Fidelity not a newcomer to the crypto sector

Offering trade execution and custodial services for crypto assets, Fidelity Digital Asset Services (FDAS) will be a separate company from Fidelity’s asset management and brokerage businesses and will launch operations at the start of 2019.

"Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors. 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," said Abigail P. Johnson, Chairman and CEO of Fidelity Investments.

Fidelity Digital Asset will utilize its smart order routing system to provide liquidity for institutional clients from multiple digital asset exchanges and will combine this service with institutional-grade custody for cryptographic assets – involving vaulted cold storage, multi-level physical and cyber controls – to ensure that clients can securely store their digital assets in a compliant manner.

Additionally, the company will offer extensive client support services ranging from customer onboarding throughout the entire business relationship with the client.

"We are going to be giving institutions – family offices, hedge funds, and others – tools they need to manage investments in this space. […] Institutions will be able to securely store their crypto assets or digital assets with us. We will provide a facility for them to trade with a number of liquidity providers so we will route their trades to the best price in the market. […] And then we are also giving them the services and tools they need to integrate some of these assets from a workflow and accounting standpoints into their own businesses," said Tom Jessop, who will head Fidelity Digital Asset Services, in an interview with Bloomberg.

**Fidelity an early crypto adopter **

The launch of Fidelity’s new digital asset subsidiary did not just happen overnight. The financial services company took an interest in blockchain technology and digital assets back in 2014 when it first started research at Fidelity Labs, and the company began mining bitcoin in 2015.

Also in 2015 Fidelity began accepting bitcoin donations to its donor advised fund Fidelity Charitable and to date has received over $70 million worth of BTC into the fund. Fidelity has enabled retail clients to purchase digital currencies through their online accounts thanks to a partnership with Coinbase, and has allowed its staff to use bitcoin to make purchases in the company’s cafeteria.

The concept for Fidelity Digital Asset originally emerged at the Blockchain Incubator in Fidelity Center for Applied Technology where blockchain technologists, product managers, financial and legal specialists have been researching disturbed ledger technology-based opportunities.

"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. 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," said Jessop.

Fidelity’s play will not be retail focused and will concentrate on providing institutional brokerage services for family offices, hedge funds and the emerging interest from traditional large institutional investors such as pension funds and endowments.

Why this matters

Fidelity’s commitment to digital assets is a milestone for institutional investor entrance into the cryptographic asset markets.

The Boston-based financial services giant has over $7.2 trillion assets under management and serves over 13,000 institutions, which opens up a wave of new cash that could potentially flow into the crypto markets in the coming year.

Moreover, if Fidelity manages to capitalize on its first-mover advantage as a leading financial institution involved in crypto assets, it will not take long for its competitors to follow suit as they do not want to miss out on the party. Hence, the launch of Fidelity Digital Asset Services could be the watershed moment that will cause bitcoin to be driven to new highs by new institutional money, which many bitcoin experts have been predicting.