Circle Internet (CRCL) is "unlikely" to see a higher valuation until adoption of stablecoin technology broadens and monetization of non-crypto use cases accelerates, Morgan Stanley said in a note Monday.

The investment bank said a "sluggish" crypto market, share price volatility and regulatory uncertainty will likely keep many investors on the sidelines.

Rising US interest-rate trajectory and Circle's fixed cost structure are significant headwinds to its interest-driven revenue, making near-term earnings difficult to predict, Morgan Stanley said.

Circle issues major stablecoin USDC, which currently holds about $70 billion in value, with broad and growing use cases. Despite Circle's long-term vision and goal of creating a new internet financial system," investors are likely to wait for clearer evidence of wider adoption and displacement of traditional financial systems before fully valuing its network, according to the note.

Morgan Stanley initiated coverage of the stock at equal-weight, with a $66 price target.

Shares of the company were down more than 4% in recent Monday trading.

Price: 60.91, Change: -3.01, Percent Change: -4.71