Capital markets News

Fidelity unveils institutional cryptocurrency offering

fidelity investments

Today Fidelity announced the launch of enterprise-quality custody and trade execution services for digital assets through a new subsidiary Fidelity Digital Asset Services. The company will not offer services to retail investors, instead focusing on institutional investors including hedge funds, family offices, and market intermediaries. For now the new company is focusing on onboarding initial clients, with a wider roll out planned for early 2019.

“Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors,” said Abigail P. Johnson, Chairman and CEO of Fidelity Investments. “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.”

The company has been exploring the sector for several years and believes that the institutional investor segment is a gap and hence an opportunity. Outside of cryptocurrencies, the company has $7.2 trillion in client assets and also services 13,000 institutions today.

Fidelity outlined several motivations that have triggered the appetite from the institutional sector. They note the rising popularity of the store of value, the relative non-correlation to the broader market, the potential for lower-cost global payments, and the emergence of “protocols to power new industries”.

The Financial Stability Board highlighted the risks of institutional investors engaging in the sector. Earlier today Ledger Insights published an article about the recent Senate debate on cryptocurrencies that specifically explores some of the issues from greater institutional involvement.

Fidelity solutions

The company highlighted three aspects of its service. First the institutional-grade custody. Fidelity Digital Assets will provide vaulted cold storage and multi-level physical and cyber controls.

Additionally, Fidelity Digital Assets will use its “smart order router” to enable trade execution across multiple markets. And because of the complexity of digital assets the company will offer a dedicated client service.

“In our conversations with institutions, they tell us that in order to engage with digital assets in a meaningful way, they need a trusted platform provider to enter this space. These institutions require a sophisticated level of service and security, equal to the experience they’re used to when trading stocks or bonds,” said Tom Jessop, head of Fidelity Digital Assets.

“With Fidelity Digital Assets, we’re building a scalable infrastructure for digital assets that meets the expectations of what it means to work with Fidelity, while leveraging unique capabilities of the blockchain to create a completely new offering.”

On the new company’s blog, it goes a step further: “This is just the beginning. We imagine a world, soon, where all types of assets are issued natively on a blockchain or represented in tokenized format.”

Jessop joined Fidelity at the start of the year as Head of Corporate Development. Prior to that he was President at Chain for nine months after spending seventeen years at Goldman Sachs.

Last week Fidelity released details about its most recent survey that showed institutional investors expect blockchain to have a big impact on the sector.

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