Fidelity Digital Assets, a division of Fidelity Investments, is making steady progress towards providing bitcoin trading and custody services for large financial institutions, including hedge funds, pensions, family offices, and endowments.
Fidelity Digital Assets announced on March 7th that their services are live with some of its clients. Fidelity Investments, which is currently world’s fifth largest asset manager with over $2.5 trillion in assets under management, is bringing bitcoin and cryptocurrency trading and custody to the institutional investors in the U.S.
The announcement on Jan. 31st, 2019 stated, “We have continued to build the technical and operational capabilities needed for securing, trading and supporting digital assets with the exacting oversight required by institutional investors.”
The company stated that a number of institutions have reached out to the financial services giant seeking a trusted platform for engaging with bitcoin and other cryptocurrencies. In response, the firm is providing a “custody platform and trading venue—providing a combination of security and a central point of market access, disrupting the obfuscated nature of trading digital assets today.”
Fidelity’s Digital Assets
The Fidelity Investments set out to experiment with blockchain and cryptocurrencies after witnessing a steady increase in interest from large financial institutions, especially around cryptocurrency custody and trading.
“In order to build professional-grade solutions that would meet the demands of large institutional clients, the incubator team invested tens of thousands of hours and millions of dollars in development, product and systems design, and rigorous security controls.”
Main Problems with Institutional Custody
One of the larger problems that Fidelity Digital Assets is trying to solve are the issues with institutional cryptocurrency custody.
According to the company’s white paper, cryptocurrency self-custody is not palpable because of the regulations and legal obligations that large financial institutions must adhere to. As a result, self-managed hardware wallets, “regardless of how secure, are not a feasible option.”
Institutional investors do not want the risk of managing private keys for the cryptocurrency. That said, Fidelity Digital Assets is working to increase access to bitcoin and other cryptocurrencies by providing the “same level of custodial service expected for other assets, despite the regulatory uncertainty.”
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