We describe the origins of the omnibus custody model in traditional finance and explore how and why digital asset custodians apply the omnibus model to securing customer assets.

By Ria Bhutoria, Director of Research

The key management process is an important component of digital asset custody that clients should evaluate when choosing a custodian. Key management determines how digital assets like bitcoin are held and secured. The two most prominent models are omnibus¹ and segregated. …

We look to notable data and developments that capture investment and use of the network to explore Bitcoin’s position today and future potential.

By Ria Bhutoria, Director of Research

As we begin the new year (and decade) and Bitcoin’s twelfth year in existence, we reflect on the maturation of infrastructure expanding the ways users and investors engage with Bitcoin, as well as robust growth of the underlying network. In a few short years, Bitcoin’s story has critically evolved to recognize the true potential of the network — as a new type of value transfer system, a tool for freedom, a savings technology and possibly more that we have yet to discover (remember, Bitcoin is a Platypus). While there are yet unanswered questions, its position is cemented, and its potential cannot be ignored. …

Digital asset data is complex and should not be taken at face value

By Ria Bhutoria, Director of Research

In its raw and unfiltered form, digital asset data can be misleading. When taken at face value, some metrics overstate certain activity, while others may undercount usage. A commonly-cited measure that is often overstated, at least in economic terms, is transaction value on the Bitcoin network, which uses an unspent transaction output (UTXO) system. While the ledger does not distinguish between economic and non-economic transactions, we believe it is crucial to strip out non-economic transactions when feasible.

Data providers, such as Coin Metrics, have made strides in separating economic value from non-economic value. A couple filters they apply to the raw data are the exclusion…

We’re setting the standard for institutional-level services for digital asset investors

We’re bringing professional financial standards to digital assets. From the security and risk management of our custody offering to our world-class client service, we’ve created the blueprint for institutional-grade standards for the digital assets industry.

We believe that we are uniquely positioned to drive adoption of digital assets across a range of use cases and client segments, which is why we are committed to the continued development of the digital assets industry. …

Seeking mission-driven professionals to continue our growth

Fidelity Digital Assets is helping financial institutions engage with digital assets in a substantive way. As we prepare for what’s next in this journey, we are expanding our team across several professional disciplines, specifically technology, compliance, product management, product design, and operations.

As we announced earlier this year, we are serving a select group of firms, primarily hedge funds, crypto funds, and family offices. The new roles on our team will fuel our continued growth into additional institutional products and services.

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Are you as excited about the future of digitally-native assets as we are? …

Institutional sentiment mirrors many of the positive developments we’ve seen in the underlying ecosystem.

What do institutions really think about digital assets? We talk with different types of institutions all the time and we hear any number of individual perspectives and investment theses. But we still want to know, do they understand the transformative potential here? Are they carving out a strategy that provides for digital assets in their portfolios?

Now, we have new research from Fidelity Investments®, which finds institutional investors are overwhelmingly favorable about the appealing characteristics of digital assets. …

With the emergence of public blockchains and associated digital assets, we’ve seen an equivalent growth in interest — and in the value — of the data associated with them. When we first began research into Bitcoin nearly five years ago, it was impossible to measure the volume or impact of the data that would be generated. Now, we have hundreds of markets producing billions of data points, and thousands of cryptoassets carrying their own unique data sets. How should we consume and interpret this information to inform decisions?

Evidence-based knowledge is central to evolution. Without data that is commonly trusted and understood, any industry would be challenged to grow and evolve. …

Since our initial announcement in October we have continued to build the technical and operational capabilities needed for securing, trading and supporting digital assets with the exacting oversight required by institutional investors.

We are currently serving a select set of eligible clients as we continue to build our initial solutions. We’ve established a robust set of technical and operational standards at a level that institutions have come to expect from Fidelity.

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Our initial clients are an important part of our final testing and process refinement periods, which will eventually enable us to provide these services to a broader set of eligible institutions. …

Time flies when you’re constantly in motion. It was about a year and a half ago that Fidelity Investments first started to acknowledge its interest in the potential for digital assets and blockchains to revolutionize our industry. Though as many now know, this work had been going on for a few years prior to that.

Some of the experimentation bore insights that helped us repriortize and select the next batch of trials, but others did not prove out as we’d hoped. Regardless, we were listening to the marketplace and specific opportunities were beginning to emerge.

Our mission is much broader than products. Institutional interest in digital assets is expanding, and these organizations require sophisticated capabilities in order to proceed. …

The market for digital assets has evolved dramatically since the release of Satoshi Nakamoto’s Bitcoin white paper ten years ago.

From Bitcoin’s origins as a peer-to-peer system of value transfer to the development of smart contracts and countless other blockchain applications, cryptography-based digital assets have become one of the most disruptive and revolutionary technologies since the advent of the internet.

Today there are at least 1,600 crypto coins and tokens, according to CoinMarketCap.com. Although it may be hard to think of another market that has developed as quickly, it is not difficult to see parallels between the development of digital assets and that of traditional asset classes such as stocks, bonds, and commodities. …


Fidelity Digital Assets

Institutional Solutions for a new asset class. https://www.fidelitydigitalassets.com

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