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Fidelity Rolls Out Crypto Trading and Custody Firm

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Fidelity Investments has launched a company focused on cryptocurrency trading and custody services for institutional investors, such as hedge funds, family offices and market intermediaries.

“For many institutional investors, a trusted custodian like Fidelity entering the space removes a huge obstacle to investing in crypto-assets,” according to Bitwise Asset Management CEO Hunter Horsley. “I think we’ll look back on 2018, and particularly this moment, as the time that crypto became cemented as a new asset class.”

The news comes about two weeks after popular advisor Ric Edelman became an advisor to Bitwise, a leader in cryptocurrency index funds, and several days after former chief economic aide to President Trump and ex-Goldman Sachs President Gary Cohn came on board blockchain-technology startup Spring Labs as an advisor.

It also follows congressional testimony by professor and author Nouriel Roubini, who last week referred to cryptocurrencies as the “mother of all scams” and blockchain as “the most overhyped — and least useful — technology in human history.”

In announcing the formation of Fidelity Digital Assets, the investment company — which has assets under administration of $7.2 trillion, including managed assets of $2.6 trillion — was, naturally, more upbeat on the emerging asset class.  

“Our goal is to make digitally native assets, such as Bitcoin, more accessible to investors,” said Fidelity Chairwoman and CEO Abigail P. Johnson, in a statement. “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.”

In a recent survey conducted by Greenwich Associates, 70% of institutional finance executives said they believe cryptocurrencies will have a place in the future of the industry.

“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,” said Tom Jessop, head of Fidelity Digital Assets, in a statement. Fidelity Digital Assets aims to serve as “a scalable infrastructure for digital assets” that meets institutional expectations.

The new firm will offer: 

  • A secure, compliant and institutional-grade omnibus storage solution for Bitcoin, Ether and other digital assets, which will consist of vaulted cold storage with multi-level physical and cyber controls;
  • Use of an internal crossing engine and smart order router for trade execution of digital assets to allow for execution at multiple market venues; and
  • Access to a dedicated client-service team.

Fidelity says it started researching digital assets via its Blockchain Incubator in 2013. It later let clients see their digital asset balances at Coinbase on and started working with the MIT Digital Currency Initiative.

Fidelity Charitable also began accepting Bitcoin as charitable donations in 2015. It received $69 million in digital asset donations in 2017, which represents a 10-fold increase in these donations since 2016.

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