CoinDesk reported in February that Fidelity’s crypto custody and trading services platform was being tested by a limited number of clients including hedge funds, family offices and financial advisors.
Fidelity Digital Asset Services (FDAS) is “now engaged in a full rollout” of its custody and trading services, expanding from the limited trial users in the platform’s final test stage, according to a Financial Times interview.
The business had initially been expected to be open in the first quarter of 2019.
In an interview with Fidelity Investments CEO Abigail Johnson, the FT said:
“Fidelity started adding clients in the first quarter and is now engaged in a full rollout of its custody and trading services for digital assets – a boon to what is a fragmented and complicated industry, Ms Johnson told the FT in a rare interview.”
The $2.8 trillion asset manager is one of the first established traditional financial institutions to offer digital asset custody services as other peers are still waiting to see how the crypto industry comes into formation.
While there are several platforms providing similar services, Johnson said Fidelity’s large client base and network were distinct advantages.
Coinbase, for example, “is still a company that most people had never heard of, and they don’t have the existing relationships with the independent advisers”, Johnson told the FT.
That crypto exchange, looking after billions of dollars of digital assets, was approved by the New York State Department of Financial Services, and launched its custody services for third parties last October.
On crypto, in general, Johnson said, “If you’re either interested or technically adept, then it’s not really that big of a deal.”
Fidelity Exec Predicts Crypto Custodians Will White-Label Their Services
Fidelity Digital Assets (FDAS) envisions a future where custodians work behind the scenes to store cryptocurrency for other firms’ clients, like supermarkets putting their brands on third-party products.
“The way we think about it is, you can build your own infrastructure but that’s really expensive”, Christine Sandler, head of sales and marketing at the unit of Fidelity Investments, said at a Hedge Fund Association conference in New York last week.
“To do it really well, you have to have geographic diversity, a staff that understands the underlying technology”, said Sandler, who joined FDAS from crypto exchange Coinbase in March.
Hence, “I expect that custodians that do really well at this-whether it’s Fidelity or Coinbase-they will act as sub-custodians to other custodians”, she said. “It means they partner with other institutions and say, ‘I’m happy to custody this and you manage the client experience.’”
To be clear, Sandler was talking hypotheticals and not announcing any new plans for FDAS. The roughly one-year-old business acts as a broker and custodian of bitcoin for institutional investors and is one of the most significant forays to date into the crypto market by an established financial services provider.
This month, Fidelity Digital Assets announced that it would open up a new entity in Europe to serve European institutional investors. In November, FDAS obtained a trust company charter from the New York Department of Financial Services (NYDFS), allowing it to custody bitcoin for institutional investors in New York. Right now, the unit sources its liquidity primarily from over-the-counter (OTC) trading desks, but it plans to sign up its first crypto exchange by the end of 2019.
At the New York event, Sandler added that a theme of 2020 will be clients expressing interest in digital assets in many different ways.
“Clients come to us and say ‘I want to expose 1 percent to 2 percent of my portfolio to bitcoin.’ That’s a big lift in terms of accessing that liquidity”, she said. “But it’s also a big lift in terms of how they are incorporating that into their portfolio, what evaluation tools are being used … what happens if the asset forks? Do you own the asset?”
