Fidelity Digital Assets Is to Onboard Its First Exchange Platform This Year

Fidelity Digital Assets (FDAS), the cryptocurrency division of the Boston-based mutual fund giant, is set to onboard its very fist exchange, before the end of 2019. The FDAS which recently launched a few months ago is currently waxing strong and pushing Fidelity’s position in the broader financial market with both cryptocurrency and traditional sections.

Speaking to CoinDesk, Fidelity’s President Tom Jessop has said that the company’s main targets are over-the-counter (OTC) platforms as liquidity providers and finding the best opportunities for profitable Bitcoin transactions, but also added that the company is ready to handle its first exchange.

“Between launching our trading platform five months ago to year-end, we will have more than doubled the number of liquidity providers. We are primarily focused on OTC liquidity providers [and] it’s likely we will connect to our first exchange perhaps before year-end,” said he.

FDAS’ decision to now begin a business with an exchange will be a good way for the company to satisfy more needs, especially with not-so-large transactions as is usual with OTC desks which are mostly focused on high-valued individuals or major institutions. Speaking on the importance of onboarding an exchange in addition to an OTC desk, Tradeblock Director of Research John Todaro said:

“An exchange has more small order activity and is more comprehensive than an OTC desk which may rely more on relationship-driven activity and is mostly used for larger block trades.”

There is still a need for properly regulated institutions in the market, to act as a link between the regular traditional market and the cryptocurrency industry. Positions like this are somewhat being filled by institutions like FDAS and Bakkt. However, it might not all be so straightforward, especially because spreading its reach to onboard an exchange might be a lot more difficult than an OTC desk. According to an FDAS spokeswoman, it’s not always a walk in the park.

“We apply a very high standard of counterparty evaluation, involving a rigorous risk management and onboarding process. This approach is something we’ve been able to apply to OTC desks with post-trade settlement more readily than working with an exchange,” said she.

At the moment, no one is exactly sure what exchange Jessop is referring to as he has deliberately refused to give this information. However, Galaxy Digital recently announced that both Bakkt and FDAS will be custodians for its new Bitcoin Funds including the Galaxy Bitcoin Fund, as well as the Galaxy Institutional Bitcoin Fund.

FDAS recently received regulatory approval from the New York State Department of Financial Services in the form of a trust company charter, which will let the company give Bitcoin custody offerings to interested investors. According to a recent company blog post, the move was necessary because FDAS has noted “a high-interest level” from these firms, which suggests that there will be increased activity from these players, as soon as there are properly regulated platforms and offerings, for them to trade.