Fidelity Investments has launched a new company, Fidelity Digital Asset Services, which will offer enterprise-quality custody and trade execution services for digital assets (cryptocurrencies) to sophisticated institutional investors such as hedge funds, family offices and market intermediaries.
“Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors,” says 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.”
“We started exploring blockchain and digital assets several years ago, and those efforts have been successful in helping us understand and advance our thinking around cryptocurrencies,” says Tom Jessop, head of Fidelity Digital Assets. “The creation of Fidelity Digital Assets is the first step in a long-term vision to create a full-service enterprise-grade platform for digital assets.”
One of the steps in realising this future for digital assets is to create a foundation of institutional-quality solutions that will continue to help advance the industry. While there are many retail service providers in the digital assets space today, there is a gap in support for institutions. This has created a paradox – while Greenwich Associates found that 70 per cent of institutional finance executives believe cryptocurrencies will have a place in the future of the industry, many firms are waiting on the sidelines to enter this market. When Fidelity Digital Assets rolls out its initial offering, it will provide solutions that institutional clients have been asking for and Fidelity – with its experience serving more than 13,000 institutions today – is ideally suited to support.
In its most recent edition of the Fidelity Global Institutional Investor Survey, Fidelity found that 70 per cent of institutional investors said that new asset classes will likely emerge because of advancing technologies, such as blockchain. With the rise of interest in digital currencies and various use cases, institutional investors – such as hedge funds, family offices and market intermediaries – look to enter the market for a number of reasons. Whether it’s the rising popularity as a store of value or relative non-correlation to the broader market, the potential to power lower-cost global payments, or the emergence of protocols that could power new industries, institutional investors are interested in engaging with this new asset class. Fidelity Digital Assets is building the foundation needed to further the market adoption by offering:
Fidelity Digital Assets will provide a secure, compliant, and institutional-grade omnibus storage solution for bitcoin, ether and other digital assets. This consists of vaulted cold storage, multi-level physical and cyber controls – security protocols that have been created leveraging Fidelity’s time-tested security principles and best practices combined with internal and external digital asset experts.
Fidelity Digital Assets will also leverage a proven internal crossing engine and smart order router for trade execution of digital assets. This smart order router will allow for execution at multiple market venues.
Given the complexity of digital assets, the early stage of institutions’ involvement with these asset classes, and Fidelity’s long-standing tradition of putting its customers first, Fidelity Digital Assets will emphasise client support in its offering. Fidelity Digital Asset clients will have access to a dedicated team of client service specialists, from on-boarding throughout the entire relationship with the company.
“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. 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,” says Jessop.