Last year’s crash in bitcoin prices seems to have done surprisingly little to deter mainstream adoption of bitcoin and other digital currencies. While many of these projects likely began back when bitcoin was booming in 2017, more and more mainstream financial giants are reckoning with the fact that bitcoin and other digital assets are here to stay.
Most recently, the asset manager Fidelity announced it would set up a new crypto business for institutional investors. It’s a particularly noteworthy announcement because, unlike other big players that have gotten into crypto this year from the Yale endowment to Goldman Sachs, Fidelity is strongly associated with a more “main street” style of investing.
In other words, Fidelity’s known as a place where normal people go to invest their money, people like amateur stock traders or employees with a company retirement account, not venture capitalists or hedge fund managers who make long-shot bets for a living. About 27 million individuals have investment accounts with Fidelity, which has a total of $7.2 trillion in client assets under management. It’s a huge, huge player with enormous influence over what types of investments wind up in the accounts of everyday Americans. Now, it’s going to make it easier for you to buy bitcoin and ether, to start.
Prices for most of the largest cryptocurrencies in terms of market capitalization soared on the news.
What Fidelity’s New Crypto Business Really Means
The goal of Fidelity’s project is to make investing in digital and crypto assets more accessible to mainstream investors, explained Fidelity’s CEO Abigail P. Johnson in a statement.
“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.”
To begin the process, Fidelity is setting up a new company called Fidelity Digital Assets which will work primarily with middle-men and institutions, including family offices. For these new clients, Fidelity will offer round-the-clock client services, trade execution and, most importantly “institutional grade custody” of digital assets. Which is another way of saying that they will safeguard enough bitcoin and ether to ensure everyone on its platform can trade it for market prices.
The latter is particularly important, because how, exactly, you store and take care of digital assets like cryptocurrencies is a wildly open-ended question (there are numerous startups working on it and it’s been one of the main impediments to the development of digital asset funds). Individual ownership of cryptocurrencies is determined through a mix of public and private keys, alpha-numeric codes that signify your bitcoin is actually your bitcoin. That’s presented a problem for the firms where you go to buy and sell crypto: Who holds the keys? (About three quarters of brokerages take care of them for clients, according to Fidelity’s stats.)
An organization like Fidelity is beginning to provide answers to these questions, in what could be the first of many needed steps for bitcoin to take so it can stop being perceived as too risky for everyday people
Even if you aren’t a Fidelity customer, the news further cements the impression that it’s only a matter of time before everyday investors will have an easier time gaining access to digital assets that aren’t quite so risky as the ones we’ve seen. While the question of whether an international financial system can operate without middle-men is still very much up for debate, the digitization of of that financial system is already underway, and it’s coming to a retirement account near you.