The world’s fourth largest asset manager, Fidelity, who manages over $7.2 trillion in assets, launched its separate company, Fidelity Digital Asset Services, on October 15. During that time, Fidelity CEO Abigail Johnson said the long-term strategy of the new investment firm is to make the crypto market more accessible for investors.
“Our goal is to make digitally native assets, such as bitcoin, more accessible to investors,” Johnson said. “We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.”
Head of Fidelity Digital Assets Tom Jessop also mentioned the company’s ideas of commercializing a standalone crypto company started in the middle of last year. “We saw that there were certain things institutions needed that only a firm like Fidelity could provide,” Jessop told CNBC, adding that it already works with 13,000 institutional clients. “We’ve got some technology that we’ve repurposed from other parts of Fidelity — we can leverage all of the resources of a big organization.”
With Fidelity’s stamp of approval on cryptocurrencies as a new asset class, it now allows the market to appeal to institutional investors that include hedge funds, pensions, and endowments. “It is not so much as the institutional mandate anymore. Custody has been a very big hurdle and having somebody like Fidelity put their stamp on it and say ‘yes, this is a new asset class, and we’re going to custody this.’ I believe they even said they may have some insurance. So that is a step closer. Now, you have Yale investing, Yale endowment, this has put everybody on notice. Now, you either have to have a strategy or you have to have a reason why you’re not,” said Kelly on CNBC’s Fast Trader.
Changpeng Zhao, CEO of Binance, which is the largest cryptocurrency exchange in the global market, said the institutional money will be present in crypto, its just a matter of time. “What happens when a fund like Fidelity allocates a mere 5% of their portfolio to crypto? Have you calculated how much that is?” he stated.
If a major asset manager distributes a small percentage of its portfolio in the cryptocurrency market as a small bet relative to the size of its holdings, it could potentially trigger many institutional investors to join into the cryptocurrency market.
In current time, companies such as Coinbase and BitGo, who lead in the cryptocurrency sector, along with financial institutions such as Goldman Sachs and Fidelity are quickly improving the institutional architecture around digital assets.
The lack of custodian solutions once represented a large gap between institutional investors and the cryptocurrency market, according to Mike Belshe, the CEO of BitGo, however, a rising number of companies are closing that gap. “If you were investing in any other asset class, you’re probably not worried about the asset just disappearing — but this one, people still have that fear. We’ve got to conquer that.”