Fidelity Investments is jumping into the emerging cryptocurrency arena with a new business to manage digital assets for hedge funds, family offices and trading firms.
The mutual fund giant will offer security and storage services, trade execution and customer service for digital assets, Fidelity said Monday in a statement. The firm is participating today in the Bloomberg Institutional Crypto conference in New York.
Fidelity is moving into crypto at a time when the value of bitcoin has plunged in the past year and as other financial firms have shied away because of unclear regulations, fears of market manipulation or even the prospect that the assets could be used in money laundering.
The business, dubbed Fidelity Digital Assets, is a bet that Wall Street’s nascent appetite for trading and safeguarding digital currencies will grow. It also puts the Boston-based firm a step ahead of top Wall Street players that have mostly stayed on the sidelines so far.
“Our goal is to make digitally native assets, such as bitcoin, more accessible to investors,” Fidelity CEO Abigail Johnson said in the statement.
Fidelity Digital Assets initially will roll out support for bitcoin and Ether starting early next year. It will also offer over-the-counter trade execution and order routing.
Top executives at Fidelity are hoping they can build on the company’s well-known brand name and win over institutional customers keen on digital currency trading. The company already works with more than 13,000 financial institutions.
“Most institutions want to deal with another institution,” Tom Jessop, who is heading the unit, said a telephone interview. “We understand institutional finance.”
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The SEC, wary of bringing crypto to the masses, postponed a decision last week from VanEck and SolidX and rejected a proposal from the Winklevoss twins.
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The SEC called into question the ability of the cryptocurrency’s exchanges to sufficiently police trading.
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Part of the problem stems from how slow regulators have been to define their views of virtual currencies.
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The firm has a “robust pipeline of customers,” said Jessop, who was previously president of Chain, which offers blockchain technology to financial companies. At the Bloomberg conference on Monday, Jessop said the firm has about 100 people working on the effort and has already started to bring on its first clients.
There are more than 370 crypto funds managing as much as $10 billion in assets, according to Autonomous Research — still just a drop in the bucket in the investment universe.
Crypto custody services are currently offered by startups like Coinbase. Goldman Sachs has been considering a plan to offer custody for crypto funds, Bloomberg reported in August. Northern Trust has examined the potential for custody services.
For Johnson, who took over as CEO in 2014, the digital assets company is a dramatic step. While many other large fund companies have recoiled from crypto on the grounds that it’s too legally murky, Fidelity has embraced the evolving realm relatively early. That’s in part because Johnson has advocated for broader adoption of blockchain technology, which is a decentralized ledger underpinning cryptocurrencies like bitcoin.
The price of bitcoin has fallen 67% from its high in December 2017, according to a composite of prices compiled by Bloomberg.
