Ultimate Resource For Fidelity Investments Bitcoin Custody Services
American investment firm Fidelity, which administers over $7.2 trillion in client assets, will purportedly launch its Bitcoin (BTC) custody offering in March, Bloomberg reports on Jan. 29Report: Ultimate Resource For Fidelity Investments Bitcoin Custody Services
Citing unnamed sources familiar with the matter, Bloomberg states that this is the next step in a plan that started in October 2018, when Fidelity announced the launch of a new company, Fidelity Digital Asset Services.
The new company will purportedly offer custody and trade execution services for digital assets, targeting institutional investors like “hedge funds, family offices and market intermediaries,” but will not for now be open to retail investors.
Fidelity reportedly said in a statement, “We are currently serving a select set of eligible clients as we continue to build our initial solutions. Over the next several months, we will thoughtfully engage with and prioritize prospective clients based on needs, jurisdiction and other factors.”
Fidelity CEO Abigail Johnson is an outspoken proponent of digital currencies, having introduced Bitcoin and Ethereum (ETH) mining at the firm in 2017. She stated at a conference in New York “I’m a believer. I’m one of the few standing before you today from a large financial services company that has not given up on digital currencies.”
Custody services, which are commonplace in traditional stocks and bonds markets, are third party services that offer to hold an asset to reduce the likelihood of theft. Custody services differ from banks in that they are not allowed to use the stored financial assets to their own ends. Major firms like BNY Mellon, JPMorgan and Northern Trust offer custody for assets like money, securities, gold and diamonds.
While traditional financial institutions like Fidelity are beginning to step into the crypto sphere, firms like cryptocurrency exchange and wallet service Coinbase have introduced their own custody solutions. Coinbase’s custodial service, which targets institutional clients, launched in July 2018. The exchange then stated that it had already been storing over $20 billion worth of clients’ crypto over the past six years.
Fidelity Investments Fully Rolls Out Crypto Custody Service, Exec Says
American financial services company Fidelity Investments has fully launched its cryptocurrency custody service.
Abigail Johnson, CEO of Fidelity Investments, revealed the development in an interview with the Financial Times published on Oct. 18. Johnson said that the company is ready to roll out its crypto custody business following a year-long preparation and accumulation of clients.
A Nascent, But Promising Business
Last fall, Fidelity specifically indicated that it would provide an enterprise-grade crypto custody service to hedge funds, family offices and financial advisors. Johnson called that kind of service nascent and not developed, but noted its potential, saying:
“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.”
Speaking about Coinbase’s custody offering, Johnson argued that Coinbase “is still a company that most people had never heard of, and they don’t have the existing relationships with the independent advisers.”
As previously reported, Coinbase Custody was initially announced in November 2017 and launched in July 2018, with an objective to provide robust security of crypto assets, which according to Coinbase has been institutional investors’ “‘number one’ concern.” As of August, Coinbase Custody claimed to store assets on behalf of more than 120 clients in 14 different countries.
Fidelity’s Careful Approach To Trading Crypto
Recently, Kathleen Murphy, personal investing president of Fidelity Investments, said that the firm does not offer cryptocurrencies on retail trading platforms to protect its clients. When asked when she expects users to trade crypto “in a meaningful way” on Fidelity’s platform, Murphy replied:
“You know, we’re really careful about that. So while we embrace crypto in terms of trying to understand it and be innovative and thoughtful… We’re also very careful about where we offer those types of things, so they’re not offered broadly on the retail platform. We want to be very careful about making sure that investors who really aren’t institutional investors […] don’t make a mistake with cryptocurrency.”
Fidelity Digital Asset Services Now Authorized To Operate Crypto Custody Platform
Fidelity Digital Asset Services, LLC (FDAS) has procured a charter from the New York State Department of Financial Services (NYDFS) to operate a virtual currency custody and execution platform.
Per a Nov. 19 press release, the NYDFS authorized FDAS to operate as a limited liability trust company and run a cryptocurrency custody and execution platform where both institutional investors and individuals can store, buy, sell and transfer Bitcoin (BTC).
