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The investment manager’s cryptocurrency arm, Fidelity Digital Assets (FDAS), inked its first deal in Europe to serve as the custodian to store London-based crypto investment firm Nickel Digital Asset Management’s crypto funds, per The New York Times.
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FDAS aims to help institutional investors get the best deals for buying and selling cryptos from different sources. Fidelity first announced FDAS in October 2018, and while it didn’t disclose its assets under management, the venture has attracted interest from family offices, wealth managers, and crypto companies, including Galaxy Digital.
FDAS is making its foray into Europe at a time when the crypto space remains volatile and investors are worried about pouring funding into the space.
Regulatory hurdles continue to plague the crypto space, making investors even more unsure about investing in the asset class. Regulators globally have been slow to regulate crypto assets, with authorities in the US and Europe still debating whose oversight crypto-related ventures would fall under, for example, and they continue to be concerned about the “absence of applicable financial rules,” per Steven Maijoor, chairman of the European Securities and Markets Authority.
This likely makes some institutional investors cautious about investing in the asset class, which could negatively impact uptake of FDAS’ solution: In fact, 56% of financial advisors in the US surveyed by Bitwise Asset Management cited regulatory concerns as a reason to stay away from cryptos, while just 6% of respondents said they currently invest their clients’ funds in cryptos, and only 7% said they would consider doing so this year.
And the price of cryptos like Bitcoin remains highly volatile, which further suppresses investor interest and could hold back potential tie-ups with the likes of FDAS. While nearly reaching a price of $20,000 at the end of 2017, Bitcoin was trading at just around $3,000 to $4,000 at the beginning of last year, and currently has a worth of around $8,000. This volatility is likely also keeping some investors from betting on digital assets and overall adoption of crypto tools.
However, we think institutional investors’ worries will be allayed in the year ahead as firms like Fidelity expand their custodial services and regulators kick their crypto efforts into high gear. The probable lack of crypto-related services by major financial firms like Fidelity has contributed to large investors’ unwillingness to invest in the emerging asset class, but FDAS’ expanding reach could change that, as more companies can access its services allowing them to trade and store cryptos securely.
Additionally, in June, tech giant Facebook’s announcement of its planned cryptocurrency this year was quickly met with backlash from regulators globally — this may have lit a fire under regulators across the US and Europe, which soon after stated that they’ll make crypto oversight a top priority this year, helping to address investor concern. Hence, with time, we will likely see more institutional investors exploring investing in digital assets, and FDAS will likely be at the forefront of trading and custody options, as it has a trusted brand behind the service.
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