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New York State Trust License – Fidelity’s Step Towards Mass Crypto Adoption?

Fidelity’s cryptocurrency investment arm, Fidelity Digital Assets (FDAS) has filed for a trust license in the state of New York according to several sources. An approved application with the New York Department of Financial Services (NYFDS) will mean that FDAS will be able to offer custodial services for digital assets in the state of New York. FDAS was launched in October 2018, with the aim of providing institutional solutions for the digital asset class.

Earlier this year in May, Bloomberg reported that Fidelity will be offering more than just custodial services such as crypto trading. The crypto arm of one of the largest asset managers in the world will now be able to compete with rivals such as Coinbase, Gemini, Paxos and other large players in the crypto custodial market.

Arthur Long, a lawyer from Gibson Dunn mentioned that a trust license is “more expansive” than the BitLicense of the state of New York which is a license for crypto firms, according to The Block. By obtaining a trust license, the firm will be allowed to execute a wider range of services in the financial services industry.

What does this mean for crypto investors?

The International Crypto Exchange (ICE)’s cryptocurrency trading platform, Bakkt is also waiting for approval from the NYDFS and will also be competing with FDAS. Institutions are willing to take the step to go through substantial processes to allow regulators to get a more in-depth understanding of crypto businesses.

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DAG Global Seeks to Break New Ground as First UK Bank to Support Crypto Businesses

DAG Global, a UK financial services company, aims to set a precedent by gaining a UK banking license to close the void between banks and crypto businesses. As reported by the Financial Times on Feb 10, DAG intends to become the UK’s first bank to support cryptocurrency businesses.

Is DAG Global walking a tightrope?

DAG Global revealed that it could resubmit its application for a banking licence in March 2020 as it remains optimistic about offering support to crypto businesses with bank accounts from 2021. The mission will act as a litmus test for the industry as they observe to see whether regulators have reached a new level of maturity regarding digital assets.

Explicitly, companies that deal with cryptocurrencies, such as Bitcoin, have not had rosy relationships with mainstream banks based on their alleged associations with criminal activities like money laundering.

DAG Global, however, seeks to solve this stalemate by making it easier for crypto businesses to access financial and banking services as incredible growth is being witnessed in the crypto space.

Constructive dialogue witnessed

Sean Kiernan, DAG Global CEO, said, “It’s a lack of understanding and reputation risk that has kept others away — we think it can be a cleaner sector [than mainstream finance].”

He also noted that since the bank made its first submission in May 2019, a series of constructive dialogues have taken place with the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), and UK regulators.

Kiernan revealed that so far, no red flags have been raised by regulators. Nevertheless, DAG Global has had to deal with delays. This is because it had hoped to have gotten the go-ahead of supporting crypto businesses by 2019. This has been primarily triggered by the stringent scrutiny being undertaken by UK regulators.

For instance, both the PRA and FCA have previously warned banks about the dangers associated with crypto businesses. Despite banks not being discouraged by neither to offer services to them, they were asked to be on the lookout to act prudently and maintain effective risk strategies when it came to crypto-assets.

It, therefore, remains a test of time whether DAG Global’s objective of supporting crypto businesses will materialize. Banks are continuously seeking to stamp their authority in the crypto space. For instance, in August 2019, San Diego-based Silvergate Bank contemplated being a crypto lender.

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South Korea’s Largest Bank Reveals Crypto Custody Service Filing and Potentially Even More Crypto Services to Come

The largest bank in South Korea, KB Kookmin Bank has revealed its filing of a trademark application for KB Digital Asset Custody (KBDAC), its crypto custody service.

The crypto custody service will be made available for assets including Bitcoin (BTC) and Ether (ETH). The trademark application was filed with the Korean Intellectual Property Office, as reported by a local news outlet.

The application stated that the bank could potentially launch the service shortly, and also means that the entity has already begun the branding of products and the development has almost been finalized.

KB announced its partnership with Atomrigs Lab in June 2019, to develop a crypto custody service leveraging a product that secures crypto utilizing multi-party computation (MPC) technology which Atomrigs Lab specializes in. MPC technology generates random key parts rather than a single private key. These key parts can be stored separately to protect the assets from the vulnerability of being stolen.

According to the report, KB could potentially add to its suite of services involving digital assets, including trading, investment advisory, and asset management.

Less than a month ago, South Korea’s National Assembly followed suit and has amended the Act on Reporting and Use of Specific Financial Information, fully legalizing cryptocurrencies in the nation.

