction: capital that remains in the asset class has consolidated into the largest name rather than rotating out along the risk curve. That is precisely the wrong tape for a product whose entire proposition is diversification beyond bitcoin.

The macro layer offers no relief. The Federal Open Market Committee met on July 28 and 29, 2026, with its decision due at 2:00 p.m. Eastern on the 29th — the day after the launch. The federal funds target range stood at 3.50% to 3.75%, held at four consecutive meetings, most recently on June 17. Kevin Warsh, who became Fed chair on May 22, 2026, has signaled that he intends to offer materially less forward guidance than his predecessors, which has left markets less certain about the path than they have been in years. Economists polled by FactSet expected a hold. Futures traders, per CME Group’s FedWatch tool, had moved to price roughly a 36% probability of a quarter-point increase, up from about 16% a week earlier — an unusual thing to see in a cycle that markets had spent a year treating as finished.

The reason for that repricing is energy. Renewed U.S.–Iran hostilities and the collapse of an earlier ceasefire pushed crude above $100 a barrel, reviving the concern that energy costs feed through into core inflation. June consumer inflation had cooled to 3.5% from 4.2% in May, which is the datapoint arguing for patience; the oil move is the one arguing against it. Long-dated Treasury yields at multi-month highs complete an environment that has been consistently hostile to long-duration, non-cash-generating assets — a description that fits most of the crypto complex.

Then there is Washington. The Digital Asset Market Clarity Act, H.R. 3633, passed the House, cleared the Senate Banking Committee and sat on the Senate Legislative Calendar. It did not get a floor vote. Senate leadership signaled in late July that the bill would not find runway before the August 8 recess as the chamber prioritized a Russia sanctions package and nominations, with an unresolved dispute over restrictions on senior government officials backing crypto projects still blocking a compromise. Reporting on July 27 and 28 described the bill as shelved for now. Missing the pre-recess window is a meaningful setback to the prospect of 2026 passage.

For an issuer selling regulated access to digital assets, the failure of the market-structure bill is a mixed signal rather than an unambiguous negative. It delays the legal clarity that would expand the addressable market. It also, for the moment, preserves the relative advantage of the compliant, registered, exchange-listed wrapper over everything else — which is exactly what Morgan Stanley sells.

The Competitive Field MSSE and MSOL Are Entering

The two categories are at very different stages of maturity, and Morgan Stanley’s odds differ accordingly.

U.S. spot ether ETPs are an established, concentrated market. Total net assets across the group stood at roughly $10.4 billion in late July 2026, with BlackRock’s iShares Ethereum Trust holding the dominant share and cumulative historical net inflows above $11 billion. Flows through July were choppy but improving: ether funds recorded net inflows on six of eight trading days in the run-up to the Morgan Stanley launch, and BlackRock’s crypto ETFs collectively drew about $343 million across five sessions ending July 17. Ether products absorbed lengthy outflow streaks earlier in 2026 before that recovery.

Displacing an incumbent that large with a fourteen-basis-point fee is difficult. Fee differences of one to thirteen basis points do not move institutional allocators out of the deepest, most liquid product in a category; spreads, borrow availability, options markets and operational familiarity matter more. Where a low fee does win is with fee-conscious advisers building model portfolios, and with platforms that screen on expense ratio. That is a real market, and it happens to be exactly the market Morgan Stanley controls.

Solana is the more interesting opportunity because the category is small enough that a new entrant can matter. Total net assets across U.S. spot SOL ETPs stood at roughly $889 million in late July 2026 by one tracker’s count, with another putting the combined figure for thirteen SOL products near $1.1 billion. Bitwise’s BSOL, the first U.S. spot Solana ETP, was the largest at roughly $635 million as of July 21, 2026. There is no BlackRock-scale incumbent to dislodge.

Solana ETPs have also been drawing disproportionate attention relative to their size. Solana and Hyperliquid funds together accounted for nearly 80% of trading volume across non-bitcoin, non-ether crypto ETFs in the third week of July 2026. In a market where investors have largely stopped taking risk, the risk they are still taking is concentrated in a short list of names, and SOL is on it.

BSOL is the benchmark to beat, and it sets a high bar operationally. Bitwise stakes essentially all of the fund’s SOL through its own on-chain solutions business, powered by Helius, and reported net investment income of about $9.32 million on staking rewards of roughly $9.89 million in the first quarter of 2026, with an annualized net investment income ratio of 6.22% for the period. That is a live, audited demonstration of what a fully staked Solana wrapper produces — a useful yardstick against which MSOL’s first quarterly report can be measured.

Morgan Stanley’s edge over Bitwise is not the fee, which is six basis points. It is that Bitwise has to persuade a platform to carry BSOL while MSOL arrives pre-approved on a platform serving 16,000 advisers and millions of E*TRADE accounts.

Ether and SOL Are Not Bitcoin, and the Framing Matters

Asked how investors should think about ether and Solana given that bitcoin has settled into a recognizable “digital gold” narrative, Wallace drew a distinction: ether has demonstrated institutional buy-in and durable underlying capability, particularly around tokenization and stablecoins, while Solana has been viewed more as a trading-oriented asset valued for speed.

That is a fair summary of how the two assets are positioned. It is also a description that carries more analytical weight than a marketing line usually does, and it is worth testing against data.

On the ether side, the tokenization claim holds up. Ethereum hosts the large majority of tokenized real-world assets and the majority of global stablecoin supply. Stablecoin market capitalization reached an all-time high around $320 billion in May 2026, and tokenized real-world assets reached a record near $28.9 billion, with tokenized Treasuries the largest component at roughly $16.1 billion. BlackRock’s tokenized liquidity fund passed $2.5 billion in total asset value by late May 2026 and is deployed across multiple chains including Ethereum and Solana.

