Clients of Fidelity Digital Assets, a subsidiary of the investment giant, will now be able to obtain cash loans by placing their Bitcoin (BTCUSD) as collateral with its digital asset custody solution. The company has partnered with crypto-lending service BlockFi, which will provide the cash loans, for the service.
Customers of both companies can receive 60% of the total amount of a loan in cash, if it is backed by a digital asset. But this percentage is not set in stone. Zac Prince, CEO of BlockFi, told Bloomberg that there was “room for customization at the client level (in the loan terms) and (the program) can be adjusted to meet the needs of large companies”.
Key points to remember
- Fidelity Digital Assets will act as the custodian of the cash loans offered by the BlockFi crypto-lending service.
- This is the investment giant’s first foray into crypto-lending, an industry that is rapidly growing in size.
- Fidelity’s announcement comes at a time when Bitcoin is increasingly interested in Bitcoin as an investment tool.
This is the first such partnership that Fidelity has signed with a crypto-lending service. “For Fidelity Digital Assets, this is an exciting first step in supporting the burgeoning digital asset lending market and deepening our relationships within the digital asset ecosystem with leading companies like BlockFi, this which enables us to provide even more institutional quality solutions to investors in this area, ”said Christine Sandler, Sales and Marketing Manager at Fidelity Digital Assets.
Tom Jessop, chairman of Fidelity Digital Assets, told Bloomberg that adding Bitcoin as collateral for loans was a “core capability” and the company expected this feature to become a “pretty big part of it. ‘ecosystem (crypto) “.
A pioneer in the field of digital assets
Crypto-lending is still a nascent industry but exploded during the pandemic shutdown, as more people turned to decentralized finance (DeFi), an acronym for the practice of lending that removes the middleman between borrowers and lender using algorithms, in an age of interest rates low interest. DeFi and crypto-lending services promise high interest rates for collateral, but the risk is also proportionately greater. According to some estimates, the crypto-loan market was worth $ 10 billion in August, up 25% from the last quarter of 2019.
Among institutional companies, Fidelity ranks among the leading players in digital assets. Fidelity Digital Assets, which started in 2018, was awarded a trust company chartered last year by the New York Department of Financial Services (NYDFS). The charter enables Fidelity to offer cryptocurrency trading and custody services to financial services and businesses.
The firm has accelerated the hiring of blockchain and technology professionals for the digital assets unit and actively target accredited investors and institutional investors. Last month, he announced a similar partnership to provide crypto custody for Stack Funds, a Singapore-based investment firm, to engage wealthy Asian investors in cryptocurrencies.
Fidelity’s announcement comes at a time when institutions are increasingly interested in the asset class. Many prominent managers investment firms have spoken out on Bitcoin’s potential to become an investable asset. The price of Bitcoin, which languished below $ 7,000 at the start of this year, strengthened during the pandemic and recently passed its high of 2017. The cryptocurrency changes hands at $ 17,984.57, up from 160% compared to the start of this year.