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trading

Fidelity, the $2.5 trillion Wall Street giant, is launching a brand new institutional brokerage and custody business for crypto

Quick Take

  • Fidelity has announced they will launch crypto custody and institutional brokerage offerings through a brand new business next year. 
  • Fidelity Digital Assets was announced at an industry conference by Tom Jessop, head of corporate business development at Fidelity. 
  • The Block sat down with Jessop to get the inside look before the announcement. 

Fidelity, the $2.5 trillion asset manager, is diving into the world of crypto with a brand new digital assets business.

The financial-services firm, which is known for its retail-brokerage and 401(k) offerings, announced Monday its cryptocurrency custody and brokerage solutions for institutions. The new services will be offered through a new entity, Fidelity Digital Assets, Tom Jessop, head of corporate business development at Fidelity, told The Block in an interview. While the initial custody solutions will be for bitcoin and ether, the firm also plans to custody other digital assets down the road. As for the trading side of the business, the firm will provide so-called white-glove services to asset managers to help them enter the market. Fidelity will act as a broker for those clients, routing orders to OTC desks where the firm can find the best price for clients.

Maps

Mapping out crypto custody solutions

Read more

Speaking to The Block in an interview, Jessop said the firm was excited to announce the new products given the increasing level of demand in the market. The products have been in the works for many months. 

“A lot of the effort over the last 6 to 9 months has been taking what had already been built and elevating it to a level in which we were comfortable to go to market,” Jessop said. “While there are many places for consumers to buy and trade crypto, we didn’t see analogous developments for institutions.”

“We made a decision to move in this direction, and that has been validated by the prospects we are talking to now,” he added.  

The platform is set to launch in 2019. Jessop made the announcement at a joint industry conference with Bloomberg LLP and Galaxy Digital. 

In September CEO Abby Johnson, a self-avowed crypto enthusiast, hinted at a big cryptocurrency announcement at a financial-technology conference in Boston. “We’ve got a few things underway, a few things that are partially done but also kind of on the shelf because it’s not really the right time,” Johnson said. “We hope to have some things to announce by the end of the year.”

Fidelity’s efforts in crypto began in 2014 with research and development, Jessop said. Then, the firm examined mining in 2015. At the end of last year, the firm saw more opportunities in the institutional space among family offices and new crypto funds that were starting up. In 2017, the firm partnered with Coinbase to allow its clients to view their crypto holdings on the digital asset exchange. 

“Fidelity’s commitment, not only to this space, but other innovation projects is significant,” Jessop said. “As I go around and talk to folks [at Fidelity], I think the thing they are surprised about is that markets are already this big and there is a meaningful activity, and there is a future value to the underlying technology that probably transcends bitcoin and ether.”

“I think once you educate people on where things actually are and get past the hype … it is like an eye-opening moment for people.”

Reporting for Business Insider, this reporter first blew the lid off of aspects of Fidelity’s cryptocurrency ambitions. In June, the firm released internal job ads seeking out talent to “engineer, create, and deploy a Digital Asset exchange” and build out “first-in-class custodian services for Bitcoin and other digital currencies.”

Fidelity’s reputation might give it a leg up over smaller providers of institutional custody solutions, including Coinbase and BitGo. Cryptocurrency assets, which require private keys to access, are difficult to store. And the lack of well-known institutional custody providers in the space is one barrier that has kept large asset-managers and investors from diving into the space. To be sure, Fidelity’s crypto custody offering does not have a qualified designation, which may turn off some firms. Still, the product could make regulators more comfortable with an exchange-trade fund tied to bitcoin, some experts say. 

“This custody solution from a 72-years-old, $2.5T, established financial institution may pave the way for regulated investment vehicles, such as ETFs.” Gabor Gurbacs, head of digital asset strategy at VanEck, told The Block. 

As for brokerage solutions, investing firms have been crying out for firms to sit in the middle of their portfolio managers and the spine-tingling market for digital assets. Other firms are looking to break into this market, including Coinbase, the cryptocurrency exchange-operator. 

Steven Zheng contributed to this report. 

Fidelity, the $2.5 trillion asset manager, is diving into the world of crypto with a brand new digital assets business. The financial-services firm, which is known for its retail-brokerage and 401(k) offerings, announced Monday its cryptocurrency custody and brokerage solutions for institutions. The new services will be offered through a new entity, Fidelity Digital Assets, […]