The uncomfortable part of that story is the disconnect between activity and price. Ethereum’s share of tokenization and stablecoin settlement grew through a period in which ether fell around 61%. Whatever relationship exists between network usage and token value, it did not operate over the past year in the way an equity investor’s intuition would predict. Fee burn under EIP-1559 removes ether from circulation in proportion to network demand, which creates a mechanism linking usage to supply — but that mechanism has plainly been overwhelmed by other forces, including the broad de-risking that pushed capital toward bitcoin and away from everything else.

Investors buying MSSE because Ethereum is winning tokenization should be clear-eyed that they are making a bet the linkage reasserts itself, not observing that it already has.

The Solana framing is more candid than most issuer commentary. Describing SOL as a trading-oriented asset valued for execution speed is accurate and implicitly acknowledges higher beta. The 75% drawdown from January 2025 and nine consecutive down months are the empirical expression of that beta. Solana’s staking yield — a network baseline in the region of 6.6%, with a broader range around 5% to 8% depending on validator performance and network participation — is genuinely higher than Ethereum’s 2% to 3%, but a substantial part of that spread reflects higher token issuance rather than higher economic return. Issuance-funded yield dilutes non-stakers; it does not manufacture value from nothing. An investor who stakes simply avoids being diluted.

This is the single most misunderstood aspect of staking ETPs. A 6.6% Solana yield is not analogous to a 6.6% bond coupon. Part of it is compensation for validation services and transaction-fee capture; part of it is a defensive claim on new supply. Any framing that presents the number as straightforward income overstates what the holder is receiving in economic terms.

The diversification argument Wallace made — that clients should have a choice of currencies rather than a single exposure — is also worth interrogating. Diversification requires imperfect correlation, and major crypto assets have historically correlated tightly with one another, particularly during drawdowns. Adding ether and SOL to a bitcoin position adds idiosyncratic technology and issuance risk without much dampening of the drawdown that matters. What it does add is genuine exposure to different investment theses: settlement infrastructure and tokenization in ether’s case, high-throughput consumer and trading applications in Solana’s. Those are different bets. They are not uncorrelated ones.

How These Products Actually Trade

Most investors will interact with MSSE and MSOL the way they interact with any ETF: they will type a ticker into a brokerage app and see a price. Understanding what sits behind that price is worth a few minutes, because the mechanism is what keeps the quoted price tethered to the value of the underlying ether or SOL, and because the Morgan Stanley filings describe a wrinkle that most retail explainers skip.

Shares are created and redeemed only in baskets of 10,000, and only by authorized participants — broker-dealers that have signed agreements with the trust. Retail investors never touch this process. What it does for them is provide the arbitrage that closes the gap between the trust’s share price and its net asset value.

The logic is mechanical. If MSSE trades above the value of the ether behind each share, an authorized participant can deliver ether to the trust, receive new shares and sell them into the market at the higher price, pocketing the difference and pushing the share price down toward fair value. If MSSE trades below, the same process runs in reverse. The wider the gap, the more profitable the arbitrage, and the harder market makers work to close it. This is why liquid ETFs track their assets closely without anyone actively managing to that outcome.

The mechanism has a failure mode, and it is the same one that has produced dislocations in every asset class where the wrapper is more liquid than its contents. If authorized participants cannot readily source or dispose of the underlying — because a market is stressed, because a venue is down, or because the trust’s own assets are locked in a staking contract — the arbitrage weakens and the share price can drift from net asset value. Discounts in stressed conditions are the usual expression. Morgan Stanley discloses that each trust may trade at a premium or discount, which is not a formality in a product that may have most of its assets staked.

One structural detail in the MSSE prospectus is unusual enough to note. In cash redemption orders, the trust delivers ether to what the filing calls an ether counterparty that is not the authorized participant, and the trust — not the authorized participant — selects that counterparty. The filing is explicit that the counterparty is not acting as the authorized participant’s agent in receiving the ether. This design keeps the authorized participant, which is typically a broker-dealer, at arm’s length from the digital asset itself. It exists because broker-dealers have faced constraints on directly handling crypto assets, and it is a small piece of regulatory engineering hiding inside an otherwise routine redemption description.

For a newly launched fund, the practical consequence of all this is that liquidity is thin at first and improves as assets grow. Each trust opened with roughly 50,000 shares and about $1 million in seed capital. Until creation activity builds, bid-ask spreads on MSSE and MSOL will be wider than on established competitors, and that spread is a real cost that does not appear in any expense ratio. An investor comparing a 0.14% fund with a 0.20% fund while paying an extra ten basis points in spread on entry and exit has not saved money.

Two Networks, Two Very Different Machines

The design differences between MSSE and MSOL trace directly to design differences between Ethereum and Solana. Understanding the second explains the first, and it explains why the funds’ yields, staking percentages and operational risks diverge.

Ethereum: deliberate, congested, economically self-limiting

Ethereum measures time in twelve-second slots grouped into 32-slot epochs of roughly six and a half minutes. Validators are admitted and released in controlled batches governed by churn limits that scale with the size of the active set — a design choice that trades speed for stability. The MSSE prospectus quantifies the current parameters: up to eight validators may activate per epoch, and a maximum of 256 staked ether can enter as new validators per epoch, roughly 57,600 ether per day network-wide.

Those limits are why the queue exists and why it can persist. When demand to stake exceeds roughly 57,600 ether a day, a backlog forms and clears only as fast as the protocol allows. The 2.71 million ether waiting as of July 6, 2026 represents an enormous amount of capital voluntarily accepting a seven-week idle period for a 2% to 3% yield — which is itself a data point about how institutional capital views ether staking.