Superintendent of Financial Services Linda A. Lacewell noted that “this approval is further evidence that innovation and consumer protection can coexist in New York’s evolving and expanding financial services industry.” Commenting on the development, Michael O’Reilly, COO for Fidelity Digital Assets, said:
“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.”
Fidelity’s Developments In Crypto Custody Service
Earlier in November, Fidelity Investments, which stands behind FDAS, hired Michael Zinaman as its product specialist to further oversee the company’s strategy on cryptocurrencies, custody and execution services. Zinaman oversees the company’s strategy for its cryptocurrency custody service that launched in mid-October.
At the time, the company’s CEO Abigail Johnson said that the company had fully launched its crypto custody business following a year of preparation and accumulating clients.
Recently, institutional Bitcoin trading platform Bakkt received regulatory approval from NYDFS to offer custody services to any institution. Previously, the option was only available for those trading its Bitcoin futures.
Dutch Bank ING Working On Digital Asset Custody Technology
Amsterdam-based bank ING is reportedly developing cryptocurrency custody technology, Reuters reported on Dec. 12.
The digital assets custody service being developed by ING is purportedly part of one of the bank’s several blockchain-related initiatives and is still at an early stage of development. ING reportedly said that it “sees increasing opportunities with regard to digital assets on both asset backed and native security tokens.”
When reached for comment, ING did not provide specific details about the project, but said that it is, “particularly active to further develop the technology behind digital assets to empower its clients with a compliant access to this emerging ecosystem.”
Financial Services Firms Embrace Crypto Custody
As cryptocurrencies begin to gain traction as an asset class, major financial firms are increasingly developing their own custody technologies and services.
American financial services giant Fidelity Investments fully launched its cryptocurrency custody service in mid-October, following a year-long preparation and accumulation of clients.
On Dec. 11, Berlin-based fintech company solarisBank announced the establishment of a subsidiary called solaris Digital Assets to provide a custody solution for digital assets.
Cryptocurrency exchanges have also developed in-house custody services, including major United States-based exchanges Coinbase and Gemini.
As Rohan Barde, a research and innovation manager at Blockchain Zoo, previously wrote, there are two main reasons why institutional investors need custodial services, which are reducing risk and regulatory compliance.
By separating the entity that stores assets from the entity that manages assets, financial institutions focus on their specializations. Custody services also reduce the risk of an employee embezzling assets.
Heightened Interest In Blockchain Technology
ING has expressed a heightened interest in blockchain technology, being one of the participants of the HQLAX project. HQLAX was launched by blockchain company R3 and uses Corda distributed ledger technology to provide liquidity and collateral management products.
In late October, ING’s distributed ledger technology team presented its white paper, called “Solutions for the Corda security and privacy trade-off: having your cake and eating it,” where it reportedly found a solution to improve the security and privacy trade-off on Corda, an open-source blockchain platform.
German SolarisBank Opens Subsidiary To Provide Custody Services For Digital Assets
Berlin-based fintech company solarisBank has established a subsidiary to provide a custody solution for digital assets.
Per a Dec. 11 announcement, solarisBank’s newly established subsidiary, solaris Digital Assets GmbH, will provide clients with an application programming interface (API)-accessible platform, which gives access to the full range of solarisBank’s digital white-label banking services.
No Need To Apply For A License
The announcement further reads that solaris Digital Assets will operate in compliance with the regulatory requirements of the German market, as well as ensure storage of digital assets that is compliant. This, according to the company, will release clients from the need to apply for a license themselves. Solaris Digital Assets plans to apply for a license for the crypto custody business in 2020.
Commenting On The Subsidiary Launch, Alexis Hamel, Managing Director Of Solaris Digital Assets, Said:
“The current infrastructure is simply not customer-friendly enough for mass adoption. That’s why we want to empower digital asset pioneers with our one-stop-shop platform, which provides a cutting-edge custody solution alongside licensed digital banking services, such as accounts, cards or KYC services.”
