Report: Fidelity Sets March Launch Date for Bitcoin Custody Service
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: Fidelity Sets March Launch Date for Bitcoin Custody Service
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.