Fidelity, the investment firm that manages more than $7.2 trillion in client assets, has announced they will be launching a separate company called Fidelity Digital Asset Services to handle cryptocurrency custody and execute trades for institutional investors.
The new Fidelity Digital Asset Service emerged out of the Fidelity Center for Applied Technology (FCAT) incubator for artificial intelligence and blockchain projects. The new head of Fidelity Digital Assets, Tom Jessop, said how the service emerged when they “saw that there were certain things institutions needed that only a firm like Fidelity could provide”. Fidelity Investments Chairman and CEO, Abigail Johnson, said that they “expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for their clients to understand and use”.
The new company will employ cold storage for safe cryptocurrency storage, along with a crossing engine and smart order router for cryptocurrency trading. This will allow institutional investors to execute trades on multiple market platforms, but the specific markets were not announced.
Blending traditional finance with a new asset class
Cryptocurrency is a very new sector that has significant potential as it strives to be peer-to-peer digital money, along with being a more efficient and secure way to secure information on the blockchain. Thus, that potential could cause significant financial rewards and why many investors are entering the space. Custodian accounts provide a gateway for many institutional investors that require greater security and knowledge to enter the cryptocurrency space rather than investing directly themselves.
Fidelity is joined in the cryptocurrency custody sector by Coinbase, Gemini, BitGo, Ledger, ItBit, Japanese bank Nomura, Goldman Sachs and Northern Trust whom are also exploring offering custodial services to allow more investors to become involved in the sector. However, Fidelity is one of the first to actually launch their service and one of the first big investment firms to have been involved in the cryptocurrency sector. Fidelity started around 2014 with mining projects in New Hampshire, USA, then partnered with Coinbase to allow users to view their cryptocurrency balance in the Fidelity app, and then facilitated Bitcoin denominated charity donations in 2015. Another big investment by Fidelity in the cryptocurrency space is their 15% stake in Neptune Dash, the publicly traded company that offers fractional Dash Masternode ownership and recently expanded to offer Masternode pooling services. This exposed Fidelity and their investors to the success and returns of the Dash network signaling their confidence in Dash.
Dash offers greater investment access for more individuals
Dash’s unique DAO structure allocates 45% of mining rewards to Masternodes in exchange for helping to further secure the network, which thus provides an economic incentive to stake the 1,000 Dash necessary for a Dash Masternode. However, this large sum can be restrictive for many individuals, much like institutional investors that often have minimum capital requirements. Instead services like Neptune Dash’s fractional Masternode ownership, Neptune Dash Pooling, and Crowdnode Pooling have emerged as ways for individuals to gain the relative percentage return from the Dash network without being restrained by the large capital requirement for a whole Masternode.
The increased participation in the network not only enables more equitable wealth distribution and usage of Dash, but also a stronger network since individuals and are able to stake their previously idle Dash to further increase Masternode counts. The Masternode Pooling system and its larger investors further demonstrates the economic incentives of the Dash network that harnesses individual motivation to create a more secure and more feature-rich network.