Fidelity Digital Assets will reportedly start letting its institutional customers pledge bitcoin as collateral against cash loans, thanks to a new partnership with blockchain startup BlockFi.
According to Bloomberg, Fidelity Digital Assets will hold the BTC pledged as collateral but would not make the loans itself. Fidelity Digital Assets, it’s worth noting, is a unit of Fidelity Investments, which has over $3.3 trillion in assets under management.
Tom Jessop, president of Fidelity Digital Assets was quoted as saying that the target is bitcoin investors who want to turn their BTC holdings into cash without selling the flagship cryptocurrency, and potential customers may include hedge funds, over-the-counter trading desks, and cryptocurrency miners.
Per Jessop holding bitcoin to back loans is a “foundational capability,” he added:
As the markets grow, we’d expect that this becomes a fairly important part of the ecosystem.
The firm has said institutional interest in the space is rising, and a survey it conducted earlier this year found 36% of respondents had cryptoassets in their portfolios. More than six out of 10 showed interest in bitcoin and other cryptos, up from 47% from a survey conducted last year.
Last year fidelity also launched a bitcoin custody service for institutional investors, and it is now letting customers use their holdings as collateral for cash loans. To get a loan, however, the customer will have to have an account with BlockFi.
The loans, Jessop said, could be longer-term than a typical repo trade, as Fidelity wants to “develop a world-class brokerage capability for assets of all types.” Zac Prince, BlockFi’s CEO, said that his firm will risk-manage the volatility of BTC “by offering cash worth 60% of a loan backed by the digital asset,” adding:
However, the program has room for client-level customization and may be adjusted to meet the needs of large firms
The move comes shortly after bitcoin’s price hit a new all-time high near $20,000, without actually breaching said mark on most cryptocurrency exchanges.
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