November 26, 2018 Article

Can Fidelity Digital Asset Services Bridge the Gap Between Institutional Investors and the Crypto Industry?

The potential of blockchain and the rising interest in fintech is beginning to capture the attention of Wall Street companies. Just recently, Fidelity Investments, a world leader and provider of a range of financial services launched a subsidiary company dubbed Fidelity Digital Asset Services to specifically handle cryptocurrency clients.

Fidelity Investment is highly experienced in financial service provision to institutional investors and boasts of client assets worth $7.2 trillion under its management. As such, this financial company identified a gap in service cryptocurrency service provision to its niche clients and decided to address the gap.


Positive Reception

Fidelity Investment's move to create a cryptocurrency specific platform has been received positively by industry players. According to ONe Network's CEO and founder, John Hoelzer, this step brings some level of legitimacy to the industry and is likely to bring the discussion on cryptocurrency regulation to the forefront.

He says, "Fidelity’s move, is one that I think, brings validation to the market and will be a trailblazer for other institutional money to come into the sector. It will also allow for better regulation and to protect all the investors, while bringing in capital that otherwise remains out of reach for crypto at this time. This will in turn allow for the creation of better products and more innovation on an even faster pace than has been seen over the last 2-5 years."

Through its subsidiary company, Fidelity Investment aims to serve family offices, hedge funds and other institutional investors who are interested in investing in virtual assets. The company will also provide security and storage solutions for digital assets using appropriate infrastructure and specialists.


Value Add

For a long time, custodial services have not been available in the cryptocurrency space. Their absence has been one of the major challenges that has made institutional investors reluctant when it comes to engaging in cryptocurrency activities. Since these needs are unique for cryptocurrencies compared to traditional assets, the step taken by Fidelity to provide custodial services alongside technological support has been received positively by investors.

Jori Falkstedt, CEO of Verifer is quick to note that Fidelity's move will have absolutely positive effects. "The more traditional Wall Street companies become involved in the crypto market, the more trustworthy and legitimate crypto companies will also be in the eyes of ordinary people. Also, more institutional money is certainly expected, which makes the market more stable," he notes.

But beyond the positive effect, Fidelity Investment has many other factors working for it. First, this financial company has great experience in handling sensitive information and cyber insecurity. This includes cryptography, offline services and controls - all this gives it an edge over other financial service providers. The firm also has a chance to utilize its existing systems to enable customers to carry out trades and assets. Its aim is to do business investors who observe anti-money laundering regulations.

Despite the drop in cryptocurrency prices and the incidences of fraud and hacking, virtual currencies are growing. More institutions are gaining confidence in the industry. Fidelity Investors considers cryptocurrencies to be a foundational technology, and like the internet, it will have its ups and downs, but will eventually stabilize.





Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.