Custody Services Gain Traction
Earlier in December, DXM, a financial services subsidiary of South Korean fintech firm Dunamu, revealed plans to launch an institutional crypto asset custody service, in collaboration with crypto cybersecurity firm Ledger. DXM plans to launch the custodian under the name Upbit Safe and that Ledger Vault, Ledger’s custody arm, will support the initiative with its technology.
Also, Fidelity Digital Asset Services, LLC (FDAS) procured a charter from the New York State Department of Financial Services to operate a virtual currency custody and execution platform, where both institutional investors and individuals can store, buy, sell and transfer Bitcoin (BTC).
Fidelity Exec Predicts Crypto Custodians Will White-Label Their Services
Fidelity Digital Assets (FDAS) envisions a future where custodians work behind the scenes to store cryptocurrency for other firms’ clients, like supermarkets putting their brands on third-party products.
“The way we think about it is, you can build your own infrastructure but that’s really expensive,” Christine Sandler, head of sales and marketing at the unit of Fidelity Investments, said at a Hedge Fund Association conference in New York last week.
“To do it really well, you have to have geographic diversity, a staff that understands the underlying technology,” said Sandler, who joined FDAS from crypto exchange Coinbase in March.
Hence, “I expect that custodians that do really well at this–whether it’s Fidelity or Coinbase–they will act as sub-custodians to other custodians,” she said. “It means they partner with other institutions and say, ‘I’m happy to custody this and you manage the client experience.’”
To be clear, Sandler was talking hypotheticals and not announcing any new plans for FDAS. The roughly one-year-old business acts as a broker and custodian of bitcoin for institutional investors and is one of the most significant forays to date into the crypto market by an established financial services provider.
This month, Fidelity Digital Assets announced that it would open up a new entity in Europe to serve European institutional investors. In November, FDAS obtained a trust company charter from the New York Department of Financial Services (NYDFS), allowing it to custody bitcoin for institutional investors in New York. Right now, the unit sources its liquidity primarily from over-the-counter (OTC) trading desks, but it plans to sign up its first crypto exchange by the end of 2019.
At the New York event, Sandler added that a theme of 2020 will be clients expressing interest in digital assets in many different ways.
“Clients come to us and say ‘I want to expose 1 percent to 2 percent of my portfolio to bitcoin.’ That’s a big lift in terms of accessing that liquidity,” she said. “But it’s also a big lift in terms of how they are incorporating that into their portfolio, what evaluation tools are being used … what happens if the asset forks? Do you own the asset?”
Fidelity Investments’ Crypto Arm Expands Custody To Asia
Asian Bitcoin investors now have a new custody option.
Fidelity Investments — one of the largest asset managers in the world — continues to expand its global reach in the cryptocurrency industry through its dedicated crypto subsidiary.
According to an Oct. 29 Bloomberg report, Fidelity Investments’s crypto branch Fidelity Digital Asset Services has partnered with a Singaporean startup Stack Funds to expand its custody services in Asia.
Within the partnership, Stack Funds will provide access to Fidelity’s custody services to its clients in a bid to meet increasing demand from high-profile investors and family offices in the region. Stack Funds executives said that custodied assets will be subject to monthly audits and investor protections like insurance coverage.
Christopher Tyrer, head of Fidelity Digital Assets Europe, said that the new partnership will give the company a better picture of investor demand in Asia, stating:
“There is a critical need for platforms which have a deep understanding of what local and regional investors are looking for has historically been lacking in the digital asset space.”
Since its launch in late 2018, Fidelity Digital Assets has been expanding its services worldwide. In December 2019, Fidelity Digital Assets established an official entity in the United Kingdom to provide services to European institutional investors.
Crypto-related demand is rapidly growing in Asia as a large number of companies have been expanding their services to the region in recent months. In early October 2020, major American crypto exchange Gemini announced that the firm was expanding in the Asia-Pacific region with a new high-profile hire. Chainalysis — a major global cryptocurrency analytics firm — said that it was launching new offices in Singapore and Tokyo to better service customers in the Asia-Pacific region.
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