- Fidelity is set to provide cryptocurrency-backed loans to institutional investors.
- The growing institutional interest in Bitcoin force traditional players to offer new services.
Fidelity Digital Assets is expanding its cryptocurrency-related services with a new option to take cash loans backed by Bitcoins. The head of the company, Tom Jessop, explained that Fidelity would continue holding BTC received as collateral, but it would not make loans in cryptocurrency itself.
The service is provided in partnership with the cryptocurrency startup BlockFi. It is targeted at hedge funds, Bitcoin miners, OTC platforms and other BTC investors who what to turn their digital assets into cash without actually selling them.
As the markets grow, we’d expect that this becomes a fairly important part of the ecosystem, said Tom Jessop, speaking in the interview with Bloomberg.
Fidelity wants to compete with DeFi
Jessop believes that holding Bitcoins to back loans was “a foundational capability.” Currently, it is accessible via numerous DeFi platforms via anyone can get a loan in stablecoins by providing BTC or ETH as collateral. However, these platforms do not satisfy the needs of institutional customers. They need more security and compliance with regulatory requirements in terms of KYC (Know Your Customer) and ALM (Anti-Money Laundering) procedures.
Fidelity, a regulated asset-management firm focused on institutional investors, notes a growing interest in digital assets and sees this move as a part of a long-term trend.
We want to develop a world-class brokerage capability for assets of all types, he said.
Bitcoin is invading the institutional space
A survey conducted by the company earlier this year revealed that 36% of the respondents held Bitcoins, while over 60% were considering exposure to BTC or other digital assets.
This data is confirmed by the survey, cited by Morgan Stanley Investment Management’s chief global strategist, Ruchir Sharma. He pointed out that 27% of millennials own cryptocurrencies and the numbers are growing. Considering that they are the new generation of investors and traders, replacing baby-boomers, their influence on the market will be growing.
The expert noted that Bitcoin might shutter the stance of the dollar as a reserve currency.
Bitcoin is also starting to make progress on its ambition to replace the dollar as a medium of exchange. Today, most Bitcoins are held as an investment, not used to pay bills, but that is changing, he said.
Gold’s position as a primary safe-haven asset is also under threat. An American largest investment bank JPMorgan believes that the rise of cryptocurrencies caught the eye of institutional players who started using it as an inflation hedge instead of gold.
Bitcoin’s long-term perspectives unshattered
This shift from the traditional reserve assets to cryptocurrencies adds credibility to long-term bullish forecasts for Bitcoin. The pioneer digital coin has gained over 170% since the start of the year and hit a new all-time high at $19,915. At the time of writing, BTC is trading at $18,450. Despite the retreat, BTC is still poised for a long-term price increase as both fundamental and on-chain metrics remain strong.
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