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 fixed. Zac Prince, CEO of BlockFi, told Bloomberg that there is “room for customer-level customization (in the terms of the loan) and (the program) can be adjusted to meet the needs of large businesses.” .
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 credit, a rapidly growing industry.
- Fidelity’s announcement comes at a time when interest in Bitcoin as an investment tool is growing.
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 , which allows us to provide even more institutional quality solutions to investors in this area. space, ”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 digital assets
Crypto-lending is still a fledgling industry but has exploded during the pandemic shutdown as more people turned to decentralized finance (DeFi), an acronym for the practice of lending that cuts out middlemen between borrowers and lenders using algorithms, during a period of low interest rates. DeFi and crypto-lending services promise high interest rates for collateral, but the risk is also proportionately greater. By 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 launched in 2018, was granted a trust company charter by the New York Department of Financial Services (NYDFS) last year. The charter enables Fidelity to offer cryptocurrency trading and custody services to financial services and businesses.
The company has stepped up its recruitment of blockchain and technology professionals for the digital assets unit and is actively targeting accredited investors and institutional investors. Last month, he announced a similar partnership to provide cryptocurrency custody to 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 this asset class. Several leading executives of investment firms have spoken of the potential of Bitcoin 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, in 160% increase since the start of this year.