U.S. investment firm Fidelity, which administers over $7.2 trillion in client assets, has announced the launch of a new company, Fidelity Digital Asset Services, according to an Oct. 15 press release.
The new company will offer custody and trade execution services for digital assets, targeting institutional investors like “hedge funds, family offices and market intermediaries,” and will not for now be open to retail investors. According to the press release,
Fidelity Digital Assets will focus on providing a “secure, compliant, and institutional-grade omnibus storage solution for bitcoin, ether and other digital assets.”
Fidelity cites research from Greenwich Associates that found that “70 percent” of institutional finance executives believe crypto will have a role in the future of the financial sector, yet many are still “sitting on the sidelines” before they enter the market.
Fidelity Digital Assets — A Game-Changer For Crypto
The startup, dubbed Fidelity Digital Asset Services (FDAS), is headed by Tom Jessop, who hopes to offer top-of-the-line cryptocurrency custody for FDAS customers. Along with offering custody, Fidelity’s cryptocurrency offshoot will reportedly handle trade execution for its clients, aggregating data on exchanges that comply with the so-called “Fidelity Standard,” before executing transactions on behalf of its clients.
While the aforementioned is known about the project, specific details surrounding Fidelity Digital Assets are still rather scant.
Tom Jessop Reveals All About FDAS
Explaining the origins of Fidelity Digital Assets, Jessop noted that the organization began its foray in crypto during 2014, when a “group of folks internally were really focused on this thing called frictionless capital markets,” which was focused on making financial systems more accesible, efficient, and cost-effective.
Per Jessop, blockchain technologies immediately became a topic of interest, adding that through Fidelity Labs, research started to commence on the use of this innovation (and digital assets) in financial products and platforms. This led the firm to foray into Bitcoin (BTC) mining, while also allowing employees to purchase in-company cafeteria items using BTC. This allowed Fidelity to learn more about this technology in general and the value that crypto assets can bring to the table of any organization.
And eventually, after years of experimentation, the institution’s top brass and internal innovational teams decided that it would be advantageous to do something closely tied to this industry — hence the creation of FDAS. As put by Jessop himself, the crypto offshoot’s goal is:
“our vision is to provide institutional brokerage capabilities for family offices, hedge funds, other institutions that are or want to invest in digital assets.”
Confirming a popular misconception about a Fidelity-backed exchange, Jessop noted that Fidelity’s crypto team would rather be focused on developing “high-quality, market access products for our customers,” implying that more exchanges aren’t a necessity at the moment.
Why Custody Is Key
Calling custody a cornerstone, Tom Jessop first noted that regulators require institutions to have a custody access to invest in crypto, then adding that FDAS’ services wouldn’t have been comprehensive without proper custodial services. Elaborating eve n further, the former Goldman Sachs executive noted:
We’ve come across a number of clients who have reasonably large positions in crypto that are held in self-custody and a number of customers who cannot execute orders to purchase digital assets until they have a custodian. So I think there is a lot of pent-up demand right now.
What’s Next For Crypto?
Especially considering the arrival of the wall street in this budding asset class. It is intresting to note that the next leg of the market will be the most intresting and the most important.
“I think we are starting to see an acceleration… I don’t know what phase (innovator, early-adopter, early majority etc.) we are in, but I think that with some of these recent announcements — our announcement, Bakkt’s launch, Harvard, Stanford, and MIT allocated into this asset class — we are now seen as this really interesting and transformative asset class… so we can expect more news heading into 2019 that raises the bar and helps growth in the [crypto and blockchain] market.”