Ethereum’s fee mechanism adds a second layer. Under EIP-1559, transaction fees split into a base fee, which is burned and permanently removed from supply, and a tip that goes to validators as part of staking rewards. Network activity therefore reduces ether supply and increases validator income simultaneously. In periods of heavy usage the burn can exceed issuance, making ether net deflationary. In quiet periods issuance dominates. This is the mechanism behind the claim that ether accrues value from usage — a real mechanism, though as the past year demonstrated, not a dominant one when macro forces are pushing the other way.

Ethereum’s staking yield is modest partly by design. Lower issuance means less dilution and a smaller reward pool. A 2% to 3% yield on a network securing the majority of tokenized real-world assets and stablecoin supply is a different proposition from a high yield on a network with little economic activity.

Solana: fast, higher-issuance, operationally simpler for a fund

Solana’s bonding and unbonding cycle runs roughly two to three days according to the MSOL prospectus — an order of magnitude faster than Ethereum’s worst case. From a fund manager’s perspective that changes everything about the liquidity calculation. If assets can be freed in days rather than weeks, the buffer needed to service redemptions shrinks toward zero, and the fund can stake essentially its entire position. That is exactly the design MSOL adopted, and it is the design Bitwise adopted for BSOL before it.

The higher yield — a baseline in the region of 6.6%, ranging roughly 5% to 8% depending on validator performance and network participation — comes substantially from higher token issuance. That distinction matters more than most coverage acknowledges. On a network with high issuance, staking is partly a defensive act: a holder who does not stake is diluted by those who do. The headline yield overstates the economic return by whatever portion is simply dilution avoidance.

Solana also produces meaningful validator income from transaction ordering and maximal extractable value, which is why some liquid-staking arrangements advertise yields above the protocol baseline. Whether an ETP’s staking providers capture and pass through that additional income, and on what terms, is a detail that varies by issuer and is not always prominently disclosed.

What the comparison means for the two funds

Put the pieces together and a clear picture emerges. MSOL should deliver a materially larger gross reward stream than MSSE, because it stakes more of a higher-yielding asset with faster exits. MSSE should deliver a smaller and initially delayed reward stream, constrained by both the 50% to 80% target range and the activation queue. Neither is better designed than the other; each reflects an honest engineering response to a different network.

The corollary is that comparing the two funds’ distributions without adjusting for these differences would be a mistake. A larger distribution from MSOL is not evidence of superior management. It is evidence that Solana issues more tokens and lets validators leave faster.

The Regulatory Scaffolding That Made This Possible

Two years ago a staking-enabled spot ether ETP from a bank-affiliated asset manager would not have been filed, let alone listed. Four distinct regulatory moves between mid-2025 and late 2025 built the foundation, and each removed a specific obstacle.

In-kind creations and redemptions. On July 29, 2025 the SEC permitted in-kind creation and redemption for crypto asset ETP shares, bringing them into line with standard practice for commodity-based ETPs. Before that, cash-only mechanics forced sponsors to transact in the spot market on every creation and redemption, adding cost and tracking error that the fund’s shareholders ultimately bore. The change also came alongside further staff guidance touching custody, staking and fraud risk.

Generic listing standards. On September 17, 2025 the SEC approved rule changes from three national securities exchanges adopting generic listing standards for exchange-traded products holding spot commodities including crypto assets. Under the standards, a qualifying product can list without an individual rule-change approval, provided the underlying asset meets criteria tied to surveillance-sharing arrangements or to having underlain a futures contract traded for at least six months on a CFTC-regulated exchange. Actively managed, leveraged and novel-structure products still require the traditional route.

This is the single change that explains the pace of new listings through 2026. Before it, each product required a bespoke approval process measured in quarters or years. After it, a sponsor with a qualifying asset and a complete registration statement could plan a launch date. It converted a regulatory question into a project-management question.

Custody clarification. On September 30, 2025 SEC staff issued a no-action letter confirming that state-chartered trust companies can be treated as banks for custody purposes under the Investment Company Act and the Investment Advisers Act. That resolved a practical problem for advisers and funds using crypto-native custodians that hold state trust charters rather than national bank charters.

The tax safe harbor. Revenue Procedure 2025-31, released November 10, 2025, was the last piece and arguably the most important for staking specifically. It let ETPs stake without endangering their investment-trust and grantor-trust classification, with an amendment window running to August 10, 2026 for existing trusts to authorize staking in their governing documents.

The sequence matters. In-kind mechanics made the wrapper efficient. Generic listing standards made launches predictable. The custody letter made the operational chain workable. The tax safe harbor made staking possible without blowing up the structure. Remove any one and the product Morgan Stanley launched in July 2026 either does not exist or looks materially worse.

What is conspicuously missing from that list is legislation. Every element of the scaffolding is administrative — SEC approvals, staff letters, an IRS revenue procedure, OCC charter decisions. The Digital Asset Market Clarity Act was meant to supply a statutory foundation, and as of late July 2026 it had passed the House, cleared the Senate Banking Committee and stalled without a floor vote. Administrative accommodations can be revisited by future administrations in a way that statutes cannot. That is a structural risk sitting underneath the entire category, and it is not priced into a fourteen-basis-point expense ratio.

What January 2024 Taught the Industry

The useful historical comparison is not another bank product. It is the launch of the first U.S. spot bitcoin ETFs in January 2024, which produced a set of lessons that every subsequent launch, including this one, has been built around.

The first lesson was that price sensitivity is real and immediate. Grayscale converted an existing trust carrying a legacy fee far above the new entrants and watched assets leave for cheaper competitors month after month, while BlackRock and Fidelity, priced aggressively and distributed widely, accumulated. Investors in a commodity wrapper have no reason to pay a premium for identical exposure, and they behaved accordingly. Morgan Stanley’s decision to price at the floor across all three products is a direct descendant of that episode.

