Institutional

Fidelity’s crypto arm has officially applied to operate in New York as a trust

Quick Take

  • Fidelity Digital Assets Services (FDAS), the crypto arm of Wall Street brokerage firm Fidelity, has filed its application to be a New York Trust, according to sources
  • Fidelity’s digital asset arm was launched in October and offers crpyto-custody to institutional clients
  • A New York trust license would allow it to serve New York traders in all realms of its business

Fidelity Digital Assets has officially applied to the New York Department of Financial Services (NYDFS) for a Trust license, according to several sources familiar with the matter.

If its application is successful, Fidelity Digital Assets (FDAS) would be cleared to add New York to the handful of states in which it currently operates its custody business for digital assets.

This is the latest development for the burgeoning provider of storage and trading solutions for bitcoin, allowing it to go head to head with rivals like Coinbase, which secured its qualified custodian designation in October alongside firms Gemini and Paxos. In May, Bloomberg reported that the firm was stretching beyond its custody business, preparing for the launch of broker services to trade on behalf of institutional clients. On the custody side, the firm has been courting traditional asset managers as well as crypto native firms, according to people familiar with the situation.

Fidelity Digital Assets also now joins the likes of ICE’s pending crypto platform, Bakkt, which has also applied for a NY trust license to be a qualified custodian to store the bitcoin underpinning its futures contract. According to a lawyer from Gibson Dunn, Arthur Long, the trust license is “more expansive” than the famed BitLicense, a New York State license for crypto firms. A trust license allows a firm to operate a broader swath of services in financial markets, such as financial advice, hinting at far reaching ambitions.

FDAS was launched last October as an offshoot of Fidelity. To that end, the firm launched cryptocurrency custody earlier this year and scooped Chris Tyrer from investment bank Barclays. Former Coinbase exec Christine Sandler also recently joined Fidelity Digital Assets as its sales head. 

Still, it could take some time for FDAS to be granted the license, which would allow it to operate as a Limited Purpose Trust Company. The process of securing the heavily-guarded green-light from the NYDFS often takes half a year, lawyer Arthur Long told The Block in May.

“Any bank or trust company is going to have to go through a substantial process so that the regulators understand the business,” he said.

For their part, FDAS are taking their time to flesh out their services. In an interview with The Block earlier this year, Fidelity Digital Assets head Tom Jessop painted a picture of the firm’s trading business, which will not be open to retail clientele.

“We are not prop trading, we don’t have a desk,” he said, noting that the firm would act as an agent for clients. “We are purely acting as effectively an agent, and that’s what our clients want. Our clients want to avoid the issues associated with funding on multiple exchanges, both administrative risk, or otherwise, they want something resembling the best price experience, and so we’ll try to do that by bringing liquidity providers, and other sources of liquidity onto our platform. I think effectively a smart order router, or logic, that would interrogate the market, find the best better offer, and allow the client to execute at that price.”

He also said the firm tries to provide clients with a platform that can minimize administrative risks and locate the best price in crypto trading.

A representative for Fidelity did not respond to an inquiry prior to publication.