- Fidelity Investments, which oversees more than $7.2 trillion in client assets, introduced Fidelity Digital Asset Services, a new and separate company on October 15, 2018
- The firm puts an immense emphasis on cybersecurity, will handle custody for cryptocurrencies as well as perform trades on several exchanges in behalf of investors
- While Fidelity has other cryptocurrency projects, they are the first ever Wall Street incumbent to formally offer cryptocurrency solutions such as custody
Fidelity, hailed as one of the world’s financial services giants, just took a massive step into the cryptocurrency space by launching Fidelity Digital Asset Services last Monday, October 15, 2018. The new firm will oversee trade execution and cryptocurrency custody for institutional investors.
Leveraging Fidelity’s Clout
In a press release, Fidelity Investments Chairman and CEO Abigail Johnson shared that one of their primary goals is to make digital assets like bitcoin more accessible to investors. She added “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 idea of commercialising a standalone crypto company first began in the middle of 2017 according to Tom Jessop, head of Fidelity Digital Assets. As of this writing, the services they are offering are available to institutions like hedge funds, family offices, and endowments. However, it’s not being offered to retail investors yet.
Currently working with 13, 000 institutional clients, Jessop told CNBC they saw certain things institutions need that only a company like Fidelity can provide. If anything, it is a force to be reckoned with in the industry—it administers a staggering $7.2 trillion in customer assets, invests $2.5 billion yearly on technology, and has a commanding 27 million customers.
Making Cybersecurity a Top Priority
Fidelity Digital Assets Services handles custody or the safe storing of digital assets. Other crypto companies like BitGo, ItBit, Coinbase, Gemini (run by the Winklevoss twins), and Ledger are also working on similar solutions.
Northern Trust and Goldman Sachs are also reportedly looking into offering custodial services. Likewise, Japanese bank Nomura also announced their plans of offering crypto custody in May of 2018.
Until Fidelity’s entrance, there’s been a noticeable lack of huge U.S. based firms in the crypto space. Many experts attribute the apprehension to risks involved in crypto investing. One of the main challenges firms are confronted with is the prevention of hacks. According to CoinDesk’s 2018 State of Blockchain Report, a whopping $1.6 billion in cryptocurrency has been stolen from clients as of end of June alone.
Fidelity boasts of a long history of dealing with enterprise security, as well as private and public key cryptography to ensure they don’t become part of the statistic. The custody solution they offer include vaulted “cold storage,” which entails taking cryptocurrency offline and utilising physical and cyber controls, among many other security protocols.
For their trade execution, Fidelity Digital Assets will utilise a smart order router and an existing internal crossing engine. The order router allows Fidelity institutional customers to perform trades for ether, bitcoin, and other assets at several market venues.
Fidelity’s Crypto Aspirations
Jessop claims the project is primarily a result of Johnson’s interest in cryptocurrency. To date, Fidelity has a few ongoing crypto projects: bitcoin mining at a location in New Hampshire as well as a Coinbase partnership that gives Fidelity customers the option to check cryptocurrency balances using the Fidelity app. In 2015, they have also allowed charitable donations in bitcoins.
The new standalone company will be based in Boston and has around 100 employees. They are in the process of onboarding their first few clients and will be “generally available” sometime in the early part of 2019.