Wall Street Giant to Launch New Crypto Trading Arm

One of the world’s largest financial service providers is venturing into the crypto arena. Fidelity Investments, which is worth a cool $7.2 trillion in client assets, has announced its plans to launch a new cryptocurrency trading and storage platform. The 72-year-old financial services provider revealed its aims to create a separate company at Bloomberg’s Institutional Crypto event on Monday. Tom Jessup, who will be head of the new division, Fidelity Digital Asset Services, announced the news which will undoubtedly be of interest to its enterprise clients.

Fidelity hopes to attract institutional investors by making the digital currency market easier and more accessible for them to invest in.
Jessup said:

“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.”

He added:

“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.”

He revealed that the next steps for Fidelity are to create a ‘scalable infrastructure’ based on the firm’s previous platform-building experience. According to the press release, the new company will offer ‘institutional-grade custody’ for cryptocurrencies such as bitcoin, and more which are soon to be revealed.

It will also execute trades on multiple exchanges for investors such as hedge funds and family offices whilst providing a dedicated client service. Although Fidelity’s cryptocurrency trading and storage platform certainly isn’t the first of its kind, Fidelity is the first of the traditional Wall Street investment companies to officially provide custody solutions which provide storage and security services for the cryptocurrency.

Custody is used by institutional investors, such as hedge funds, who have huge sums of bitcoin and other cryptocurrencies. The custody solutions come in the form of hot storage (with connection to the Internet) and cold storage (disconnected from the Internet). Fidelity says it will be storing digital assets in vaulted cold storage which means they will take it offline - maintaining a high level of physical and cyber control.

Fidelity Investments Chairman and CEO Abigail Johnson said in a press release.

“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.”

Johnson has been interested in crypto for quite some time and has been at the helm of the company’s foray into digital currency, setting up a number of crypto projects. It also has a partnership with Coinbase which enables its clients to look at their crypto balances via the Fidelity app.

The company started toying with the idea of creating its own separate commercial crypto company in 2017. Boasting 27 million customers, including over 13,000 institutional clients, it certainly has the technological and operational resources (the company spends $2.5 billion per year on technology alone).

The new company was the brainchild of the team based at Fidelity’s Center for Applied Technology (FCAT). Fidelity is following in the footsteps of fellow financial giants such as Japanese bank Nomura, Goldman Sachs and Northern Trust who are also apparently considering offering custodial services.

But so far there hasn’t been any large American incumbents stepping into the space, until now that is. Part of the reason that large financial firms are wary of getting involved in digital assets is security and the fear of being hacked. Indeed, according to CoinDesk’s 2018 State of Blockchain Report, $1.6 billion in cryptocurrency was stolen from clients by the end of June. However, Fidelity is somewhat of an expert in this field, specialising in public and private key cryptography and is confident its custody solutions will provide maximum cybersecurity.

The new standalone company has its headquarters in Boston and already has around 100 employees who are busy recruiting their first clients. The company is expected to be fully up and running in early 2019.

By Joy Lewis.