Fidelity launches company to custody and trade cryptocurrencies

Fidelity Investments is launching a new company to offer custody and trade executions of cryptocurrencies and other digital assets.

The goal of Fidelity Digital Asset Services is to make things like bitcoin more available to sophisticated institutional investors such as hedge funds, family offices and market intermediaries, according to Abigail Johnson, chairman and CEO of Fidelity Investments.

Fidelity Digital Assets will launch in early 2019 with support for bitcoin and ether, and will offer over-the-counter trade execution and order routing. Functionality for independent registered investment advisers is on the road map for next year.

“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,” Ms. Johnson said in a statement.

Fidelity is betting that established Wall Street firms will feel more comfortable working with another institution than with a startup. Fidelity said that it will carry over its same security principles and best practices to provide secure and compliant storage for digital assets, and use its internal crossing engine and smart order router to execute trades.

The asset management company has been exploring blockchain and digital assets for several years, said Tom Jessop, head of Fidelity Digital Assets. While there are plenty of solutions for retail investors, there is a gap in the support available for financial institutions despite a growing belief that cryptocurrencies have a place in the future of the investing.

Creating the new company is the first step toward building a “full-service enterprise-grade platform” for cryptocurrencies, Mr. Jessop said in a statement.

“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,” he said. “These institutions require a sophisticated level of service and security, equal to the experience they’re used to when trading stocks or bonds.”

Fidelity isn’t the only traditional financial institution dipping into the cryptocurrency waters. TD Ameritrade made an investment last week in a platform to trade digital asset futures, and Edelman Financial services founder and executive chairman Ric Edelman has invested in Bitwise Asset Management, a startup that’s putting together cryptocurrency index funds.

Last month, Apex Clearing announced Apex Crypto to provide its custody and clearing clients with the ability to store and trade cryptocurrencies.

While the immediate opportunity may be in trading digital assets, Fidelity sees more long-term benefit in blockchain, the distributed ledger technology behind bitcoin. The company believes blockchain can enable new business models and improve existing market infrastructure for all types of assets.

(More: AI, blockchain take center stage at SIFMA fintech event)

Since Fidelity launched its Blockchain Incubator in 2013, the company has experimented with mining cryptocurrencies. In 2015, Fidelity Charitable began accepting donations in bitcoin. It received $69 million in digital asset donations in 2017 alone.

Last year, Fidelity integrated with Coinbase to let retail investors see their cryptocurrency balances on Fidelity’s website.

Related Topics: Fidelity Investments