By Financial services giant, Fidelity Investments, announced on Monday 15 October 2018 that it will be officially providing cryptocurrency solutions to its customers through its new crypto branch trading desk, Fidelity Digital Asset Services.
According to Fidelity Investments Chairman and CEO, Abigail Johnson, “our goal is to make digitally native assets, such as bitcoin, more accessible to investors”. This new service offering by Fidelity is the first of its kind among Wall Street firms and hopes to bridge the gap between the crypto sector and institutional investors. According to Johnson, “we expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use”.
Service Offerings
Fidelity Investments, the 72-year-old, Boston-based asset management firm, administers more than $7.2 trillion in client assets and has over 27 million customers. According to CNBC, Fidelity spends approximately $2.5 billion per year on technology and this “new digital asset company was born out of Fidelity Center for Applied Technology”.
Fidelity’s new subsidiary, Digital Asset Services, aims to offer digital asset services to its institutional investors, which encompasses hedge funds, endowments and family-run offices. The services offered include cryptocurrency custody and trading on multiple cryptocurrency exchanges.
It is reported that Fidelity will offer and execute trade in cryptocurrencies across multiple exchanges using its existing smart order routing and internal crossing engine. Exchanges will have to be vetted to comply with Fidelity’s quality and risk standards. Although it is as yet unknown which exchanges have met with Fidelity’s standards, one can presume that the larger international exchanges that meet regulatory authority standards will be used.
Although many institutional investors will willingly trade in cryptocurrency, their main concern remains the custody of the cryptocurrency once procured. Companies such as Goldman Sachs and Northern Trust are reportedly working on custodial services, while Nomura, the Japanese Bank, announced in May of this year its plans to offer crypto custody. Cryptocurrency exchanges such as Coinbase, Gemini, BitGo, Ledger and ItBit have similarity been working on developing solutions to the problem.
With the astronomical increase in crypto-related financial crimes, Fidelity has recognized this risk and proposes to mitigate it through its long history of asset security. Fidelity will reportedly use public and private key cryptography, multilevel physical and cyber controls and offline, vaulted, cold storage to secure the cryptocurrency held in its custody.
Fidelity’s Crypto Chase
Fidelity’s Digital Asset Services will be a stand-alone company, comprised of around 100 employees, with its headquarters in Boston. According to Tom Jessop, head of Fidelity Digital Assets, the company is presently onboarding clients and plans to enter the market by the first quarter of 2019.
Despite the high risk and volatile nature of the crypto market, Jessop believes that one cannot be deterred by price when cryptocurrency and blockchain technology has long-term potential to revolutionize financial services. According to Jessop, “no one said when some of these early-stage Internet companies in 2000 were going out of business, ‘Gee, the Internet is toast’”. As a result, Jessop stated that Fidelity doesn’t focus too much on the price as cryptocurrency is a foundational technology and “people are trying to get exposure to the trend and expect volatility in the assets themselves”.
With a leading wall street firm giving authority and experience to its new service offering, more institutional investors may make the move to invest in crypto in 2019.
Do you think the crypto-markets will recover in 2019 with companies like Fidelity entering the market? Give us your thoughts in the comments below.
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