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David Drake

December 3, 2018 Article

Fidelity Investments Takes Initial Step in Cryptos, Will Other Wall Street Firms Follow Suit?

2018 has been a tough year for cryptocurrencies. After experiencing a boom that saw bitcoin reach a high of $19000 in December 2017, the cryptocurrency market capitalization has been reduced by billions of dollars this year. But the announcement made by Fidelity Investments last month could give the cryptocurrency market the boost it needs to get on the path to recovery.

Founded in 1946, Fidelity administers assets worth $7.2 trillion, making it the fourth largest asset manager on the globe. The Wall Street financial firm is set to launch a separate company to focus on bringing virtual currencies to its customers. This move will provide institutional investors with a digital currency platform, advise and custody services.

Bridging the Gap

Fidelity Investment already has a client base of nearly 13000 institutional investors, including brokers and advisory firms. Through the Fidelity Digital Asset Services platform, the firm will make cryptocurrency services accessible to institutional investors round the clock starting in 2019. This unique step aligns well with the continuous trading cycle of blockchain.

In doing so, the platform will be bridging that gap between cryptocurrencies and major institutional investors and, in the process, usher in a new era of cryptocurrency adoption by investors. According to
ONe Network CEO, John Hoelzer, this will aid in validating the cryptocurrency market.

He says, "Fidelitys 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 the investors all 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."

Fidelity Digital Assets already has 100 employees and has brought onboard its first customers ahead of of its early 2019 launch. This marks the most significant step that any institutional asset manager has taken in the cryptocurrency space.

Speaking to Forbes, the Fidelity Digital Asset Services founding head, Tom Jessop, said the move is in recognition of the fact that institutional demand for digital assets does exist. He added that sophisticated investors, such as hedge funds and family offices, are beginning to seriously consider the digital currency space.

First Step

With time, Fidelity Digital Asset Services will begin to boost the legitimacy of digital assets on a wider scale. The trust and acceptance of cryptocurrencies by institutions is likely to push this emerging technology to the tipping point. Should this happen, it will boost the acceptance of digital currencies as investment opportunities among mainstream investors.

Verifer CEO, Jori Falkstedt, holds that the entry of Fidelity Investments into the cryptocurrency space will have an absolutely positive effect. According to him, 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 non-investors. At the same time, more institutional money is certainly expected to flow into the cryptocurrency space, which stabilizes the market even more.

Fidelity Investment's interest in cryptocurrencies dates back to 2013 when it initiated research on digital assets through the Fidelity Center for Applied Technology. Even though Fidelity Digital Assets is a product of this blockchain incubator program, research work around digital assets and blockchain continues in the center.

According to Jessop, the move to set up Fidelity Digital Assets is an initial step in the long term vision that the company has to develop a full service enterprise platform for virtual assets.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.

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