Fidelity Digital Assets Can Now Facilitate Bitcoin Custody and Transactions
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Fidelity Digital Assets Can Now Facilitate Bitcoin Custody and Transactions

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On November 19th, 2019, the New York State Department of Financial Services granted Fidelity Digital Asset Services the designation of a New York Trust Company. Under the designation, Fidelity Digital Assets can now offer a platform through which institutional and individual investors can buy, store, sell, and transfer bitcoin.


What It Means: Fidelity Digital Assets as a New York Trust Company

Today, Linda Lacewell — the superintendent of the New York State Department of Financial Services — announced that Fidelity Digital Assets has been granted a charter under New York Banking Law. The charter allows Fidelity Digital Assets to operate as a limited liability trust company and enter the New York state’s quickly growing digital asset marketplace.

Fidelity Digital Assets can now establish a custody and execution platform for digital assets. Through the platform, both institutional and individual investors will be able to perform a variety of tasks to including buying, selling, storing, and transferring bitcoin.

As the largest cryptocurrency by market capitalization, Bitcoin is by far the most popular digital asset. It is also free from regulatory scrutiny when it comes to securities violations, which a large majority of existing digital assets may be susceptible to.

Fidelity Digital Assets sees the recent approval as a major step toward bringing institutional investors into the digital asset space. According to Michael O’Reilly, COO for Fidelity Digital Assets,

“The custody and trade execution services that we provide are essential building blocks for institutional investors’ continued adoption of digital assets. The designation as a New York Trust Company under the supervision and examination of the DFS builds on the credibility and trust we’re establishing amongst institutions and other market participants. We will continue to play a leading role in supporting the maturation of the entire ecosystem as we expand our business and the clients we serve.” 

Superintendent Lacewell said the designation shows how regulation, investor protection, and emerging technology can work in harmony:

“This approval is further evidence that innovation and consumer protection can coexist in New York’s evolving and expanding financial services industry.”

Fidelity Digital Assets Explained

Fidelity Digital Assets is a subsidiary of 72-year-old Fidelity Investments — one of the world’s largest investment firms that manages around $7 trillion in assets. The subsidiary was announced back in October of 2018.

Fidelity has had its eyes on digital assets much earlier than that, however. In as early as 2014, Fidelity initiated a Bitcoin mining operation in the U.S. state of New Hampshire. At the time, bitcoins sold for under $200 a piece.

Later in 2015, Fidelity started to organize charitable donations in Bitcoin. The firm facilitates two significant benefits when gifting Bitcoin to charity: tax deductions are equal to the fair market value of the bitcoin and instead of paying capital gains tax, the charity receives the full amount of the donation.

Fidelity Digital Assets has also made moves to continue its development. In October of 2019, Fidelity CEO Abigail Johnson announced plans for a cryptocurrency custody service. During the interview, Johnson said the financial services industry sees a notable amount of value in digital assets. So long as that value is there, “people will look to preserve that value”, she said.

The plans for custody services were dependent upon the New York State Department of Financial Services’ approval to operate as a trust company. That approval has now been granted.

What do you think about Fidelity Digital Asset’s designation as a New York Trust Company? Will this bring institutional investors into the cryptocurrency realm? We want to know what you think in the comments section below.


Image courtesy of Fidelity.

November 19, 2019

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Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions (IoT).