Fidelity Launched Secure Crypto Branch for Trade and Storage
On Monday, October 15th, the Boston-based multinational financial services firm, Fidelity, launched a subsidiary called Fidelity Digital Asset Services. This digital arm will focus on managing the trade and custody of virtual assets exclusively for institution based investors.
According to Abigail Johnson, the firm’s Chairperson and Chief Executive Officer, the corporation plans to facilitate the easy access of cryptocurrencies to large scale investors. She noted that the subsidiary will experiment and continue to invest in various long term solutions to help bridge the gap between the rapidly expanding technology and institutions in a user friendly approach.
The new lead of Fidelity Digital Assets, Tom Jessop, previously worked at a cryptocurrency company and before that had spent seventeen years at Goldman Sachs. He explained that plans to commercialize an exclusive crypto division started in 2017. For the meantime, their target audience includes investors from hedge funds, family offices, as well as donations without approaching the retail industry.
During a statement issued to CNBC, Jessop stated that the plan to create a crypto oriented division of Fidelity stems from the realization that institutional investors require services that only a corporation such as Fidelity can offer. The division already has a client base of 13,000 institutions with the support of proprietary technology leveraged from parent company Fidelity.
The Fidelity corporation is among one of the largest financial service firms, administering over $7 trillion worth in assets with 27 million clients. It also spends a yearly average of $2.5 billion towards technological advancements in the AI and blockchain sectors including that of their latest crypto division.
The newly launched sector will be responsible for managing and storing cryptocurrencies offering services similar to crypto behemoths such as Coinbase, Ledger, and Gemini. Similarly, Nomura, a Japanese bank, released an official statement outlining plans to begin offering digital asset custody this May. Other competitors include Northern Trust and Goldman Sachs, who have both expressed their interest in investigating crypto services. Despite a growing trend to incorporate digital assets into traditional firms, Fidelity is among the few US corporations to officially welcome the technology.
One of the key reasons against institutional speculation in cryptocurrencies is the threat of cyber attacks. In a report conducted by CoinDesk this year, approximately $1.6 billion worth of digital assets have already been hacked from client funds. An issue many developers are attempting to solve.
Security As a Priority
Fidelity is well known for its lengthy history of providing the highest level of enterprise security. It plans to continue this standard within the digital asset sector. Its storage service will include assets that are stored offline protected by various software and physical controls in addition to security protocols specifically developed through leveraging the firms security principles from throughout the greater business.
Jessop explained that the firm has already been participating in the crypto sector for a significant time. The first step was to take the knowledge of security systems established for enterprises and mesh them with an in depth exploration of cryptocurrency technology. Statistics show a growing trend in institutional interest in digital assets despite recent market slumps and media highlighted cyber attacks.
According to CNBC reports, major educational institutions such as Harvard, Yale, Stanford, and Dartmouth have all reportedly made major donations to at least one digital asset fund in recent years.
Fidelity’s Shift to Crypto Could Encourage Others to Follow
Apart from safely storing digital assets, the crypto division will utilize internal systems to facilitate the trade of cryptocurrencies as well. The firm plans to support the trade of tokens including BTC, ETH, in addition to other popular assets across various venues. Although particular exchanges have not been disclosed, Jossep explained that collaborations will be based on maintenance and compliance with Fidelity’s high standards applied across the entire firm. Their onboarding process is extremely extensive, Jessop noted, and will only partner with businesses that comply with regulatory policy.
Fidelity's Digital Asset Goals
The shift to cryptocurrency was largely facilitated by the company’s Chief Executive Officer and her interest and belief in the sector, which began as far back as 2014. The firm currently has various digital asset projects underway including a collaboration with Coinbase enabling Fidelity clients to review digital asset balances on the firm’s application, a BTC mining project based in New Hampshire, as well as a bitcoin-based charity that was launched in 2015. Jossep stated that their CEO was extremely interested in the emerging technology and keeps up to date on the developments within the crypto space.
The newly launched Crypto division that functions as a separate entity is currently emplying 100 individuals and is also based in Boston. It is in the process of establishing initial clients and is scheduled to operate in the market by next year. In the greater scheme of the crypto market, digital assets continue to struggle, with BTC down by half the price nearly $432,000 down from its peak value reached last year. Bitcoin gained an all time high price of $20,000 before stabilizing at around $6,000, with many industry figures predicting an upcoming boom in values within the next few years.
Regardless, Jessop, the firm is not distracted by trading values but rather look towards the emerging technology’s long term impact on the greater finance industry. He noted that similar to the origins of internet technology, that also experienced its ups and downs, the main focus was not on present day success but rather the widespread adoption and massive potential it presented to the modern age. The same goes for cryptocurrencies, with mainstream interest only now picking up speed, volatility is to be expected.