Fidelity Launches Company to Help Hedge Funds and Other Big Investors Trade Crypto
Fidelity Investments is launching a new company for institutional clients that will trade and store cryptocurrency assets such as bitcoin and ethereum, the mutual-fund company announced Monday.
The new company, named Fidelity Digital Asset Services, will not set up an exchange to trade cryptocurrency assets, but will connect with a number of other crypto exchanges to help its clients quickly find the best price. Fidelity will also store the private keys that control cryptocurrencies with a combination of enterprise software and vaulted cold storage.
Fidelity, which oversees more than $7.2 trillion in client assets, is hoping the new initiative will help it tap into what it sees as a sudden and recent interest in crypto among institutional investors such as hedge funds, family offices and market intermediaries.
“If you look at the existing market infrastructure, it’s heavily skewed toward the needs of retail investors and early adopters of the space,” Tom Jessop, a Fidelity executive overseeing the new company, said in an interview with Bloomberg. “The time is quite good for this announcement. We’ve seen a real acceleration of demand over the last couple months.”
Institutional investors have reportedly replaced high-net-worth individuals as the biggest buyers of cryptocurrencies, which currently have an aggregate $211 billion in market value. Many have been using over-the-counter markets to do so. Endowments at Harvard, Stanford, Yale, and MIT are also making more investments in bitcoin and other crypto assets.
While Fidelity is often seen as online broker and mutual-fund company servicing individuals and families, Jessop said that Fidelity has been experimenting with cryptocurrencies since 2014, mining hundreds of bitcoins in house to understand the bitcoin ecosystem better and encouraging employees to pay for cafeteria items with bitcoin.
“There’s a reasonable amount of demand for this product” Jessop said. “The question is, how do we stay ahead of the competition? How do we innovate and bring new products onto the platform?”