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Announced through an interview with the Financial Times, Fidelity CEO Abigail Johnson said her firm will launch digital asset custody services. The move stems from interest by existing clients and marks the firm’s transition from dabbling in cryptocurrencies “just for fun” to a legitimate service for an asset class which, Johnson says, is not going away.
Fidelity’s Involvement in Cryptocurrencies Explained
Fidelity Investments is one of the largest investment firms in the world. The financial group has nearly $3 trillion worth of assets under management.
The company has had an active interest in cryptocurrencies as far as back as 2014, when it started a $200,000 Bitcoin mining operation located in New Hampshire.
Fidelity CEO Abigail Johnson says such activity was “just for fun”. Now however, the firm is moving into the cryptocurrency space in a much different light.
In late 2018, the firm launched Fidelity Digital Asset Services. The new branch aims to offer “enterprise-quality custody and trade execution services” for financial advisors, family offices, and hedge funds.
The first aspect of the new service will include cryptocurrency custody services, which Johnson says is much needed in an under-developed industry:
“There are people out there with significant amounts of wealth in cryptocurrencies, probably bitcoin, and they’re looking for somebody to hold those coins for them because in the event of their passing — which is going to happen at some point or another — you’ve got to have a plan to be able to get those coins to somebody else.”
Fidelity Digital Asset Services has submitted an application with the New York State Department of Financial Services to operate as a limit-purpose trust custody. If approved, it would allow Fidelity to provide cryptocurrency custody services to a large range of financial institutions.
Fidelity decided on custody services as the best first step into the cryptocurrency realm, which is largely due to a high volume of requests from existing clients.
According to Johnson, the financial services industry features a legitimate amount of interest in digital assets:
“It’s not going away. As long as the value is there, people will look to preserve that value.”
Many believe institutional firms have refrained from entering the digital asset realm due to the Initial Coin Offering’s (ICO) lack of regulatory compliance. Yet the Security Token Offering (STO) features regulatory safety which is otherwise absent in the ICO.
As a result, STOs have seen a stark increase, raising nearly $1 billion to date.
What do you think of Fidelity launching its cryptocurrency custody service? Does this count as Fidelity entering the cryptocurrency space? Let us know what you think in the comments section below.
Image courtesy of AARP.