The second lesson was that distribution beats brand. Several highly regarded asset managers launched competent bitcoin products that gathered comparatively little, while firms with platform reach compounded. The gap between a good fund and a large fund turned out to be almost entirely a function of who could put the product in front of allocators. Morgan Stanley’s entire strategy — captive advisers, a captive brokerage, a captive approval process — is an attempt to be on the right side of that dynamic from day one.

The third lesson was that first-mover advantage in this category is durable but not absolute. The largest bitcoin fund established its lead in the opening months and has held it, which argues that being early matters. But the Solana category shows the other side: BSOL’s roughly $635 million lead as of July 21, 2026 is real, and it is not so large that a bank with $9 trillion of client assets cannot challenge it. Categories consolidate around a leader only after enough assets have arrived to make switching costly. Solana has not reached that point.

The fourth lesson is the one still being learned. Bitcoin ETFs launched at a cyclical moment when the asset went on to rally substantially, which flattered every launch metric and made distribution look easier than it was. MSSE and MSOL are launching into the mirror image. The 2024 playbook was written in conditions that no longer exist, and the honest answer is that nobody has yet run the experiment of launching a crypto ETP into a 60% to 75% drawdown and measuring what happens over a year. MSBT is the closest thing to a control, and its result — steady accumulation, no explosive growth, an asset base that remains a small fraction of the sponsor’s ETF suite — is the most relevant precedent available.

The Risks That Actually Deserve Attention

Every prospectus in this category contains pages of risk language, most of it boilerplate. A handful of items in the Morgan Stanley filings are specific enough to matter.

Slashing

Ethereum and Solana both penalize validator misconduct programmatically. If a staking services provider double-signs, equivocates or otherwise misbehaves, the protocol can confiscate a portion of the staked assets. The MSSE prospectus states plainly that there is no guarantee the trust will recover any of its staked assets, or their value, if they become subject to slashing penalties. Morgan Stanley’s mitigation is provider selection — monitoring uptime and slashing history and spreading assets across three operators — which reduces but does not eliminate the exposure. Slashing events at institutional validators have been rare. Rare is not never.

The liquidity and redemption mismatch

An exchange-traded product promises daily creation and redemption. A staked asset cannot be moved on demand. The gap between those two facts is bridged by the utilization-rate model, and the model is only as good as its assumptions about redemption behavior under stress.

The MSSE filing describes the inputs: unbonding periods, historical cumulative drawdowns in redemptions during the bonding period for U.S.-listed ETFs and comparable instruments abroad, trust size, provider reliability, secondary-market liquidity and market conditions. Those are sensible parameters. They are also, by construction, calibrated on historical data, and the tail event this model needs to survive is one that has not happened yet — a wave of redemptions concentrated in days while the Ethereum exit queue is long. In that scenario, a trust with 80% of its ether staked and a multi-week exit wait would need to satisfy redemptions from a shrinking unstaked buffer. The consequence would most likely show up as the shares trading at a discount to net asset value rather than as an outright failure to redeem, since baskets are only redeemable by authorized participants and the sponsor controls the un-staking instruction. Discounts of that kind are how structural illiquidity usually announces itself in a wrapper.

MSOL faces a milder version of the same problem, which is why it can stake up to 100%.

Fee drag without offsetting income

The sponsor fee accrues daily in kind regardless of whether staking rewards are flowing. During the initial activation queue, and during any period when the sponsor reduces staking for liquidity or risk reasons, the ether behind each share declines with nothing offsetting it. Over a 47-day window at 0.14% annualized, that is only about 1.8 basis points of drag — small in absolute terms, but the point is directional: the yield advantage is contingent, and the fee is not.

Custodian concentration and replacement risk

The prospectus notes that if a custodian resigns or is removed without replacement, it could trigger early termination of the trust. It also notes that some service providers may not be subject to federal regulation and oversight, and that replacing them could pose a challenge to the safekeeping of the digital assets and to the trust’s operations. Splitting custody across BNY and Coinbase reduces single-point failure risk relative to a single-custodian design. It does not remove the dependence.

No 1940 Act protections

Worth restating because it is the risk most often skimmed. These trusts are not registered investment companies. There is no board of directors with fiduciary duties to shareholders in the 1940 Act sense, no statutory custody rule, no affiliated-transaction limits. Governance rests on the trust agreement and on Morgan Stanley’s internal standards. Investors are relying on the sponsor’s reputation and processes rather than on a statutory framework.

Premium and discount risk

Each trust may trade at a premium or discount to net asset value. The arbitrage mechanism that normally keeps ETF prices tethered depends on authorized participants being willing and able to transact. In stressed crypto markets — particularly if staked assets are illiquid — that mechanism can weaken exactly when investors most want it to work.

Concentration and limited operating history

Each trust holds one asset on one network. Both funds are new, with no operating history on which to evaluate tracking quality, staking execution or distribution reliability. Morgan Stanley says so directly in its risk disclosures. The first quarterly report will be the first genuine evidence.

Regulatory reversal

The staking-enabled ETP exists because of a specific stack of accommodations built between July 2025 and November 2025: in-kind creations and redemptions, generic listing standards, custody clarification and the IRS safe harbor. Regulatory postures change with administrations and with market events. A future SEC or Treasury less inclined toward the category could complicate staking, custody or tax treatment. The failure of the Clarity Act to reach a Senate floor vote in July 2026 is a reminder that the statutory foundation under all of this is still administrative rather than legislative.

The Rest of Morgan Stanley’s Digital-Asset Footprint

The ETPs are the most visible expression of a commitment that now runs across several parts of the firm, and the other pieces are worth cataloguing because they shape how seriously to take the asset-management push.

