The potential impact of Fidelity Digital Assets

Fidelity, one of the world’s largest and most reputable financial service firms, is launching a new company, Fidelity Digital Assets.

The new company will offer custody and trade services for cryptocurrencies to institutional investors, which could have a big impact on cryptocurrency markets.

Abigail P. Johnson, Chairman and CEO of Fidelity Investments, said:

“Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors. We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.”

The Wall Street Journal notes that Johnson has long been interested in the future potential of cryptocurrencies. Tom Jessop, head of Fidelity Digital Assets, added:

“We started exploring blockchain and digital assets several years ago, and those efforts have been successful in helping us understand and advance our thinking around cryptocurrencies. The creation of Fidelity Digital Assets is the first step in a long-term vision to create a full-service enterprise-grade platform for digital assets.”

The real thing

It’s worth emphasizing that Fidelity Digital Assets doesn’t offer sophisticated financial products, like futures or other derivatives, vaguely pegged to bitcoin or another cryptocurrency, but the real thing: The new company will actually buy, store and sell cryptocurrencies for its clients.

Previous Fidelity studies and surveys confirmed that institutional investors are looking into entering cryptocurrency markets directly (that is, owning and trading cryptocurrencies), but so far have been deterred by lack of trusted enterprise-level service providers. Fidelity wants to fill this gap. Jessop concluded:

“In our conversations with institutions, they tell us that in order to engage with digital assets in a meaningful way, they need a trusted platform provider to enter this space. These institutions require a sophisticated level of service and security, equal to the experience they’re used to when trading stocks or bonds. With Fidelity Digital Assets, we’re building a scalable infrastructure for digital assets that meets the expectations of what it means to work with Fidelity, while leveraging unique capabilities of the blockchain to create a completely new offering.”

In their recently launched Medium channel, Fidelity Digital Assets representatives are starting to educate institutional investors to the future potential of cryptocurrencies. “We imagine a world, soon, where all types of assets are issued natively on a blockchain or represented in tokenized format,” notes a post.

Potential impact

The Wall Street Journal notes that Fidelity executives expect other Wall Street players to follow Fidelity and “bring more institutional investors to the cryptocurrency markets.”

This seems likely to bring increased capital influx and trading volumes to cryptocurrency markets. It’s worth noting that Fidelity Digital Assets will also offer consulting services, and can be expected to be better than average at picking winners.

Image from Pixabay.