Fidelity Investments announced the launch of a new company, Fidelity Digital Asset Services (FDAS). The company will offer enterprise-quality custody and trade execution services for digital assets, commonly referred to as cryptocurrencies, to sophisticated institutional investors such as hedge funds, family offices and market intermediaries. Fidelity describes itself as one of the largest and most diversified financial services providers, with over $7.2 trillion in client assets.
“Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors,” said Abigail 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,” said 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 realizing 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.
In its most recent edition of the Fidelity Global Institutional Investor Survey, Fidelity found that 70% 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 institutional grade digital assets custody, trade execution, and dedicated client service.
“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,” concluded Jessop.
Fidelity said in a statement that distributed ledger technologies can enable entirely new business models, lead to the creation of frictionless capital markets and improve existing financial market infrastructure. The asset manager began researching digital assets in its Blockchain Incubator (part of Fidelity Center for Applied Technology) in 2013 and has since experimented with mining, enabled its customers to see their digital asset balances at Coinbase on Fidelity.com, and has collaborated extensively with others committed to furthering this space, including an effort with the MIT Digital Currency Initiative earlier this year. Fidelity Charitable also began accepting bitcoin as charitable donations in 2015, an idea that was born out of donor demand and influenced by their feedback. Fidelity Charitable, an independent public charity, received $69 million in digital asset donations in 2017, a ten-fold increase since 2016.
Though FDAS started in the Blockchain Incubator at Fidelity and has now graduated from this group to become a stand-alone business, the incubator continues to research and experiment with blockchain and digital assets, expanding Fidelity’s knowledge and potential products/services, and also contributing to continued progress in the ecosystem.