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Investment giant Fidelity is the latest financial services company to join the crypto bandwagon with its announcement that it will start a new and separate company, called Fidelity Digital Asset Services, for executing trades on multiple exchanges for investors like hedge funds and family offices.
Fidelity becomes the first Wall Street financial services company to provide cryptocurrency custodial services.
“Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors. 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.”
According to Tom Jessop, head of Fidelity Digital Assets, the company started exploring the potential of blockchain technology and cryptocurrencies some years back. This new company is the result of the advancement in their understanding of this space. Fidelity is looking at setting up a full-service, enterprise-grade platform for digital assets.
Currently, the services of the new company will be available only for institutional investors like hedge funds, endowments, and family offices but not to retail investors.
The new company will handle custody of digital assets, similar to proposed solutions of companies like Gemini, Coinbase, BitGo, and Ledger. Financial services companies like Goldman Sachs and Northern Trust are also exploring custodial services of digital assets.
The biggest challenge facing Fidelity will be the security of stored digital assets. A whopping 1.6 billion USD has been stolen as of until June this year by hackers who overpowered the security measures of wallets and exchanges. However, Fidelity is confident that it has the expertise and wherewithal to provide best-in-class security measures to protect clients’ digital assets. The new company is the brainchild of Fidelity Center for Applied Technology, or FCAT, the tech arm of the investment firm. It has been developing all of its cybersecurity measures, something the company has a long and proud history of.
Investors have always wanted a trusted services provider to enter the crypto space to attract more investment. Endowments funds of institutions like Yale, Harvard, Massachusetts, Stanford, and Dartmouth have reportedly invested in at least one cryptocurrency fund. With the entry of a reputed institution like Fidelity, many more such institutions are likely to enter this space with confidence.