Following the passage of the amendment by the South Korean Parliament, cryptocurrency holding and trading have finally found their place in the nation’s legal system. It is speculated that this turn of events will usher in a restructuring of the country’s blockchain sector.

After President Jae-in Moon signs the passed amendment, the enactment process will kickstart and is expected to take full effect one year from the date of signing, with a six month grace period to follow for a market adjustment.

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Fidelity Investments Unveils Plans to Expand Business by Hiring Crypto Savvy Staff

Fidelity Digital Assets, the cryptocurrency arm of Fidelity Investments, is set to additional onboard hands as it prepares for the growing demand in the digital assets ecosystem.

Primarily designed to cater to institutional investors, the crypto arm of the investment giant was established back in 2018, with Bitcoin (BTC) custody and trading services launched afterwards.

The digital currency ecosystem has grown remarkably from that time until now. To reposition itself to capture a good share of the market, Fidelity is set to hire 110 engineers and developers with blockchain expertise. These professionals will help the company build a robust crypto infrastructure that can also support Ethereum (ETH), the world’s second-largest digital currency.

Despite the fact that the cryptocurrency industry has taken a beating recently, fueled by the Terra blockchain crash, Fidelity Digital Assets head, Tom Jessop said the offshoot is focused on long-term structures that fuel growth.

“We’re trying not to focus on the downturns and focus on some of the long-term indicators,” such as demand from clients, Mr. Jessop said. “We are trying to build infrastructure for the future because we measure success over years and decades, not weeks and months.”

While Fidelity Investments currently boasts over 400 clients, including hedge funds and registered advisors, the firm plans to hire as many as 100 customer service agents to help provide the proper support.

Ideally, there has been growing competition in the digital currency ecosystem, and this has heightened the demand for skilled workers as many growing startups are being given massive funding and in turn, they offer experienced blockchain staff an ambitious growth path.

Fidelity still has the name and the right industry history of attracting the best talents. However, the firm’s overall goal will be to be well-positioned to handle the demand as the digital currency ecosystem goes mainstream.

Fidelity Set to Hire 100 Employees to Strengthen its Crypto Firm

Fidelity Digital Assets, the asset management Behemoth Fidelity’s cryptocurrency division, has disclosed its plans to hire 100 new employees in the next six months to strengthen its workforce.

Chris Tyrer, the CEO of Fidelity Digital Assets Europe and Fidelity Digital Asset Management made this statement during a panel discussion at the Blockworks Digital Asset Summit earlier this week in London.

Tyrer said, “We’ve gone through a fairly aggressive hiring spree over the last 12 months and we probably, in excess, doubled the size of our organization, so we’re probably looking at adding another 100 over the next three to six months.”

Recall that since its establishment, Fidelity Digital Assets offshoot has been actively involved in the crypto sphere. Again, the firm, which is in charge of $9.9 trillion, recently introduced an Ethereum index fund and developed a platform for digital trading assets alongside Charles Schwab and Citadel Securities.

Additionally, Fidelity Digital Assets, equally stated that to complement its current bitcoin trading and custody services, it will soon begin providing Ethereum to institutional clients. Before the announcement, the enterprise exclusively offered BTC trading services.

Hiring in Crypto Winter

Fidelity’s employment strategy is implemented at a time when numerous significant crypto companies are laying off employees. Recall that one of the oldest market makers in the sector, GSR, cut almost 10% of its personnel last week.

Similarly, the exchange hiring comes after many renowned cryptocurrency startups experienced executive departures. FTX, Kraken, Genesis, and NYDIG are leading crypto companies where top administrators have retired.

The Wall Street Journal reported back in May that Fidelity Digital Assets intended to hire 110 technical personnel and 100 customer service personnel this year.

Presently approximately 400 employees work with Fidelity Digital Assets according to Tyrer. He added that the platform services business, which includes everything from holding to trade execution, and the asset management firm are two independent entities.

Apollo Teams Up With Anchorage to Expand its Product Offering

Apollo Global Management, an American private equity firm with more than $30 billion in assets under management has inked a new partnership with Anchorage Digital for its crypto custody options.

The partnership between the duo has been an evolving one and as revealed by the latter firm, it will solely be in charge of safeguarding the crypto holdings of Apollo which is now deepening its feet into the Web3.0 world.

“Apollo is a leader in the alternatives industry, so their use of Anchorage’s custody platform is incredibly validating, and we expect this collaboration can set the bar for how institutions work with regulated digital asset banks like Anchorage to provide custody and other services for their crypto holdings. Being both nimble and secure with digital asset portfolios doesn’t have to be mutually exclusive–and we are confident this partnership will prove that,” said Diogo Mónica, Co-Founder and President, of Anchorage Digital.

