Fidelity Says It Will Trade Bitcoin for Hedge Funds
Story by: Justin Baer
Fidelity Investments said it will store and trade digital currencies for hedge funds and other professional investors, becoming one of the first Wall Street giants to step into this volatile corner of the financial world.
The new business, Fidelity Digital Asset Services LLC, is currently setting up accounts for some new clients and will open more broadly early next year. Fidelity will deal for now in bitcoin and ether, the world’s two most-valuable digital currencies, but intends to expand into additional assets in the future, said Tom Jessop, Fidelity’s head of corporate-business development.
Fidelity’s open embrace of alternative currencies has set it apart from other large banks and financial services companies that have been cautious and even skeptical of bitcoin’s benefits. Bitcoin operates online and allows users to transact with each other directly, bypassing governments and banks that normally act as middlemen in financial transactions. Regulatory, security and risk-related issues are major barriers to broader adoption or the technology.
Fidelity began exploring the possibilities of bitcoin and other digital currencies roughly four years ago. The firm experimented with mining virtual coins and using digital ledgers to execute trades, put some of its own money to work in a digital currency fund, and eventually allowed clients to donate digital assets to charities.
“Some of you might be wondering: Why am I here today?” Fidelity Chief Executive Abigail Johnson said during a May 2017 digital-currency conference. “I’m here because I love this stuff…all that the future might hold.”
Some of the systems initially built to serve its own forays into digital currencies formed the basis for what Fidelity will now make available to outside clients, Mr. Jessop said. He predicted other traditional Wall Street players will follow Fidelity and help bring more institutional investor to these nascent markets.
“It’s easy to get caught up in the here and now, but if you believe in the technology, you (see it) as a new medium for financial assets,” Mr. Jessop said. “When Abby first got interested, she saw that.”
Fidelity Digital will serve money managers, family offices and other institutional clients, and has no plans for now to extend its offerings to retail customers, Mr. Jessop said. The business has about 100 employees, including dedicated client-services representatives, he said.
Fidelity plans to execute trades through several digital-currency exchanges and platforms.
Many of Fidelity’s peers, including the large custody banks and securities firms that trade and safeguard stocks, bonds and other securities, are researching ways blockchain technology can be used to make it faster and safer to move assets. Far fewer have explored dealing more directly with the currencies themselves.
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