E*TRADE’s spot trading rollout, completed on July 15, 2026 in partnership with Zerohash, gives Morgan Stanley a direct retail crypto channel covering bitcoin, ether and Solana — the same three assets as the ETP suite, which is not a coincidence. A client who wants the token itself and a client who wants the wrapper are both served without leaving the firm. For a business whose central anxiety is asset leakage to platforms like Coinbase and Robinhood, that symmetry is the point.

The conditionally approved trust bank charter would eventually add custody and fiduciary staking, closing the loop on a function currently rented from BNY and Coinbase.

Morgan Stanley’s institutional side has been active in the sector too. The firm was appointed alongside KBW to examine strategic options for LMAX Group, the institutional trading venue, in a process that could value the company at as much as $5 billion, with a Nasdaq listing reportedly the preferred route among a direct sale, a special purpose acquisition company merger and an initial public offering. That is an advisory mandate rather than a principal investment, and large institutions run information barriers between advisory and asset-management functions precisely to keep such engagements separate. Readers should not infer any connection between the two activities. It does illustrate that the firm’s exposure to the digital-asset industry now spans investment banking, wealth, brokerage and asset management simultaneously — which is a commercial fact worth knowing when assessing how committed the institution is.

Client sentiment, meanwhile, has been improving from a low base. Morgan Stanley Wealth Management’s quarterly retail investor pulse survey, released July 20, 2026, found 62% of investors bullish for the quarter, up from 56% in the prior survey, with 66% expecting markets to move higher by quarter-end against 55% in the second quarter. Concern about volatility eased marginally, with 61% anticipating an increase versus 63% previously. That survey covers markets broadly rather than crypto specifically, and self-reported sentiment is a weak predictor of allocation behavior. But a client base turning modestly more constructive is a better environment for introducing a new asset class than one turning more defensive.

How to Read the First Quarterly Report

Both trusts are SEC-reporting issuers, which means the marketing claims made this week will meet audited disclosure within months. Knowing what to look for turns that filing from a formality into the single most informative document about whether the product does what it says.

Net investment income and the staking reward line. The report should show gross staking rewards received and the net amount retained after the staking fee. Bitwise’s BSOL provides the template and the benchmark: roughly $9.89 million of staking rewards producing about $9.32 million of net investment income in the first quarter of 2026, an annualized net investment income ratio of 6.22%. If MSOL’s equivalent ratio lands close to that, the fund is executing. If it lands materially below, the question becomes whether the shortfall came from provider performance, timing of deployment, or something structural.

Average staked percentage, not the point-in-time figure. MSSE has committed to publishing its staked share daily. The number that matters for returns is the average over the period, weighted by assets. A fund that ends a quarter at 78% staked but averaged 40% because it spent six weeks in the activation queue earned rewards on 40%.

Tracking difference against the benchmark. The trusts aim to track their CoinDesk settlement rates adjusted for expenses and staking. The gap between the fund’s total return and the benchmark’s return, less the fee, is where operational quality shows up. Persistent negative tracking beyond the expense ratio points to execution friction — costs in creations and redemptions, timing losses on token sales to fund distributions, or unrewarded staked balances.

Realized gains from funding distributions. Because staking rewards arrive in kind and distributions go out in cash, the trust sells tokens. Those sales create realized gains or losses inside the trust that flow through to shareholders under grantor-trust treatment. The size and timing of these sales, particularly in a falling market, is worth watching.

Any slashing or validator incident disclosure. A material slashing event would be disclosed. Its absence across a first full period is meaningful evidence that provider selection is working; a single incident would be meaningful evidence in the other direction, and would deserve scrutiny of which of the three providers was involved.

Basket activity. The number of creation and redemption baskets over the period is the cleanest available measure of genuine demand, distinct from asset growth driven by price. A fund whose assets rose because ether rallied is a different story from one whose assets rose because authorized participants kept creating.

Testing the “Five Percent” Claim

One number from the launch-day interview shaped the entire optimistic case and deserves independent handling. Wallace said that ETFs represent only about 5% of the overall crypto market, framing the remaining 95% as addressable runway.

The claim is directionally plausible and analytically slippery, and the slipperiness is in the denominator.

If “the overall crypto market” means total market capitalization of all digital assets, then the ratio of ETP assets to that figure is arithmetically a share of market value — but it measures something odd. Most crypto market capitalization consists of tokens that no ETP holds and never will, held by people with no interest in a brokerage wrapper. A rising ETP share of that denominator would require either enormous ETP growth or a collapse in everything else.

If instead the denominator is the value of bitcoin, ether and SOL specifically, the ETP share is considerably higher, because U.S. spot bitcoin funds alone have absorbed a substantial fraction of bitcoin’s float.

And if the intended meaning is investor access — the share of people holding crypto exposure who do so through a regulated exchange-traded product rather than an exchange account or self-custody — then the figure is a statement about behavior that no public dataset measures cleanly.

None of this makes the claim wrong. Executives use round approximations in television interviews and there is nothing improper about it. But readers should treat “ETFs are only 5% of the crypto market, so there is 95% of runway” as a rhetorical frame rather than a measured total addressable market. The honest version of the argument is narrower and still persuasive: a large share of U.S. wealth-management assets sits on platforms where clients cannot easily hold crypto any other way, and those platforms have only recently begun approving these products. That is a real, bounded opportunity, and it is the one Morgan Stanley is actually positioned to capture.

Where This Fee War Ends

The trajectory of crypto ETP pricing over thirty months is a compressed replay of what happened to equity index funds over thirty years, and it is worth spelling out because it tells you what the next twelve months look like.