The era where mainstream investment firms consider the crypto ecosystem as an alien offshoot of the financial industry is passed. Many institutional investors today are now exploring new and unique avenues by which they can join the bandwagon, and fulfill the demands of their existing customers while attracting new customers.

Apollo remains one of the major investment outfits pushing its boundaries with a steady entry into the Web3.0 space. While its custody relationship with Anchorage Digital dates back to 2021, the company dipped its feet into the industry some more when it joined the investors that bankrolled Anchorage when it raised $350 million in Series D funding last December.

While its crypto embrace is still shaping up, Apollo said its choice of Anchorage Digital as its primary strategic partner is based on the firm’s “strong emphasis on security and segregation of client assets,” as well as the “ease of use for asset managers to hold digital tokens.”

The First Crypto Bank in Puerto Rico Rolls Out Digital-Asset Custody Service

FV (Fintech Ventures) Bank, a global financial entity registered in the U.S. territory of Puerto Rico, has launched a digital-asset custody service for seamless safeguarding and interoperability of crypto and fiat, according to Bloomberg.

The crypto custody feature will first support Bitcoin (BTC). Later on, Ethereum (ETH), Tether (USDT), and USD Coin (USDC) will be incorporated in coming weeks, with plans to add more cryptocurrencies in the future.

FV Bank finds itself in a rare playing field in the growing banking-meets-crypto industry, according to Steven Beattie.

The financial crime consulting and crypto risk leader at EY added:

“First movers are incredibly valuable. As a first mover you have a chance to change your competitive position across the industry. But being first creates some risk.”

Even though various cryptocurrency exchanges enable users to swap fiat for crypto, only a few US-regulated banks have this ability.

Miles Paschini, FV Bank’s CEO, pointed out:

“Our primary goal since founding FV Bank has been to help drive blockchain technology innovation in financial services by offering institutional clients a technology solution seamlessly integrated into a regulated bank and trust model that offers traditional banking along with digital assets custody and settlement.”

FV Bank sees the digital-asset custody service as a stepping stone toward bridging the gap between the traditional financial sector and the crypto economy. Paschini added:

“We have also advanced best in class AML procedures for digital assets by combining traditional bank compliance functions with specialized blockchain analytics, to ensure we are positioned as a leader and role model for how banks can participate in the convergence of traditional financial services and the digital asset economy.”

Meanwhile, France-based BNP Paribas recently entered the crypto custody bandwagon, Blockchain.News reported.

As the second largest global bank in Europe, BNP Paribas partnered with Swiss-based crypto infrastructure firm Metaco to enable the offering of digital assets custody services to its customers.

US Regulator Crypto Custody Proposal Opposed

In response to the SEC’s proposal to amend its custody rule, the Blockchain Association and Andreessen Horowitz have filed letters of opposition. The Blockchain Association claimed that the rule would limit investment in digital assets and could leave investors’ assets at more risk. Meanwhile, Andreessen Horowitz stated that the rule could prevent registered investment advisers from transacting with crypto exchanges and violate the SEC’s duty of care requirements.

The proposal, which has not yet been approved by the SEC, aims to impose more stringent rules on investment advisers in the custody of assets, including crypto. The proposed measures include proper segregation of assets and annual audits from public accountants, among other transparency measures.

The SEC’s Chair, Gary Gensler, has specifically targeted crypto exchanges with the rule, claiming that some crypto trading platforms offering custody services are not qualified custodians. However, even within the SEC, Commissioner Hester Pierce has questioned the rule’s workability and breadth, suggesting that it appears to be targeting crypto and crypto-related companies.

The Blockchain Association and Andreessen Horowitz have both argued that the rule exceeds the SEC’s authority and would have a negative impact on investment in digital assets. They have also claimed that the proposed measures would prevent investment advisers from using crypto and could leave investors’ assets at greater risk.

Despite opposition from industry proponents and within the SEC itself, the proposal remains under consideration. It is yet to be seen whether the SEC will make any changes to the rule in response to the letters of opposition.

Ripple Acquires Swiss-based Metaco, Sets Sights on $10T Institutional Crypto Custody Market

Ripple, the global provider of blockchain-based payment systems, has announced its acquisition of Metaco, a Swiss provider of digital asset custody and tokenization technology, according to a press release from Ripple’s official website.

This strategic move is in response to the predicted growth of the institutional crypto custody market, anticipated to reach an impressive $10T by 2030, and Ripple’s recognition of the growing demand for enterprise crypto services.

