Institutional investing giant Fidelity launched its digital asset branch— Fidelity Digital Asset Services— late last year. Now, the branch is live and operational with increasing institutional investor interest despite the industry’s current bear market. Fidelity’s research suggests this pattern will only continue.
Details of Fidelity Digital Asset Services Going Live
At the recent DC Blockchain Summit, head of Fidelity Digital Assets Tom Jessop revealed to the media that the new branch is live and operational.
Fidelity is a 70+ year old firm based in the United States which primarily handles retirement plans and mutual funds.
The company also spends a reported $2.5 billion each year on emerging technologies including artificial intelligence and blockchain.
Last year, the investing giant started Fidelity Digital Assets. The new branch handles the custody of digital assets, meaning safe and secure storage, and it also facilitates the trading of those assets.
Over the past few months, it has been onboarding institutional investors to include hedge funds and family offices.
According to Jessop, the current bear market faced by the larger cryptocurrency industry “hasn’t had an impact” on getting Fidelity Digital Assets up and running.
As known all too well by those who follow cryptocurrency, the volatile industry has suffered significant losses. In 2018, more than $20 billion was poured into Initial Coin Offerings (ICOs). Yet according to current market capitalizations across the industry, nearly 90% of those funds have disappeared.
Nonetheless, Jessop said institutional investors have continued to show some form of long-term interest in adding cryptocurrencies to their portfolios.
Fidelity’s Research Showing Institutional Investor Interest in Digital Assets Explained
Fidelity interviewed approximately 450 institutions, including hedge funds, pensions, endowments, and wealthy families. 22% of interviewees claimed they already owned cryptocurrency. Those who owned digital assets also noted that they expect to double their crypto allocation within a five-year period.
Jessop says the current drop in the crypto market hasn’t dampened institutional investor interest:
“If anything, they are as encouraged now as they were when prices were higher.”
Security tokens have also played a role in the growing interest from institutional investors. As opposed to ICOs, Security Token Offerings (STOs) openly declare themselves securities and therefore abide by existing securities laws.
The regulatory safety found in security tokens has already attracted other institutional giants such as NASDAQ, who entered the space through Symbiont. Though security tokens are new, tokenized assets already include equity, real estate, investment funds, REITs, and even fine art.
Not every institutional investor is ready to enter the digital asset space, however. In terms of those who remain hesitant, Jessop emphasized two elements responsible for such hesitation: volatility and education.
In terms of education, Jessop highlighted an interesting correlation: the more a firm knew and understood blockchain technology, the more likely they were to be holding cryptocurrency.
“They’ve approached us wanting to learn, which is an encouraging sign.”
What do you think about the launch of Fidelity Digital Assets? What will the result be of an institutional giant like Fidelity entering the digital asset space? We want to know what you think in the comments section below.
Image courtesy of Fidelity Digital Assets.