The first U.S. spot bitcoin ETFs launched in January 2024 with headline sponsor fees clustered in the 0.19% to 0.25% range, several of them waived to zero for an initial period or an initial asset threshold. Grayscale’s converted trust, carrying a legacy 1.50% fee, bled assets to cheaper rivals for months — the clearest natural experiment anyone could ask for on whether crypto fund investors are price sensitive. They were.

By mid-2026 the ether floor was 0.15% and the bitcoin floor 0.14%. Morgan Stanley then set both the ether and Solana floors at 0.14%, and 21Shares answered on the same day with a twelve-month zero on Solana. The direction is not in doubt.

Three consequences follow.

First, sponsor fees stop being a differentiator. When the spread between the cheapest and most expensive products in a category is sixteen basis points, as it currently is in Solana, the fee decision stops driving allocation and liquidity takes over. Deep, tight, heavily traded products win institutional flow regardless of a few basis points.

Second, the staking take becomes the real battleground. It is larger in magnitude, harder for investors to compare, and less visible in the standard fund-screening tools that display only an expense ratio. Morgan Stanley’s decision to zero out its own cut is a bet that this line item becomes the one investors scrutinize next. If it does, competitors charging 7% or 10% of gross rewards face pressure they cannot answer without giving up revenue they were counting on.

Third, economics migrate to whoever owns the client. If the product itself earns nothing, the money is in custody, brokerage, lending, advice and the retention of assets that would otherwise leave the firm. That is precisely the logic behind Morgan Stanley’s trust bank charter and its E*TRADE build-out. The ETP is the loss leader; the relationship is the business.

For investors this is unambiguously good on cost and worth watching on structure. Products priced below their cost of production are subsidized by something, and it is reasonable to ask what.

What an Adviser Actually Has to Decide

Strip the launch of its narrative and a practical question remains for anyone choosing among these funds. Four variables matter, roughly in this order.

All-in cost, not headline fee. Add the sponsor fee to the sponsor’s share of gross staking rewards multiplied by the expected gross yield. A 0.20% fund taking 5% of a 7% Solana yield costs roughly 0.55% all in. A 0.14% fund taking nothing from rewards but losing 5% to providers costs roughly 0.49%. A 0.00% fund taking 15% of rewards costs roughly 1.05%. The headline fee is the smallest term in the equation.

Staked share. A fund that stakes 100% of a 7% yield delivers a very different gross reward stream than one staking 60%. MSSE’s committed range of 50% to 80% is a genuine and disclosed constraint, and the fund has committed to publishing its staked share of ether daily — a level of transparency worth using rather than ignoring.

Liquidity. Bid-ask spreads and average daily volume determine what a real allocation costs to enter and exit. For a new fund with roughly $1 million of seed capital, this is the variable that will look worst for the longest, and it is the one most likely to make an institution wait a quarter before allocating.

Tax location. Staking income is ordinary income. In a taxable account, a high-yield staking product can produce a worse after-tax result than a lower-yield one, depending on the holder’s bracket. The same fund can be an excellent choice in an IRA and a mediocre one in a brokerage account.

None of this constitutes a recommendation, and none of it substitutes for a conversation with a qualified adviser about individual circumstances. It is simply the arithmetic the marketing does not do for you.

The Case For and the Case Against

The supporting interpretation

Morgan Stanley has done something structurally unusual in a business that mostly copies itself. It priced at the floor, removed its own claim on staking rewards entirely, split custody between a bank and a specialist, spread validation across three independent operators, chose an FCA-regulated benchmark administrator, and disclosed the constraints on its staking program in unusual detail — including the inconvenient 47-day queue figure, which no marketing department would have volunteered.

It has done all of this while owning the distribution channel, which means the products do not need to win a beauty contest on a third-party platform. And it has demonstrated with MSBT that the machine works: elevenfold asset growth in 99 days during a severe bear market is evidence, not theory.

The timing argument is also stronger than it looks. Products launched at cycle tops gather assets from investors who then lose money and leave. Products launched into drawdowns build slowly, from allocators with longer horizons, and are positioned when conditions turn. Wallace’s stated logic — that the long-term value of the technology justifies launching regardless of the tape — is the same logic every durable fund franchise has used, and it is usually right in retrospect.

The skeptical interpretation

The skeptical case does not dispute any of that. It disputes what follows from it.

A cheap, well-built wrapper around an asset that has fallen 61% or 75% is still a wrapper around an asset that has fallen 61% or 75%. Fourteen basis points of fee savings against a competitor at 0.20% is six basis points a year. A single week of ether volatility exceeds that many times over. The fee is close to irrelevant to the outcome an investor experiences, and treating it as the headline risks anchoring buyers on the wrong variable.

The staking yield, which is the genuinely new feature, is smaller and more contingent than the marketing implies. Ether’s 2% to 3% gross network yield, applied to 50% to 80% of the portfolio, net of 5% to providers, and delayed by weeks of queue, produces a net contribution in the range of roughly one percentage point a year, before ordinary-income tax. That is real. It is not what “additional yield” suggests to someone who has not read the prospectus.

The distribution advantage cuts both ways. Products sold through a captive channel are sold to clients who did not go looking for them, which historically produces less sticky assets than products investors sought out. And MSBT’s $381 million against more than $9 trillion of client assets suggests the channel converts slowly.

Finally, the diversification thesis has not yet been demonstrated in the only way that counts. Ether and SOL fell alongside bitcoin, harder than bitcoin, in the same drawdown. An investor adding them to a bitcoin position in 2025 got more volatility and worse returns, not a smoother ride.

What would settle it

Three pieces of evidence would move the argument materially in either direction: sustained creation activity in MSSE and MSOL beyond the seed baskets over the first sixty days; a first staking distribution that lands close to what the network yield and the disclosed staked share imply; and any sign that competitors are forced to cut their staking take in response. Absent those, the launch is a well-executed product decision whose commercial outcome remains genuinely open.

