Fidelity Investment Corporation has recently posted advertisements looking for software developers to open a cryptocurrency exchange. Details have yet to be released about the launch date and how the exchange will operate. Fidelity is a leader in world investment, with over $2.5 trillion dollars of assets under management.
Fidelity will compete with the likes of Coinbase, Kraken, Binance, and OKex. However, given the vast amounts of wealth under management, its entry represents a complete shift in the industry. It is a colossal financial services firm, and it is the first western wealth firm to create a cryptocurrency exchange. In Japan, SBI Holdings recently launched their cryptocurrency exchange, and they are also heavily invested in high-volume Japanese exchange, Bitflyer.
The news comes amidst a flurry of positive regulatory announcements concerning the cryptocurrency industry. Jay Clayton has stated that Bitcoin and other cryptocurrencies are not securities, a new cryptocurrency friendly head has been appointed by the SEC, a CFTC official has referred to blockchain as a “technological revolution,” and Coinbase is set to acquire licenses to trade SEC regulated cryptocurrency products. While Coinbase has launched a suite of institutional products, existing wealth conglomerates, such as Fidelity, can turn their clients and portfolios towards the sector more easily.
A financial behemoth with $2.5 trillion in management opening a cryptocurrency exchange is not the same as a cryptocurrency exchange operating in isolation. It signals regulatory approval and a definite interest from large-scale institutions. While there is much talk and enthusiasm surrounding cryptocurrencies, the actual amounts traded are tiny compared to other financial markets. If pension plans, mutual funds, hedge funds, and ETFs turn even 1% of their portfolios towards cryptocurrencies, the effect on price, adoption, and integration will be phenomenal. All of these announcements are the foundations for this to take place.
Given that regulatory uncertainty is being removed from the market, and cryptos are being given the nod from the SEC, it makes sense for Fidelity to make a move. Fidelity is among the first large financial services firms to get involved in the growing cryptocurrency market, though Goldman Sachs has made some inroads. Coinbase may attract some large-scale investors, but financial whales are most likely going to continue to operate through Fidelity and other established institutions, provided the infrastructure is put in place.
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Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.