Fidelity Investments plans to launch the Fidelity Digital Dollar (FIDD) stablecoin in February, among the first mainstream asset managers (AUM $6.8 trillion) to do so. This follows the Office of the Comptroller of the Currency granting preliminary approval to Fidelity Digital Assets, National Association as a national trust bank in December. Key applications the stablecoin will support include 24/7 institutional settlement and on-chain retail payments.
On the institutional settlement front, there is momentum behind the use of tokenized collateral to enable variation margin at clearing venues 24/7. With Fidelity issuing both a stablecoin and a tokenized money market fund, it has the key institutional use cases covered.
The structure positions Fidelity strategically. Asset managers, particularly those that manage tokenized money market funds (MMF), are well placed to issue stablecoins in order to reduce frictions. If the asset manager wants to support 24/7 fund redemptions, they could automate the creation of stablecoins on demand. When an institution wants to redeem, for example, $10 million of the tokenized MMF, the stablecoin issuer mints the $10 million in stablecoins while simultaneously holding the redeemed MMF shares as reserve assets. This approach means Fidelity avoids holding a large volume of third party stablecoins to enable the redemptions, without losing the return on the funds.
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