What Happens Next

Confirmed and scheduled. The FOMC decision landed on July 29, 2026 at 2:00 p.m. Eastern, one day after the listing, with the target range at 3.50% to 3.75% going in and market pricing split between a hold and a quarter-point increase. The Senate’s August 8 recess closes the near-term window for the Digital Asset Market Clarity Act. The IRS safe harbor amendment window under Revenue Procedure 2025-31 runs to August 10, 2026 — a date that matters more for competitors retrofitting existing trusts than for Morgan Stanley, whose products were built with staking from inception. Both trusts, as SEC-reporting issuers, will file periodic reports; the first quarterly disclosures will be the earliest audited window into staking income, staked percentages and tracking quality.

Company commitments. Morgan Stanley has said MSSE will publish its staked share of ether daily. Reporting on the prospectuses indicates staking distributions are intended monthly, at minimum quarterly. Morgan Stanley Digital Trust, National Association must satisfy the OCC’s conditions, including at least $50 million in tier 1 capital for three years with half in eligible liquid assets, before operating.

Open questions. Whether the Ethereum activation queue shortens or lengthens will determine how quickly MSSE’s staking program becomes economically meaningful. Whether 21Shares’ zero-fee waiver on TSOL provokes similar moves from Grayscale, Bitwise or Fidelity will determine whether 0.14% remains a differentiator by the autumn. Whether other issuers cut their staking take toward Morgan Stanley’s zero is the most consequential unknown for investor economics across the whole category.

Editorial scenarios, clearly labeled as such. A plausible base case is slow, steady accumulation similar to MSBT’s, with the Solana product punching above its weight because the category is small and Morgan Stanley’s distribution is not. A plausible downside is that both funds stall in the low tens of millions because advisers will not recommend assets sitting 60% to 75% below their highs to clients who remember 2022. A plausible upside is that a macro turn — a dovish surprise from the Fed, a resolution in energy markets, or a revived Clarity Act in the autumn — coincides with a product suite that is already approved, already priced at the floor and already on every adviser’s platform. None of these is a forecast.

Frequently Asked Questions

What are MSSE and MSOL?

MSSE is the Morgan Stanley Ethereum Trust and MSOL is the Morgan Stanley Solana Trust. Both are spot exchange-traded products that began trading on NYSE Arca on July 28, 2026. MSSE holds ether and tracks the CoinDesk Ether Benchmark 4PM NY Settlement Rate; MSOL holds SOL and tracks the CoinDesk Solana Benchmark 4PM NY Settlement Rate. Both intend to stake a portion of their holdings.

What do the Morgan Stanley Ethereum and Solana ETFs cost?

Each charges a unitary delegated sponsor fee of 0.14% of net asset value, accrued daily and paid in kind out of the trust’s holdings. Separately, staking services providers and custodians are expected to receive an aggregate 5% of gross staking rewards. Morgan Stanley Investment Management retains no portion of the staking rewards.

Are these really the cheapest ether and Solana ETFs?

On standing sponsor fees at the moment of launch, yes — the previous floors were 0.15% for ether products and 0.19% for Solana products. But on July 28, 2026, 21Shares waived the sponsor fee on its Solana ETF (TSOL) to 0.00% for twelve months, which is lower for the duration of the waiver. Sponsor fees also exclude any issuer cut of staking rewards, which for some competitors is a larger cost than the expense ratio.

How much staking yield can investors expect?

Neither Morgan Stanley nor anyone else can guarantee a figure, and the prospectus states there is no guarantee the trusts will receive any rewards. Ethereum’s network staking yield has generally run in the 2% to 3% range, with some sources citing up to 4%; Solana’s has generally run in the 5% to 8% range, with a baseline near 6.6%. Those are network figures. What a fund delivers depends on the share of assets actually staked, provider performance, the 5% staking fee, activation queues and the sponsor fee.

Why does MSOL stake up to 100% while MSSE stakes only 50% to 80%?

Because the two networks handle exits differently. The MSOL prospectus puts Solana bonding at roughly two to three days. Ethereum’s historical unbonding range is one to five days, and its activation queue stood at approximately 2,710,876 ether with an estimated 47-day wait as of July 6, 2026. MSSE holds a larger unstaked buffer so it can meet redemptions without waiting for the Ethereum protocol.

Does Morgan Stanley really pass back 100% of staking rewards?

Morgan Stanley Investment Management retains none of the rewards, which is what the company states. The prospectus discloses that staking services providers and custodians — Figment, Galaxy Blockchain Infrastructure and Coinbase Canada, alongside the custodians — are expected to receive an aggregate 5%. So the sponsor takes nothing and the operational layer takes 5%.

How are staking rewards taxed?

Under current U.S. federal guidance, staking rewards are generally treated as ordinary income when received. The trusts are structured as grantor trusts, so shareholders are treated as directly realizing their pro rata share of trust income. The IRS created a safe harbor for ETP staking in Revenue Procedure 2025-31, released November 10, 2025. This is general information, not tax advice; treatment depends on individual circumstances and jurisdiction.

Who custodies the assets?

The Bank of New York Mellon serves as cash custodian and as one of the digital-asset custodians, with a Coinbase entity as the other. The prospectus notes BNY currently produces a SOC 1 Type 1 report while the Coinbase custodian produces SOC 1 Type 2 and SOC 2 Type 2 reports.

Is Morgan Stanley planning to custody the assets itself?

Not imminently for these trusts, according to the firm’s global head of ETFs. Separately, the OCC conditionally approved a national trust bank charter for Morgan Stanley Digital Trust, National Association on June 18, 2026, following an application received on February 18, 2026. That entity is intended to custody digital assets for clients and facilitate staking on a fiduciary basis.

