Friday, 18 September 2020

What is Fidelity Digital Assets?

The Big Bang of Crypto Reaches Wall Street

Fidelity is launching an Institutional solution for a new asset class. As Bakkt launches next month, we know now that the rest of Wall Street are following in the footsteps of the ICE.
Let’s make no mistake, this is Fidelity launching a crypto trading desk. Fidelity with Fidelity Digital Asset Services (FDAS) becomes the first Wall Street firm to open one, with cold storage and all for digital assets (a.k.a. cryptocurrencies).

This is the kind of institutional and custody service solution crypto could only dream of just a few years ago. Fidelity Investments already administers more than $7.2 trillion in client assets.

If you follow the history of Bitcoin and its altcoin kids, here is the creation of Fidelity Digital Assets, a remarkable first step in a long-term vision to create a full-service enterprise-grade platform for digital assets. This year has been nothing but a continuation of the big-bang of crypto that was December, 2017.

The FDAS is a subsidiary solely focused on offering products that pertain to digital assets, such as Bitcoin and Ethereum. We don’t yet know which other altcoins they will offer. So who will be their clients? Well, for starters, these aren’t the cash-strapped poor investors of Coinbase who need to pay outrageous transactions fees to begin with. The FDAS, headed by Tom Jessop, will be offering top-of-the-line cryptocurrency custody for Fidelity’s 13,000 institutional clients.

If you thought the progress of Binance, Bitmain, Coinbase, Gemini, Galaxy Digital and others was impressive, just wait till Bakkt and FDAS join the party. We may be witnessing the future of investing, as young people show a marked preference for investing in “decentralization” and their related digital assets.

Recently, Greenwich Associates found that 70 percent of institutional finance executives believe cryptocurrencies will have a place in the future of the industry. Perhaps many still don’t realize how big they will be.

Just as Visa is set to get in on cross-border payments to rival the likes of Ripple (XRP) and popular apps such as Transferwise, the future of investing is pivoting and Wall Street has to keep up to the demand. Bitcoin is no longer the rebel. Many view it as a populist symbol of all that is wrong with the real world of money and that status quo. Fidelity getting into crypto means something when some of the leading centralized crypto exchanges earmark the event:

It took Fidelity quite some time to roll out FDAS, but at least Bakkt will have some competition. If FDAS (Fidelity Digital Assets) emerged originally from a select team of blockchain technologists, product managers, financial and legal specialists within the Blockchain Incubator in Fidelity Center for Applied Technology, how it rolls out likely won’t be so slow.

Fidelity found that 70 percent of institutional investors said that new asset classes will likely emerge because of advancing technologies such as blockchain. Since blockchain adoption is now accelerating in the real world, digital assets are tethered to them, including how altcoins are tethered (literally and symbolically) to Bitcoin’s price.

Bakkt and FDAS only help kick start the SEC to regulate more aspects of cryptocurrencies including a pending Bitcoin ETF. The acceleration of the mainstream moving into cryptocurrencies is, as of October, 2018, well underway. From Central Banks getting fiat on to the blockchain to the dynamic evolution of DEXs, how we invest and trade digital assets will help to build a new world.

FDAS will seek to scale market adoption by offering what you’d expect:

1- Institutional-Grade Custody of Digital Assets

2- Trade Execution

3- Dedicated Client Service

There’s no turning back, Satoshi Nakamoto is not rolling in his grave. This is just another step in the inevitable progress of digital assets towards a more fluid and dynamic world.

Fidelity’s mission is to inspire better futures and deliver better outcomes for the customers and businesses they serve. How ironic that altcoins and digital assets could become front and center in how they do this.

As more diversified financial services firms put a stake in crypto, that’s $billion of dollars heading in the direction of decentralization and blockchain, investing in the future that some are calling the crypto singularity.

FDAS will come with security in mind:

1- Secure, vaulted cold storage

2- Physical, cyber, and operational controls

3- Multilevel safeguards

Fidelity is big. How big? Fidelity employs more than 40,000 associates who are focused on the long-term success of their customers. Fidelity images a world where all types of assets are issued natively on a blockchain or represented in tokenized format. When institutional investors want to talk crypto, you know they know the names of Bitcoin’s children and understand the future better.

The FDAS could be significant, or it could be just a first-mover in what will likely be a crowded space.

By Michael K. Spencer
Legal disclaimer: The insight, recommendations and analysis presented here are based on corporate filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. They are presented for the purposes of general information only, and all the information belongs to the original publishers. These may contain errors and we make no promises as to the accuracy or usefulness of the information we present. You should not make any investment decision based solely on what you read here.

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