Fidelity Investments, the world’s third-largest asset manager with $7.1 trillion in assets under management, has become the latest blue-chip company to dive into cryptocurrencies. In a first for any major financial firm, Fidelity announced on Oct. 29 that it will create its own digital token and offer blockchain services to clients — marking an important turning point for the largely unregulated cryptocurrency market. Fidelity is launching Fidelity Digital Assets, a new subsidiary focused on cryptocurrency services. The venture will operate an exchange, register as a broker-dealer, and act as an advisor on cryptocurrency investing— all from within one company rather than different departments of the same firm. And most interestingly of all: It will also create its digital token (called ‘F fidelity Digital Assets’), granting users privileged access to its primary market research and private sale opportunities.
Why Fidelity is Getting into Cryptocurrencies
The investment world has become increasingly aware of the potential of cryptocurrencies. And as the hype has increased, so too has the number of mainstream companies entering the market. More and more financial institutions are getting involved in mining, trading, and investing in coins. The reasons for this are mostly two-fold. Firstly, there’s the growth potential — cryptocurrencies have grown significantly in popularity, value, and usage since their creation in 2009. But secondly, there is also the potential for regular income, as many cryptocurrencies also act as an investment vehicle for funding start-ups and projects. There are several reasons why Fidelity decided to dive into cryptocurrencies. Firstly, the company has been interested in blockchain technology since the early days. As a firm focused on building products for clients, it has been looking for ways to apply blockchain since its inception. Fidelity has continued to build up its blockchain team and expertise over the past few years. It has also been hiring blockchain developers and investing in research to make sure that the company is fully up to date on the latest developments in the blockchain space.
Blockchain for Institutional Investors
Fidelity’s foray into cryptocurrencies has been made possible by blockchain technology. The company has built a system that allows it to store, buy, and sell cryptocurrencies on behalf of clients. This is also where clients will be able to track their digital asset investment. The system uses what’s called a “trustworthy” ledger. This is a decentralized database that is normally used for tracking cryptocurrency transactions. By storing data on a blockchain, Fidelity can make sure that records are accurate, safe, and effectively tamper-proof. The firm will also allow clients to transfer funds from their existing bank accounts or brokerage accounts to its cryptocurrency exchange. This is made possible by the blockchain ledger. The ledger records every transaction, meaning that Fidelity’s new cryptocurrency exchange will be able to verify client identity and source of funds. This means that the firm can comply with regulatory requirements and protect against any fraudulent activity.
What Is Fidelity’s Digital Asset?
However, to gain access to this new exchange and investment platform, clients need to purchase Fidelity’s digital token. The company has announced that it will sell this token to the public at large. And in an unusual move, Fidelity will also give its employees early access to the token sale. The token is designed to give clients early access to Fidelity’s cryptocurrency research and private sale opportunities. While Fidelity hasn’t revealed how much the token will cost, or how the token sale will work, the company has stated that it will accept payment in cryptocurrency as well as traditional currencies
What Does This Mean for Consumers and Investors?
Fidelity’s new venture shows just how bullish the company is on cryptocurrencies. By creating a new digital token and giving clients early access to investment opportunities and research, Fidelity is making a bold move to offer services that no other company has provided before. While Fidelity is the latest in a long line of major companies getting into cryptocurrencies, it is the first to offer clients a token. The token will give clients privileged access to special deals and research that will be unavailable to non-token holders. While the token might appear to be a way to make money for Fidelity, the company is keen to point out that it is not a security. Fidelity’s director of corporate communications, Tom Jessop, said “We’re not looking to make a profit on this,” and that the token is “just a new way for clients to interact with our existing platform.”
Fidelity’s foray into cryptocurrencies is a massive development in the continuing maturation of the market. Now that a major financial services company is getting involved, and doing so with a token, it is likely to attract even more interest to cryptocurrencies as an asset class. It also represents a significant step towards the wider adoption of blockchain technology.
