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Fidelity Unveils Digital Assets Business

Fidelity Investments, one of the world’s largest financial services providers with more than $7.2 trillion in client assets, has announced the launch of a new company, Fidelity Digital Asset Services, which will offer enterprise-quality custody and trade execution services for cryptocurrencies to sophisticated institutional investors such as hedge funds, family offices and market intermediaries.

The launch culminates a more than four year programme by Fidelity that started with initial research conducted in February 2014. The firm says it believes that distributed ledger technologies can enable entirely new business models, lead to the creation of frictionless capital markets and improve existing financial market infrastructure. It adds it can envision a world where all types of assets are issued natively on a blockchain or represented in tokenised format.

“Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors,” says Abigail Johnson, chairman and CEO of Fidelity Investments. “We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.”

Tom Jessop, who joined Fidelity in January this year after a short spell as president of crypto ledger firm Chain, will head the new company. Jessop previous spent 17 years at Goldman Sachs, mostly in strategic investments. He says, “We started exploring blockchain and digital assets several years ago, and those efforts have been successful in helping us understand and advance our thinking around cryptocurrencies. The creation of Fidelity Digital Assets is the first step in a long-term vision to create a full-service enterprise-grade platform for digital assets.”

Fidelity says that one of the steps in realising this future for digital assets is to create a foundation of institutional-quality solutions that will continue to help advance the industry. “While there are many retail service providers in the digital assets space today, there is a gap in support for institutions,” it says. “This has created a paradox – while Greenwich Associates found that 70 percent of institutional finance executives believe cryptocurrencies will have a place in the future of the industry, many firms are waiting on the sidelines to enter this market. When Fidelity Digital Assets rolls out its initial offering, it will provide solutions that institutional clients have been asking for.

Fidelity recently conducted one of its global institutional investor surveys and says it found that 70 percent of institutional investors believed that new asset classes will likely emerge because of advancing technologies, such as blockchain. “With the rise of interest in digital currencies and various use cases, institutional investors – such as hedge funds, family offices and market intermediaries – look to enter the market for a number of reasons,” the firm says. “Whether it’s the rising popularity as a store of value or relative non-correlation to the broader market, the potential to power lower-cost global payments, or the emergence of protocols that could power new industries, institutional investors are interested in engaging with this new asset class.”

Fidelity says its Digital Assets business is building the foundation needed to further the market adoption by offering a secure, compliant, and institutional-grade omnibus storage solution for bitcoin, ether and other digital assets. This consists of vaulted cold storage, multi-level physical and cyber controls – security protocols that have been created leveraging Fidelity’s security principles and best practices combined with internal and external digital asset experts.

The firm will also leverage an internal crossing engine and smart order router for trade execution of digital assets. This smart order router will allow for execution at multiple market venues.

Fidelity also says that given the complexity of digital assets and the early stage of institutions’ involvement with these asset classes, the new business will emphasise client support in its offering. Clients will have access to a dedicated team of client service specialists, from onboarding throughout the entire relationship with the company.

“In our conversations with institutions, they tell us that in order to engage with digital assets in a meaningful way, they need a trusted platform provider to enter this space,” explains Jessop. “These institutions require a sophisticated level of service and security, equal to the experience they’re used to when trading stocks or bonds. With Fidelity Digital Assets, we’re building a scalable infrastructure for digital assets that meets the expectations of what it means to work with Fidelity, while leveraging unique capabilities of the blockchain to create a completely new offering.”

Tilde Collaborates with TradAir for Asian Crypto Solution

Asian cryptocurrency liquidity provider Tilde is working with TradAir, a platform solution provider for institutional FX and cryptocurrency trading, to introduce electronic cryptocurrency trades among institutional investors in Asia. The firm says the collaboration will enable Tilde clients to trade a “multitude” of cryptocurrencies through TradAir’s personalised and intuitive platform, making trading more efficient and secure.

Tilde is an OTC cryptocurrency trading service and market maker launched byAsian proprietary trading firm Grasshopper in July 2018. It says it aims to bring high standards of integrity, pricing efficiency and execution to cryptocurrency trading on behalf of institutions, hedge funds, and family offices, while applying Grasshopper’s expertise in liquidity provision and technology to the cryptocurrency and post-ICO markets.

The deal is TradAir’s first cryptocurrency white labelling partnership in Singapore. Tilde customers will be able to trade a full suite of cryptocurrencies, including niche pairs, through an HTML5 cryptocurrency native trading platform. TradAir’s suite of analytical tools will also allow effective monitoring of customer credit and trade risk.

“As the cryptocurrency market matures and institutional investors become more involved, we want to facilitate the trading process by maximising efficiency while minimising risks in their interactions with OTC desks,” says John Lin, founder and CEO of Grasshopper and Tilde. “TradAir’s platform is intuitive and with Tilde it offers best execution that delivers an exceptional trading experience. We are excited about the partnership and look forward to transforming the cryptocurrency trading arena for our clients.”

ErisX Announces New Digital Assets Exchange

ErisX is making a bet on crypto-assets with plans announced last week that it will launch a derivatives exchange (DCM) and clearing organisation (DCO) that will include fully regulated digital asset futures and spot contracts on one platform.