How did Morgan Stanley’s bitcoin ETF perform?

The Morgan Stanley Bitcoin Trust (MSBT) launched on April 8, 2026 at the same 0.14% fee, drew roughly $34 million on its first day and more than $100 million in its first week, and held more than $381 million in assets under management through July 16, 2026 per the firm’s launch announcement, with approximately $392 million reported on its product page as of July 24, 2026.

Are these funds protected like a mutual fund?

No. Neither trust is registered under the Investment Company Act of 1940, so the statutory protections that apply to mutual funds and most ETFs — board oversight under that act, custody rules, affiliated-transaction limits — do not apply. Each trust may also trade at a premium or discount to net asset value.

What should investors watch over the next few months?

Creation activity beyond the roughly $1 million seed in each trust; the daily staked percentage MSSE has committed to publish; the timing and size of the first staking distribution; the length of Ethereum’s activation queue; and whether competitors respond by cutting their own staking take rather than just their sponsor fees.

Final Assessment

The most important thing Morgan Stanley did on July 28 was not price two funds at fourteen basis points. It was declining to take a cut of the staking rewards.

Sponsor fees in this category are already close to zero and heading lower; a six-basis-point advantage over Bitwise will not survive the year and 21Shares erased it on Solana within hours. The staking take is different. It is large, it is opaque, it does not appear in the expense-ratio field of most fund screeners, and for several issuers it is a deliberate revenue line rather than a cost of doing business. By setting its own share at zero and disclosing that providers and custodians take 5%, Morgan Stanley moved the competitive frontier to a variable where the incumbents have more to lose.

The strongest verified evidence in the firm’s favor is MSBT: roughly $34 million on day one in April, more than $381 million by mid-July, achieved while bitcoin fell toward a 21-month low. That is a demonstrated distribution capability, not a projection. Combined with 16,000 advisers, more than $9 trillion in wealth client assets, E*TRADE spot trading live since July 15 and a conditionally approved trust bank charter, it describes a firm assembling every layer of the stack rather than renting one.

The strongest credible concern is that all of this is well-built machinery pointed at assets that have lost roughly 61% and 75% of their value, in a market where capital has retreated into bitcoin, at a moment when the Federal Reserve’s path has become less predictable under a new chair and the legislation that would have supplied durable regulatory clarity has been shelved. Wrapper quality does not change asset outcomes. An investor in MSSE owns ether, with all of ether’s volatility, plus slashing risk, plus a fee, minus a contingent and modest yield.

What genuinely changed on July 28 is narrower and more interesting than the headlines suggested. A bank-affiliated asset manager put staking-enabled ether and Solana exposure inside the compliance perimeter of the largest adviser network in the country, at a price that removes cost as an objection, with a reward-sharing structure that competitors will find awkward to match. The remaining uncertainties are whether Ethereum’s queue lets MSSE’s staking program mean anything before the autumn, whether advisers allocate into a drawdown or wait for confirmation, and whether the fee war migrates from expense ratios to staking economics.

Watch the daily staked percentage MSSE has promised to publish, the first distribution, and the second month of creation baskets. Those three data points will say more about whether this launch worked than any amount of commentary about basis points.

This article is provided for general informational purposes and does not constitute financial, investment, tax, or legal advice.

Sources

• Morgan Stanley Investment Management launch announcement for MSSE and MSOL, July 28, 2026
• Morgan Stanley Ethereum Trust prospectus, SEC Form 424(b)(3)
• Morgan Stanley Solana Trust prospectus, SEC Form 424(b)(3)
• The Block: Morgan Stanley debuts Ethereum and Solana ETFs with market’s lowest fee, staking rewards
• CoinDesk: Morgan Stanley debuts ether and solana exchange-traded products after bitcoin fund success
• crypto.news: Morgan Stanley launches ETH, Solana ETFs at 0.14%
• BeInCrypto: Morgan Stanley launches 0.14% Ethereum and Solana ETFs, will flows follow?
• Morgan Stanley: MSIM enters digital investments with the launch of Morgan Stanley Bitcoin Trust
• CoinDesk: Morgan Stanley’s bitcoin ETF reaches $100 million in first week
• Morgan Stanley second quarter 2026 earnings release, SEC Form 8-K
• E*TRADE from Morgan Stanley completes rollout of crypto spot trading, July 15, 2026
• American Banker: Morgan Stanley gets conditional approval for trust charter
• Morgan Stanley Wealth Management retail investor pulse survey, July 20, 2026
• crypto.news: LMAX taps Morgan Stanley and KBW to weigh a listing or sale
• Ledger Insights: Morgan Stanley files for national trust bank charter dedicated to digital assets
• 21Shares Solana ETF (TSOL) product page and fee waiver disclosure
• Bitwise: the Bitwise Solana Staking ETF (BSOL) begins trading
• Bitwise Solana Staking ETF first quarter 2026 quarterly report
• Grayscale cuts GSOL sponsor fee to 0.19% and staking fee to 7% in an SEC filing
• CoinDesk Indices: Benchmark Settlement Rates methodology
• Dechert: generic listing standards for crypto and commodity ETPs
• Vedder Price: IRS guidance allows exchange-traded products to stake digital assets
• CoinDesk: IRS opens staking path for crypto ETPs under Revenue Procedure 2025-31
• CoinDesk: U.S. Senate puts off the crypto Clarity Act for now
• Federal Reserve: FOMC minutes, June 16–17, 2026
• CBS News: what experts predict for the Federal Reserve’s July 2026 meeting
• Forbes: Solana prices fall as risk aversion pulls crypto markets lower
• CoinDesk Research: stablecoins and tokenized asset report, May 2026

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