It’s been a FUD-filled week for cryptocurrency, but a big-name financial-services company, for one, remains bullish.
Fidelity Investments announced yesterday the launch of a new company, Fidelity Digital Assets, that will manage cryptocurrency holdings for hedge funds and other large, traditional institutions looking to sink their money into digital coins. The head of corporate business development at Fidelity, Tom Jessop, will head the new organization, which has 100 employees, according to a Fidelity spokesperson. Up until December 2017, Jessop served as president of Chain, a company that uses blockchain technology to privately manage monetary assets.
In May 2017, Quartz reported that Fidelity had been mining both bitcoin and ether. First, it was for educational reasons, according to Fidelity CEO Abigail Johnson, but then it started “actually making a lot of money.” Employees who embraced cryptocurrency at the company got a fun nickname (“bitcoin vikings”), and could even use bitcoin to buy lunch at the company’s Boston headquarters.
“We started exploring blockchain and digital assets several years ago,” Jessop said in a statement yesterday about Fidelity Digital Assets’ launch. Fidelity took in $7 million worth of bitcoin in donor-advised funds (where the money can grow tax-free until the account holder decides to give it away) in 2016, the year after it first started accepting donations in the digital currency. And in 2013, long before the likes of Goldman Sachs started talking bitcoin trading, Fidelity began its digital asset research through its Blockchain Incubator, eventually letting customers track the state of their Coinbase wallets on Fidelity.com.
What’s most striking about Fidelity’s latest move is not just that the financial-services company is active in crypto, but that it seems to truly understand the nuances of digital currency and its history. Anyone can use crypto as a marketing hook to garner hype, but not every 72-year-old finance company can explain how David Chaum set the precedent for cryptocurrencies in 1989.
Fidelity does this breezily in a Medium post timed with its new crypto endeavor’s launch. From Chaum’s “untraceable but verifiable” digital money to Adam Back’s Hashcash, which introduced the proof-of-work used today in bitcoin mining, to Nick Szabo’s consensus model, Fidelity Digital Assets’ post (which does not identify the author) paints a thorough picture.
Institutions thinking about dipping their toes in crypto investments need someone to paint that picture for them. Crypto is a new and rocky terrain, and most traditional financial institutions aren’t equipped to guide potential investors through it. After all, most traditional financial institutions haven’t had crypto mining rigs in their offices.
“In our conversations with institutions, they tell us that in order to engage with digital assets in a meaningful way, they need a trusted platform provider to enter this space,” said Jessop. Fidelity currently works with more than 13,000 institutions on asset management, according to its press release. It’s anyone’s guess, though, how many of them want to meaningfully engage with crypto.