Fidelity’s Institutional Bitcoin Trading and Custody Solution Live with Select Clients
Fidelity Digital Assets, a division of Fidelity Investments, is making steady progress towards providing bitcoin trading and custody services for large financial institutions, including hedge funds, pensions, family offices, and endowments. On Mar. 7th, the division announced that their services are live with some of these clients.
Fidelity Investments is the world’s fifth largest asset manager with over $2.5 trillion in assets under management. One of the firm’s divisions, Fidelity Digital Assets, is bringing bitcoin and cryptocurrency trading and custody to US institutional investors.
“We have continued to build the technical and operational capabilities needed for securing, trading and supporting digital assets with the exacting oversight required by institutional investors,” as stated in a Jan. 31st, 2019 announcement.
According to the company, a number of institutions have reached out to the financial services giant seeking a trusted platform for engaging with bitcoin and other cryptocurrencies. In response, the firm is providing a “custody platform and trading venue—providing a combination of security and a central point of market access, disrupting the obfuscated nature of trading digital assets today.”
On Mar. 7th, Fidelity Digital Assets announced that bitcoin services are live with a “select group of eligible clients”:
We are live with a select group of eligible clients and will continue rolling out slowly. Our solutions are focused on the needs of hedge funds, family offices, pensions, endowments, other institutional investors. More on our project: https://t.co/EkJ2pWJt2Y #DCBlockchain
— Fidelity Digital Assets (@DigitalAssets) March 7, 2019
Background on Fidelity Digital Assets
The Fidelity Investments set out to experiment with blockchain and cryptocurrencies after witnessing a steady increase in interest from large financial institutions, especially around cryptocurrency custody and trading.
To satisfy that experimentation, Fidelity Digital Assets was created—a product of Fidelity’s blockchain incubator, the Fidelity Center for Applied Technology around October of 2018.
“In order to build professional-grade solutions that would meet the demands of large institutional clients, the incubator team invested tens of thousands of hours and millions of dollars in development, product and systems design, and rigorous security controls.”
Problems with Institutional Custody
One of the larger problems that Fidelity Digital Assets is trying to solve are the issues with institutional cryptocurrency custody.
According to the company’s white paper, cryptocurrency self-custody is not palpable because of the regulations and legal obligations that large financial institutions must adhere to. As a result, self-managed hardware wallets, “regardless of how secure, are not a feasible option.”
Allegedly, institutional investors do not want the risk of managing private keys for the cryptocurrency. That said, Fidelity Digital Assets is working to increase access to bitcoin and other cryptocurrencies by providing the “same level of custodial service expected for other assets, despite the regulatory uncertainty.”
According to the company in its Oct. 15th, 2018 release:
“We imagine a world, soon, where all types of assets are issued natively on a blockchain or represented in tokenized format. Addressing custody issues for institutional investors is one critical step in order for these markets to continue to develop.”
As the world’s fifth largest financial institution, if Fidelity is able to provide other large financial institutions with access to bitcoin then it could substantially increase the appetite for the cryptocurrency and consequently drive adoption. As stated by Fidelity Digital Assets:
“We realize Bitcoin is not the first form of digital cash, but we recognize the transformative potential it has created.”
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