Fidelity Launching a Crypto Company for Institutional Investors

Bakkt is expected to launch by November this year. In addition to this, Bakkt has recently acquired Adam White who was considered part of the ‘Coinbase Mafia’—a group within Coinbase that has pushed the development of the crypto space. Other than Bakkt, you also have the likes of Goldman Sachs that has now dabbled in cryptocurrencies.

Though 2018 is quite bearish for the entire crypto market, the crypto market is slowly gaining traction from institutional investors.

Recently, Financial services giant, Fidelity is now looking to enter the crypto market. This 72-year old company announced that it is about to launch a separate company called Fidelity Digital Asset Services. This will handle crypto custody and trade execution specifically for institutional investors. According to their Chairman and CEO Abigail Johnson, “Our goal is to make digitally native assets, such as bitcoin, more accessible to investors”. She also added that “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”.

For Tom Jessop who is the head of Fidelity Digital Assets, he said that the idea of having a separate crypto company started last year.

The services such as hedge funds, endowments, and family offices are going to be available for institutions and not for retail investors at this time. Jessop mentioned to CNBC that “We saw that there were certain things institutions needed that only a firm like Fidelity could provide”. He added that “We’ve got some technology that we’ve repurposed from other parts of Fidelity—we can leverage all of the resources of a big organization”.

$7.2 trillion In Customer Assets

What makes this a big deal is the fact that Fidelity has experience holding $7.2 trillion in customer assets. It also has 27 million customers and has spent around $2.5 billion annually on technology. Among the things that Fidelity spends on included blockchain projects along with artificial intelligence. The new digital asset company was a product of Fidelity Center for Applied Technology or FCAT.

The new company is going to be in charge of handling custody and figuring out how to store digital assets safely. Among companies that are already catering such type of services included Coinbase, Winklevoss led Gemini, BitGo, Ledger, and ItBit.

Japanese bank Nomura also expressed its interest to offer crypto custody. As for custodial services, Goldman Sachs and Northern Trust are among the big players that are already involved in such services.

Hacking Concerns

Hacking concerns have always been part of the reason why a lot of institutional investors are still not yet involved in the crypto market. As of the end of June, around $1.6 billion in cryptocurrency had already been stolen by hackers according to CoinDesk’s 2018 State of Blockchain Report.

Hacking incidences are also the reason why Japan finally decided to screen crypto exchanges. These new regulations even caused Kraken to move out of Japan. The good news is that Fidelity has a long history of dealing with enterprise security. The custody solution offered by Fidelity will include “cold storage” taking cryptocurrencies offline away from hackers.