Fidelity Digital Assets will allow its institutional clients to pledge Bitcoin as collateral against cash loans as part of a partnership with blockchain start-up BlockFi.
The unit of Boston-based asset manager Fidelity Investments will own the digital asset and not make loans itself, said Tom Jessop, president of Fidelity Digital Assets, in an interview. The target is Bitcoin investors who want to turn their digital stash into cash without selling, and potential clients include hedge funds, crypto miners, and over-the-counter trading desks, Jessop said.
Fidelity’s new service comes after Bitcoin broke its highest price of 2017 earlier this month before declining in recent days. The world’s most valuable digital asset grew 164% this year, hitting a high of $ 19,462 on December 3. It traded Monday at around $ 18,880. Other cryptocurrencies like Ether and Litecoin also registered gains.
Holding Bitcoin to secure loans is “a fundamental ability,” Jessop said. “As the markets develop, we expect this to become a fairly important part of the ecosystem.”
Fidelity said institutional investor interest in digital currencies is growing. A survey conducted by the asset manager earlier this year found that 36% of those surveyed had cryptos in their wallets. More than six in 10 expressed interest in Bitcoin and other cryptocurrencies, up from 47% in a 2019 survey.
Fidelity launched a Bitcoin custody service last year, but this is the first time it has allowed coins to be used as collateral. To obtain a loan, a Fidelity customer will need to have an account with BlockFi.