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Crypto Fidelity Makes Moves To Attract Institutional Investors Into Digital Asset Space

by Jessica Darmoni
11 months ago

Earlier this month it was announced that Fidelity Investments would launch a cryptocurrency trading and storate platform for enterprise clients.

Tom Jessop, the head of the new division called Fidelity Digital Asset Services LLC, spoke at the Futures Industry Association's (FIA) Expo held earlier this month. 

"Fidelity has been interested in bitcoin since 2014 and has been mining the cryptocurrency since 2015," he said on a panel focused on the institutional perspective. "While internally we developed core technical capabilities, we wanted to wait until the market matured to introduce them."

As one of the largest financial service providers in the world, according to CNBC, the firm maintains about $7.2 trillion in client assets and has about 27 million customers.

"This is not a build it and they will come scenario.  Our customers are sitting on millions in digital assets and need a place to hedge," Jessop said at FIA Expo. "Institutions need a trusted platform provider and require a sophisticated level of service and security."

The creation of the new digital asset entity at Fidelity is the firm's first step in a long-term vision to create a full-service enterprise-grade platform for digital assets.

While other crypto companies have debuted similar products, Fidelity is the first Wall Street incumbent to officially provide cryptocurrency solutions such as custody. The firm plans to manage custody for bitcoin, ethereum and other cryptocurrencies in cold storage.  They also have multi-level physical and cyber controls in place.

Law360 believes this aspect is key because hedge funds like other registered investment advisors, are required to use a proper legal custodian that protects assets from theft or loss.  Until now, large financial firms have been hesitant to provide such services that would enable an insititutional investor to satisfy their regulatory requirements.

Fidelity joins a group of other traditional financial institutions that are looking to make institutional investors more comfortable with cryptocurrencies. 

Intercontinental Exchange plans to launch their trading platform Bakkt in December and is working with familiar names such as Starbucks to gain public acceptance.  Another planned cryptocurrency exchange, ErisX, is engaging intermediary firms such as TD Ameritrade in an effort to attract institutional flow.

In an announcement released by Fidelity, CEO Abigal Johnson said, "Our goal is to make digitally-native assets more accessible to investors.  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."

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