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Fidelity Digital Assets, the crypto arm of Fidelity Investments, a leading asset manager, has joined hands with BlockFi, a renowned crypto lender, to let its institutional investors pledge BTC as collateral against cash loans. A report unveiled this news on December 7, noting that Fidelity Digital Assets would only hold the crypto and will not play any part in setting loan terms. Reportedly, this offering targets BTC investors that seek to convert their BTC into cash without selling. As such, potential customers will be hedge funds, crypto miners, and over-the-counter (OTC) trading desks.
According to the report, this collaboration will offer Fidelity Digital Assets’ clients access to extra liquidity for their day-to-day operations without forcing them to lose a long position on their BTC. However, the customers would have to create a BlockFi account to get the loans. Commenting on this development, Tom Jessop, Fidelity Digital Assets’ president, said that holding BTC to back loans is a foundational capability. He added that the company hopes this capability will be a significant part of the ecosystem as the crypto market continues growing.
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Jessop further cited that he views the loans as long-term instead of a typical repo trade. According to him, such loans are a type of tri-party agreement, which is familiar to everyone on Wall Street. He concluded by saying Fidelity Digital Assets seeks to create a world-class brokerage service for all types of assets.
According to BlockFi’s CEO, Zac Prince,
“BlockFi will risk-manage the famous volatility of Bitcoin by offering cash worth 60% of a loan backed by the digital asset. However, the program has room for client-level customization and may be adjusted to meet the needs of large firms.”
Increasing demand for crypto-related products
A Fidelity Investment representative disclosed that this offering comes after the organization’s clients demanded increase capital efficiency. The representative went on to assert that the firm’s full-service offering includes custody and trading, adding that Fidelity will continue helping institutions enable capital efficiency while prioritizing the safety and stillness of assets.
This news comes after Fidelity Investments conducted a survey earlier this year and found that institutional investors are increasingly becoming interested in crypto. According to the findings, approximately half of institutional investors believe digital assets are worthy to hold in portfolios. Reportedly, the survey interviewed 441 institutional investors and found that 72% of the respondents prefer buying investment products that hold digital assets. Meanwhile, 57% of the respondents preferred buying cryptocurrencies directly.
The survey also discovered that 47% of institutional investors believe cryptocurrencies are worth investing in. Another 47% said they appreciate crypto for being innovative, and 46% of the respondents praised the low correlation between crypto and other assets.