Ripple’s CEO, Brad Garlinghouse, referred to the acquisition as a “monumental” move that will significantly augment the company’s growing product suite and extend its global footprint. Ripple and Metaco share a common objective: offering secure enterprise-grade solutions to top-tier institutional clients. The acquisition is set to provide Ripple’s customers with the technology needed to issue, custody, and settle any kind of tokenized asset, advancing its enterprise offerings.

Established for over a decade, Ripple has consistently addressed the multi-trillion-dollar challenges in the cryptocurrency and blockchain industry. The company’s expansion, from cross-border payments and Central Bank Digital Currencies (CBDCs) to liquidity management and tokenization, demonstrates its continuous innovation and growth. The integration of Metaco’s solutions, aimed at issuing and settling tokenized assets, is the next evolution in Ripple’s product suite.

Metaco’s offering, Harmonize™, provides a secure, versatile custody infrastructure for institutions looking to expand into the crypto economy. Its solutions have been widely accepted by the world’s largest custodians, top-tier banks, financial institutions, and corporations. The technology is currently available in several jurisdictions, including Switzerland, Germany, Turkey, France, the UK, the US, Singapore, Australia, Hong Kong, and the Philippines, among others.

Adrien Treccani, Founder and CEO at Metaco, expressed his enthusiasm about the partnership with Ripple, emphasizing that the collaboration would enable Metaco to leverage Ripple’s scale and market strength to achieve its goals more quickly.

The institutional interest in crypto custody is apparent, with several established financial institutions expressing their intent to enter this arena. For instance, BNY Mellon is currently offering digital asset custody services to US asset managers, while NASDAQ recently announced its plan to launch crypto custody services for Bitcoin and Ethereum by the end of Q2 2023.

The acquisition signals a bright future for crypto custody as more reputable financial institutions express their interest in the market. Ripple is poised to leverage this opportunity alongside Metaco to offer innovative services to customers, thereby strengthening its position as a leader in the realm of enterprise crypto solutions.

Coinbase's Custodial Role in New Bitcoin Spot ETFs Marks a Crypto Milestone

The U.S. Securities and Exchange Commission (SEC) recently approved eleven spot Bitcoin exchange-traded funds (ETFs), marking a significant milestone in the integration of cryptocurrencies into mainstream financial markets. Of these, eight are in partnership with Coinbase, highlighting the platform’s critical role in this development.

Historical Context and Significance

This decision by the SEC is seen as a watershed moment for the crypto economy, particularly Bitcoin. Coinbase, a major player in the cryptocurrency world, has been appointed the custodian for these newly approved ETFs. The approval of Bitcoin spot ETFs is not only a recognition of Bitcoin’s growing legitimacy as an asset class but also a response to the persistent demand from investors for regulated crypto investment vehicles. Such ETFs offer investors exposure to Bitcoin without the complexities of direct ownership.

Coinbase’s Role and Security Measures

Coinbase’s role as a custodian is crucial, given its long history of securely storing assets for both retail and institutional customers. The company provides robust cybersecurity and legal protections for assets stored in its custody. The approval of these ETFs is expected to attract institutional volume to Bitcoin and potentially other cryptocurrencies, further cementing their place in mainstream finance.

Alesia Haas’s Perspectives

Alesia Haas, CFO of Coinbase, underscores the importance of this development. She notes the increasing adoption of crypto assets in the U.S., with over 52 million Americans owning them. Haas emphasizes that Coinbase’s priority is the security of investors’ investments and highlights their comprehensive approach to cybersecurity and operational safety.

Regulatory and Investor Implications

The approval of Bitcoin spot ETFs is seen as a step forward in the ongoing effort to bring regulatory clarity to the cryptocurrency sector. It’s a move that not only legitimizes the crypto market but also opens it to a broader base of investors who prefer traditional financial products. This development is expected to introduce a significant amount of capital into the crypto market that was previously inaccessible due to regulatory constraints.

Future Prospects and Challenges

While this development is a positive step for the crypto economy, challenges remain, such as the need for continued regulatory clarity and addressing cybersecurity concerns. The approval may also pave the way for the introduction of other crypto-related investment products, further expanding the market’s reach and potential.

In conclusion, the SEC’s approval of Bitcoin spot ETFs, with Coinbase as a key custodian, represents a significant stride in the crypto industry’s journey towards mainstream acceptance and integration into the global financial ecosystem. It highlights the evolving nature of cryptocurrency as an investable asset class and the growing intersection between traditional finance and the digital asset world.