Fidelity Digital Assets: The Journey From Idea To Market
Time flies when you’re constantly in motion. It was not quite 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 idea for Fidelity Digital Assets emerged originally from a select team of blockchain technologists, product managers, financial and legal specialists within the Blockchain Incubator in Fidelity Center for Applied Technology (often called FCAT and previously referred to as Fidelity Labs). Fidelity Center for Applied Technology helps Fidelity’s clients and businesses imagine the possibilities of new ideas and emerging technologies, starting with research and academic partnerships and bringing ideas to life through prototypes.
In February of 2014, cryptocurrencies were gaining wider attention, mostly because of their mysterious origins and dramatic volatility. At that time, the path to general institutional acceptance of digital assets was unclear. There was little regulatory guidance on so-called “crypto” coins. Even today, more than four and a half years since we first began our research, only a handful of countries have established clear regulatory guidelines for digital assets.
Over this same time period, Fidelity was seeing a steady increase in calls from large financial institutions regarding the company’s plans for handling digital assets, specifically with respect to custody and executional services.
While interest kept rising, our incubator team within Fidelity was engaged in deep and challenging experimentation, testing, and learning. Although the company possesses decades of experience in institutional and retail financial services, this expertise is rooted in more widely-known products spanning investing, retirement services, wealth management, institutional services, and securities trading. Digital assets represented, initially, a departure from familiar investment tools, products and processes.
Journey To Market
In order to build professional-grade solutions that would meet the demands of large institutional clients, the incubator team invested tens of thousands of hours and millions of dollars in development, product and systems design, and rigorous security controls.
At each stage of development, the team’s work was reviewed and evaluated by an advisory committee which greenlighted positive advances and redirected efforts when obstacles arose. This exacting oversight contributed to the creation of Fidelity Digital Assets as a separate business entity focused on institutional solutions for digital assets. Fidelity Digital Assets has graduated from the Blockchain Incubator, and that separate team continues to investigate and experiment with blockchain and cryptocurrencies.
This is just the beginning.
We imagine a world, soon, where all types of assets are issued natively on a blockchain or represented in tokenized format. Addressing custody issues for institutional investors is one critical step in order for these markets to continue to develop. By building native expertise in these technologies we hope to be well-positioned to serve the needs of our clients for the long term.
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Digital assets are speculative and highly volatile, can become illiquid at any time, and are for investors with a high risk tolerance. Investors in digital assets could lose the entire value of their investment.
Fidelity Digital Assets and the Fidelity Digital Assets Logo are service marks of FMR LLC. ©2018 FMR LLC. All rights reserved.