Fidelity Digital Assets (FDAS) imagines a future where custodians work behind the scenes to store digital currency for other company’s customers, similar to supermarkets having their brands on third-party products.
“The way we think about it is, you can build your own infrastructure but that’s really expensive,” Christine Sandler, Fidelity Investments’ unit head of sales and marketing, stated at a Hedge Fund Association conference in New York a week ago.
“To do it really well, you have to have geographic diversity, a staff that understands the underlying technology,” stated Sandler, who joined FDAS from cryptocurrency exchange Coinbase in March.
Thus, “I expect that custodians that do really well at this–whether it’s Fidelity or Coinbase–they will act as sub-custodians to other custodians,” she stated. “It means they partner with other institutions and say, ‘I’m happy to custody this and you manage the client experience.’”
To clarify, Sandler was discussing hypotheticals and not declaring any new plans for FDAS. The approximately one-year-old business goes about as a custodian and broker of bitcoin for institutional investors and is one of the major forays so far into the cryptocurrency market by an established financial services provider.
This month, Fidelity Digital Assets revealed that it would open up a new entity in Europe to serve European institutional investors. In November, FDAS got a trust company charter from the New York Department of Financial Services (NYDFS), enabling it to custody bitcoin for institutional investors in New York. At present, the unit sources its liquidity principally from over-the-counter (OTC) trading desks, but it intends to get its first cryptocurrency exchange before this year ends.
At the New York event, Sandler further said that a theme of 2020 will be customers communicating interest in digital assets in many various ways.
“Clients come to us and say ‘I want to expose 1 percent to 2 percent of my portfolio to bitcoin.’ That’s a big lift in terms of accessing that liquidity,” she stated. “But it’s also a big lift in terms of how they are incorporating that into their portfolio, what evaluation tools are being used … what happens if the asset forks? Do you own the asset?”