Though retail participation in the cryptocurrency arena continues to trend higher, some of the biggest pools of investment capital remain sidelined from these opportunities due to the absence of clearer regulation and more robust custody solutions.
Although new products like listed futures, options, and ETFs have made it easier for institutional investors to gain exposure, adding the underlying assets has proven problematic.
Nevertheless, institutional appetite for crypto-related opportunities continues to grow. To this end, many traditional banks and financial firms are unveiling a range of services, including research coverage and custody options, to address this heightened interest.
Among them is Fidelity Investments, one of the globe’s largest financial services providers with over $7 trillion in client assets under management. (See Analysts’ Top Stocks on TipRanks)
To gain a larger foothold in the cryptocurrency space, enterprise-grade execution and custody services platform Fidelity Digital Assets, a division of Fidelity Investments, has inked a deal to collaborate with Nexo to launch a wide range of institutional-focused products.
The bridge built between these two ecosystems will offer institutional-grade custodial and lending services, and develop other innovative institutional products to be launched in the future.
As part of this tie-up, Nexo will expand its institutional offerings and grow its portfolio of assets under management (AUM). In return, Fidelity clients will gain access to Nexo’s array of digital asset products and lending solutions.
Moreover, this alliance will deliver an additional custody layer on top of Nexo’s existing military-grade security infrastructure.
Here Come The Custodians
Custody has long been one of the major hurdles constraining institutional crypto demand. In the context of cryptocurrency, custodians are third-party service providers of digital asset security and storage for investors.
For institutional investors, this is a matter of regulation, given that any U.S.-based institutional investor with more than $150,000 of customer funds must use a “qualified custodian.” Accordingly, a custodial solution is required for any U.S.-based institutional investor to enter the digital asset market.
With the strategic relationship in place, institutional investors who currently hold digital assets at Fidelity Digital Assets will be able to access Nexo’s products and services directly. Moreover, Nexo’s lending solutions with Fidelity Digital Assets’ asset protection will enable institutional clients to benefit from tax-efficient borrowing through tri-party structures.
Commenting on this partnership, Christopher Tyrer, Head of Fidelity Digital Assets, Europe, noted, “We’ve seen tremendous growth of interest in digital assets from institutions within the European market and we’re committed to implementing sophisticated solutions to match those available with traditional asset classes.”
Disclosure: At the time of publication, Reuben Jackson did not have a position in any of the securities mentioned in this article.
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