Nov 30, 2019
Fidelity has been granted a trust licence to offer trading and custody of bitcoin by the New York State Department of Financial Services, as the asset management group continues to woo cautious institutional investors into the “Wild West” of digital assets.
The move allows Fidelity’s new digital assets subsidiary to launch a digital currency custody and execution platform “on which institutional investors and individuals can securely store, purchase, sell, and transfer bitcoin” to New York residents, the DFS said.
Boston-based Fidelity, which has about $2.8tn of assets under management, made clear last year it intended to take the plunge to offer digital assets services to Wall Street, where other regulated groups have held back from the nascent marketplace.
“The custody and trade execution services that we provide are essential building blocks for institutional investors’ continued adoption of digital assets,” Michael O’Reilly, chief operating officer for Fidelity Digital Assets, said on Tuesday.
“The designation as a New York trust company under the supervision and examination of the DFS builds on the credibility and trust we’re establishing among institutions and other market participants,” he said, adding that the group wanted to continue to play a “leading role” in “supporting the maturation of the entire ecosystem”.
Last month, Abigail Johnson, the investment group’s chief executive, told the Financial Times that what had started as a “just for fun” experiment had become a serious drive to build up a viable crypto custody business for hedge funds, family offices and financial adviser clients.
Safekeeping of crypto assets has been a concern for institutional investors because exchanges have been plagued by outages and hacks. Prolific market manipulation and scams in the loosely regulated space have been a deterrent.
Nevertheless, yield-hungry speculators have continued to flock to volatile crypto markets, while some are optimistic that Facebook’s plan to spearhead the launch of its own digital currency, Libra, will further legitimise the space. The price of bitcoin has risen this year from less than $4,000 at the beginning of the year to more than $8,000 today.
To date, New York has issued 23 of the highly coveted licences to companies involved in virtual currency activities in the state. Earlier this year, the department granted a licence to the Intercontinental Exchange, the world’s second-largest exchange group by market value, to provide custody of bitcoin futures via Bakkt, its digital assets arm.
The move signals New York’s keenness to promote itself as a hub for crypto activity, alongside countries such as Switzerland and Malta.
“This approval is further evidence that innovation and consumer protection can coexist in New York’s evolving and expanding financial services industry,” said Linda Lacewell, the DFS’s superintendent of financial services.