When Fidelity Digital Assets (FDAS) was launched in early 2019, offering custody services and tools for institutional traders and investors, the firm’s services started and ended with the support of Bitcoin. However, FDAS president Tom Jessop told The Block’s Frank Chaparro that all of that might soon change.
“On ‘The Scoop Live’ podcast, Frank Chaparro recently spoke to Fidelity Digital Assets’ president, Tom Jessop, to talk about … support for Ethereum, and the application of blockchain technology in the tokenization of traditional assets.”https://t.co/h6vpnxL7D4
— Frank Chaparro (@fintechfrank) December 14, 2019
Indeed, the institutional cryptocurrency trading platform, which is operated by US-based financial services firm Fidelity, may roll out support for Ether next year, Jessop said. However, Jessop also said that support for ETH would only truly be considered if the company’s clients show sufficient interest.
“We’ve done a lot of work on Ethereum. We intend to support it in the New Year,” Jessop explained, adding that “we’re very led by our clients.”
Fidelity’s sole support of BTC may have kept it from “truly competing” with other institutional platforms
The Block’s Celia Wan wrote that some have argued that the fact that FDAS only supports Bitcoin has “kept FDAS from truly competing with crypto-native firms like Coinbase and BitGo.”
Indeed, the addition of ETH support could bring FDAS into closer competition with services like Coinbase Pro and BitGo, which also offers institutional trading and custody services in multiple digital assets. However, Fidelity would have quite a bit of catching up to do in terms of the number of assets offered; for example, Coinbase Pro offers trading in Bitcoin Cash, Stellar Lumens, XRP, Dash, and other cryptocurrencies.
Still, it could be argued that FDAS’ proximity to institutional clients involved in Fidelity’s other branches could offer FDAS an advantage when it comes to onboarding new investors and traders.
Fidelity has shown doubts around the stability of crypto in the past, but Jessop belives that “many of these things solve themselves with time”
FDAS isn’t designed to serve retail investors–rather, the company primarily serves institutional clients: hedge funds, pensions, endowments, family offices, and other kinds of institutional investors.
In October, Kathleen Murphy, who is the president of personal investing at Fidelity Investments, told CNBC that Fidelity generally does not offer cryptocurrencies on any of its retail trading platforms in order to protect retail clients.
“While we embrace crypto in terms of trying to understand it and be innovative and thoughtful… We’re also very careful about where we offer those types of things, so they’re not offered broadly on the retail platform,” she said. “We want to be very careful about making sure that investors who really aren’t institutional investors […] don’t make a mistake with cryptocurrency.”
In Jessop’s recent interview, he also said that the lack of regulatory clarity, price volatility, and well-established track record had kept Fidelity Digital Assets away from exploring the support of Ethereum and other cryptocurrencies so far.
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“How do I know that if I buy this thing, it’s gonna be around tomorrow?” he asked. “Like, what indication of durability or longevity do I have based on the fact that the history of this asset is 10 years old?”
However, Jessop added that “I think many of these things solve themselves with time.”
Competition heats up between institutional trading platforms
The announcement that Fidelity may add support for ETH next year comes at a time when institutional crypto trading platforms are competing for what seems to be a smaller pool of investors than many in the cryptosphere seem to have expected.
Indeed, the launch of several institutional crypto products and platforms this year has left many industry participants wanting: notably, the launch of Van Eck’s Bitcoin Trust, as well as some of the early trading volume figures on ICE’s Bakkt (trading on the platform has since picked up speed.)
ICYMI: Friday’s Bakkt Bitcoin Monthly Futures:
📉 Traded contracts: 1551 ($11.23 million, -22%)
🚀 All time high: 5671 (11/27/2019)
💰 Open interest: $6.33 million (+13%)
— Bakkt Volume Bot (@BakktBot) December 14, 2019
However, in a recent interview, Tagomi’s Marc Bhargava told Finance Magnates that a new wave of institutional capital could crash into crypto in 2020 with the dawn of “big tech” in the cryptosphere.
“I think that this next 2020 wave of ‘institutional’ investors is really these large tech firms,” he said in an interview with Finance Magnates. “And I think that down the road, you definitely will see more from the traditional asset managers–right now, we see more of the family offices who have broader discretionary ability to invest in things, or funds that are primarily hedge funds run by a couple parts.”