By Fidelity Digital Assets (FDAS) has announced it will take its time with regards to adding support for the Ethereum blockchain, according to the executive in charge.
Fidelity’s digital asset trading and custody branch, which went live earlier this quarter, has created an internal framework for the evaluation of cryptocurrencies which could be added in the future, as per a statement from FDAS president Tom Jessop.
Despite Jessop previously stating that the FDAS might look to add other ethereum and other cryptocurrencies, he said in a statement on Tuesday that the process to do so is not as clean cut as most think.
Jessop stated:
“We’re currently supporting bitcoin, we have designs to support other coins over the balance of the year center to various criteria including our [in-house selection framework], where we obviously look … at client demand and other things.”
The FDAS framework assesses how decentralized a coin is, what the client demand is like and lastly whether any “peculiarities about the protocol” are present that could make the launch difficult.
However, Jessop stated that so far, client demand has equated closely with that of market capitalisation.
Jessop added:
“We will probably go in market cap order, that’s where the demand is, but it doesn’t mean that we will list every coin. There may be reasons why we [won’t list] a coin that have nothing to do with quite frankly client [demand].”
For example, Jessop explained the situation surrounding ethereum which is the second-largest cryptocurrency by market cap, explaining:
“We’d love to have support [for] ether, but you know you have a hard fork coming up and some upgrades, so I think we’re trying to see how those things work out before we make a decision to put them on the platform.”
Ethereum’s recent Constantinople hard fork introduced a number of upgrades to the platform, including the lowering of the ETH block reward and a number of other technical changes with another update dubbed Istanbul which is expected to go live in October.
Part of FDAS’s challenge is to ensure that it can protect investors according to Jessop. In his statement, he made mention of another cryptocurrency, ethereum classic as an example of a project which would require comprehensive risk assessment in light of the 51% attack the protocol suffered earlier this year.
Furthermore, Jessop did not divulge a concrete timeline for when the new assets would be added to the FDAS platform.
Fidelity’s Plans For 2019:
Jessop stated that FDAS has plans to scale its business in 2019 and wants to cover 90% of its market in the States by year-end.
The planned scaling will include securing regulatory approvals, i.e. money service business licenses and continuing work on ironing out any bugs which could pop up on the platform.
“Despite crypto winter, the market is still pretty robust, and so we’re excited about that,” he stated adding:
“The [goal for the] rest of the year is scale the business in terms of adding new clients [and] expanding the scope for offering trading execution services … we can we say we’re live [but] it’s also a function honestly of where we have jurisdictional authority to operate.”
Despite Jessop declining to divulge which US states FDAS is licensed in or even how many, he said that it is a “reasonable number,” and added that the firm is continuing its work on the acquisition of licenses throughout 2019.
He added:
“We’re still in the process of collecting licenses to do business in multiple jurisdictions, but we’re very encouraged [by] the progress we’ve made so far.”
Furthermore, he added:
“We continue to pursue status as a qualified custodian and … that’s still in sight for this year, and it’s really been a priority we have.”
Although FDAS is seeking to secure state-level licences, Jessop did add that the firm is making states which have larger market shares a priority instead of focusing on every state from the get-go.
Client Demand:
The firm has seen “a significant amount of demand” since its announcement last October, claimed Jessop, with a diverse variety of firms showing interest which includes dedicated crypto funds, hedge funds, family offices, intermediaries as well as individuals seeking to launch private fund products based on crypto.
Furthermore, FDAS has also garnered attention from exchanges hoping to offer clients custody through Fidelity, according to Jessop:“
“I know in terms of assets under management … it’s anywhere from like low single-digit millions up to tens if not hundreds of millions.”
The firm has surveyed a myriad of fund types as well, coming to the conclusion that crypto investment remains “consistent” with Jessop explaining:
“We’ve still seen consistent interest from institutions, I think largely because institutions have been doing their homework and returned to understand the space, and quite frankly wouldn’t make a decision to invest at any price until they really understood their own personal [investment] theses.”
Also included in Fidelity’s survey were a number of pension funds, and while there has been some questions asked as to the allocation of capital, Jessop stated that he does not see any others actually committing funds to this particular asset class except for a previously announced investment from a Virginia county retirement fund via Morgan Creek.
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