The new venture is already backed by an impressive group of investors spanning the traditional capital markets and digital asset markets, including DRW Venture Capital, Valor Equity Partners, TD Ameritrade, Virtu Financial, NEX Opportunities, Cboe Global Markets, CTC Group Investments, Digital Currency Group, Nico Trading, Pantera Capital and Third Stone Partners. It has additional support from CMT Digital, Susquehanna International Group, XR Trading, C2 Capital Management and ED&F Man Capital Markets Inc, which also participated in the investment round.

According to the firm, ErisX is designed to bring a regulated, transparent and stable venue to the digital asset market with the reliability and trusted infrastructure of a centralised exchange. Thomas Chippas, former head of global quantitative execution at Citi, has joined as CEO of ErisX. Neal Brady has been named Executive Chairman.

“Closing this round of funding enables us to accelerate investments in the platform and our team,” says Chippas. “Leveraging our heritage and experience with exchange infrastructure, our market participants will benefit from modern trading tools on a fair and transparent platform. ErisX’s enhanced experience will provide the opportunity for new participants to enter the digital asset market and existing participants a superior venue for their execution and clearing needs.”

“ErisX will eliminate many of the impediments to institutional adoption and usher in a new wave of market participants,” adds Don Wilson, founder and CEO of DRW, which includes Cumberland. “This further develops the digital asset space and brings more transparency to these evolving markets.”

“To function efficiently, financial markets must demonstrate security and compliance, two critical gaps in today’s digital asset markets,” says Antonio Gracias, founder and managing partner at Valor Equity Partners. “ErisX has recognised there is a monumental opportunity to re-imagine digital asset trading, and they’ve developed a platform to deliver a highly secure yet revolutionary experience that will work better, and for more participants.”

“As investors in ErisX, as well as a strategic contributor in the initiative, we are looking forward to advancing our innovation goals by working with an established, CFTC-regulated exchange that will include digital asset futures and spot contracts on a single platform,” says Tim Hockey, president and CEO, TD Ameritrade. “Working with these innovative companies gives us the opportunity to help them develop cryptocurrency products that we believe will fill a gap for retail investors within the digital currency ecosystem.”

“As a global liquidity provider, Virtu supports and engages products and venues across various asset classes,” says Douglas Cifu, CEO of Virtu Financial. “Given the transparent ErisX market model and regulatory framework, it’s natural we would want to provide liquidity and grow this digital asset market centre.”

More recently, CQG, which provides trading, market data, and technical analysis tools, announced a collaboration with ErisX to provide its CQG Desktop as the front-end trading platform.

CQG president, Ryan Moroney, says: “We see the value that ErisX brings to the digital asset space and are excited to partner with them to present the spot crypto markets together with futures contracts on a single platform. In an industry in need of this level of security and transparency, we believe ErisX will open these markets to many of our institutional partners and help move this emerging market forward.”

“We were impressed with the range of trading tools that were included in CQG’s platform offering and are pleased to offer CQG Desktop as our front-end trading provider,” adds ErisX’s Chippas. “We are working with a robust group of leading class technology and service providers to improve the digital asset trading experience.”

FSB Outlines Potential Financial Stability Issues from Crypto-Assets

October 10th 2018
The Financial Stability Board (FSB) today published Crypto-asset markets: Potential channels for future financial stability implications. The report sets out the analysis behind the FSB’s proactive assessment of the potential implications of crypto-assets for financial stability.

The report includes an assessment of the primary risks present in crypto-assets and their markets, such as low liquidity, the use of leverage, market risks from volatility, and operational risks. Based on these features, crypto-assets lack the key attributes of sovereign currencies and do not serve as a common means of payment, a stable store of value, or a mainstream unit of account, says the report.

Crypto-assets do not pose a material risk to global financial stability at this time, FSB finds. However, vigilant monitoring is needed in light of the speed of market developments, it says. Should the use of crypto-assets continue to evolve, it could have implications for financial stability in the future. Such implications may include: confidence effects and reputational risks to financial institutions and their regulators; risks arising from direct or indirect exposures of financial institutions; risks arising if crypto-assets became widely used in payments and settlement; and risks from market capitalisation and wealth effects.

Crypto-assets also raise several broader policy issues, FSB says, such as the need for consumer and investor protection; strong market integrity protocols; anti-money laundering and combating the financing of terrorism (AML/CFT) regulation and supervision, including implementation of international sanctions; regulatory measures to prevent tax evasion; the need to avoid circumvention of capital controls; and concerns relating to the facilitation of illegal securities offerings. These risks are the subject of work at national and international levels and are outside the primary focus of this report, says FSB.

Additionally, FSB says members have to date taken a wide variety of domestic supervisory, regulatory, and enforcement actions related to crypto-assets. National authorities and standard-setting bodies have issued warnings to investors about the risks from crypto-assets, as well as statements supporting the potential of the underlying distributed ledger technology (DLT) that they rely on to enhance the efficiency of the financial system. These actions are balanced between preserving the benefits of innovation and containing various risks, especially those for consumer and investor protection and market integrity, it says.

The FSB coordinates at the international level the work of national financial authorities and international standard setting bodies and develops and promotes the implementation of effective regulatory, supervisory and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with 65 other jurisdictions through its six regional consultative groups.

The FSB is chaired by Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

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