Slated to launch in the coming weeks, Fidelity Investments will soon have a compliant bitcoin trading platform for institutional investors.
Monday’s (May 6) report comes after Fidelity published a survey last week of 441 institutional investors. In total, 47 percent of those questioned said they think investing in digital assets is a good idea.
With the company set to provide services to over US$7.2 trillion in customer assets, the bitcoin trading announcement makes Fidelity the first major firm to offer digital asset services of this kind to institutional investors. Fidelity launched the new company, called Fidelity Digital Assets, in late 2018 to provide an institutional investor platform for trading and custodial services.
“Our goal is to make digitally native assets, such as bitcoin, more accessible to investors,” Fidelity CEO Abigail Johnson told Forbes in October. The new company is said to have 100 employees offering services 24 hours a day to complement digital asset trading hours.
“Family offices, hedge funds, other sophisticated investors, are starting to think seriously about this space,” Fidelity Digital Assets Head Tom Jessop told the news outlet.
Jessop further noted that the demand for cryptocurrencies is increasing from this tier of investors. Fidelity’s survey states that 22 percent of institutional investors already have exposure to digital assets, while 40 percent would consider investing to gain exposure to digital assets within the next five years.
The survey further notes that family offices and financial advisors view digital assets in the most favorable light, with 80 percent of family offices and 74 percent of financial advisors viewing the attributes of digital assets positively. The low correlation of digital assets to other assets is also viewed favorably by 46 percent of those surveyed.
“More institutional investors are engaging with digital assets, either directly or through service providers, as the potential impact of blockchain technology on financial markets — new and old — becomes more readily apparent,” said Jessop.
Trading for bitcoin will be deployed in partnership with Robinhood and E*Trade Financial. Fidelity currently provides over-the-counter trading services for a small group of institutional clients.
In addition to digital asset trading, Fidelity Digital Assets provides cold storage services, enabling investors to hold their assets in physical vaults. These custodial services are removed from the internet and thus provide heightened security through compliant means. These storage facilities are “distributed over multiple geographically dispersed locations” to prevent digital assets from being hacked.
Fidelity’s move into this space has some important implications for digital assets; the platform has the potential to bring legitimacy to the space.
Still rife with controversy, digital assets continue to face a number of ongoing scandals. For example, clients are owed upwards of US$190 million in the QuadrigaCX debacle. In addition, Bitfinex recently obscured the loss of corporate and client cash to the tune of US$850 million.
The Fidelity survey further notes that the primary challenges for digital asset investing, according to the respondents, are price fluctuations, unclear regulation, its short history and limited fundamentals.
Some other financial institutions are projected to begin providing services for digital assets if they aren’t already. In February, Julius Baer (SWX:BAER), Switzerland’s third largest bank, announced that it will provide cold storage services for digital assets. Currently, TD Ameritrade (NASDAQ:AMTD) enables qualified investors to trade bitcoin futures. The firm, which manages over US$1 trillion in assets, has stated that it is working closely with ErisX to launch trading products for digital assets.
The pending release of Fidelity’s trading platform aligns with a rise in price for bitcoin. Year-to-date, bitcoin had increased 50 percent to US$5,790 as of Monday, according to CoinMarketCap. Meanwhile, Fidelity shares have risen over 25 percent year-to-date to US$39.37.
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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.