As already disseminated across almost all blockchain media sources, it was reported that Fidelity revealed their plans to file for a bitcoin investment fund through an SEC filing. As to no surprise for many in the industry, this has been in the works under their internal Fidelity Digital Assets group for quite sometime. Actually, Fidelity itself has been in the blockchain/crypto space for a few years already boasting themselves as one of the early large financial institutions getting involved before the 2017 ICO craze.
(Figure 1) A thorough timeline encapsulating Fidelity's early involvement with bitcoin and blockchain.
As other large financial institutions start to test the waters of crypto or even continue to avoid the still nascent space, Fidelity has taken the proactive approach right from the beginning launching a Blockchain Incubator through their Fidelity Center for Applied Technology back in 2013. PANews hypothesizes that less than 10% of the people who work in the blockchain/crypto industry knew what bitcoin was, let alone blockchain.
After the first, many would deem, the bitcoin bubble of 2013 popped and then dropped in wan fashion, Fidelity ramped up its research efforts and started allowing customer to invest funds from their self-directed IRAs into SecondMarket’s Bitcoin Investment Trust. This eventually precipitated into more auxiliary services such as allowing their internal donor advised funds to accept bitcoin, integrating Coinbase onto their platform to allow users to monitor crypto holdings, and even to accepting bitcoin at its own corporate cafeteria. This would still be considered “cutting-edge” in many office of corporate America.
Fast forward to present day as we have entered in the 9th month of 2020, Fidelity now has its hands in bitcoin mining, digital assets custodianship, institutional trade execution, European market presence, and now the elusive BitLicense.
The main catalyst behind this ironic engagement coming from a traditional financial brokerage is their own CEO, Abigail Johnson. She has become bitcoin’s unlikely evangelist right from the start. At the Consensys 2017 she’s revealed Fidelity’s involvement with blockchain startup Axoni, investment firm Boost VC and university initiatives with MIT, University College London and Cornell.
(Figure 2) A ranking, by IPE.com, of the world’s largest asset managers by AUM.
For a traditional company such as Fidelity, who saw revenues hit about $20.9 billion in 2019, one would postulate their involvement in bitcoin. As one of the largest asset managers in the world, peered with the likes of Vanguard, Charles Schwab, and Blackrock, albeit sitting on a massive AUM in the tunes of trillions, things have been going smooth sailing for them for the past decade. Being a privately held company could also have been a contributing factor of their reduced risk averse investments into bitcoin. But they also have identified the ongoing wealth generational transfer that is about to happen in the next decade. Investors are getting younger and savvier. Fidelity took this opportunity merely as a wake up call in welcoming this new asset class rather than shunning it down. Instead of taking shots at bitcoin like how Richard Turnill, BlackRock’s global chief investment strategist, did back in 2019, Fidelity is welcoming this asset class with open arms.
One thing that the larger asset managers, i.e.
BlackRock, Vanguard, State Street, have an advantage over Fidelity are their widely
popular ETFs. Fidelity also has its star lineup of ETFs and mutual funds, which
are also have become core portfolio investment holdings for IRAs, brokerage
accounts, and 401ks. But if Fidelity can be the first to offer a publicly traded
retail focused bitcoin ETF, expect to see Fidelity multiply their AUM. They already
have the infrastructure, knowledge, partners, and target market for it. All that
separates them from this next frontier is the SEC.