It was announced today that Fidelity Investments, one of the biggest providers of 401(k) services and other retirement products to Americans, is planning to build a digital asset exchange leaked through a job ad looking for a DevOps system engineer “to help engineer, create, and deploy a Digital Asset exchange to both a public and private cloud.”
Other established financial institutions, such as Goldman Sachs, the New York Stock Exchange, and Nasdaq have made attempts to move into the nascent crypto market. However, if Fidelity is successful in launching a digital asset exchange, it would be perhaps the largest move by a top Wall Street firm to date and could help further legitimize the rapidly growing crypto market.
Josh McIver, CEO of ULedger:
“When a firm like Fidelity commits significant resources to open a digital asset exchange, it reaffirms the growing demand for regulatory compliant conduits for crypto assets. The crypto space is quickly becoming more and more mainstream as the assets have proven to be more than just a fad. The advent of security token exchanges will be another big step in mainstream adoption of these revolutionary assets.”
Rob May, CEO of BotChain:
“Although the crypto space is still in its infancy, Fidelity committing resources towards a digital asset exchange is indicative of the market’s rapid maturation. It’s worth recognizing that the industry most impacted by impending blockchain application is financial services — big banks, insurers, and credit providers stand to gain significantly from the overturning of legacy processes and the mess of regulatory intervention, leading the blockchain revolution at the enterprise scale.”
Rohit Kulkarni, Manager Director of Private Investment Research, SharesPost:
“Buying cryptocurrencies through exchanges is the easiest way for investors to access blockchain technology. The top five traded currencies alone are now worth more than $500 billion. We estimate that the annual revenue run rate of the top five leading crypto exchanges has tipped over $10 billion on a cumulative basis. As a result, large brokerage firms and traditional securities exchanges are paying close attention to both technical and regulatory developments in the crypto space. Smart money is waiting on the sidelines, and large incumbents are adopting a “wait and see” approach.
From a regulatory standpoint, we expect the cryptocurrency landscape will be dominated by government regulation, or the threat of government regulation during 2018, and will likely continue into 2019. This is having a negative impact on the activity across the blockchain ecosystem today. Despite such a regulatory backdrop and the volatility in cryptocurrencies in the past six months, the forward progress in the blockchain ecosystem has continued. Last week, investors committed $4 billion to Block.one’s sale of its EOS digital tokens, which is the largest coin offering to date, and larger than most of this year’s tech IPOs. We view this week’s appointment of Valerie Szczepanik as the crypto chief at the SEC as a step forward for the cryptocurrency ecosystem.
As regulatory infrastructure stabilizes, over the next 12-18 months, we expect significant investments and consolidation in the space, particularly around the blockchain ecosystem’s building blocks such as crypto mining and currency exchanges.”
David Hanson, Co-CEO at blockchain-powered gaming distribution platform Ultra commented:
“Fidelity are true pioneers and leading the crypto charge at the highest level of the finance world. This news further validates the crypto space and I believe this will influence many other companies to jump in as well. Crypto is the future and other players in the space will be excited to have large companies in the ecosystem.”
Eiland Glover, CEO at stablecoin project Kowala:
“The significance of this move to the maturation of the crypto space cannot be overstated. In the past, almost one out of three crypto exchanges has been subject to hacks, and even the most prominent exchanges have faced consumer ire due to their inability to provide consistent customer support. If Fidelity and its peers are serious about wading into the fray, I think we will see a massive flight to quality followed by the deaths of many of today’s exchanges run by comparatively amateurish teams.”
Today, Business Insider broke news of Fidelity plotting its big move into crypto trading. Yo Kwon, CEO of blockchain cybersecurity firm Hosho, explains how this move can turn Fidelity into hacker bait — not only because of the number of customers Fidelity will bring onboard, but also the volume of assets that will potentially be moving around on its exchange.
As the story develops and continues to unfold
Yo Kwon, Co-founder & CEO of Hosho
“Cryptocurrency exchanges are faced with security issues that differ from traditional websites and even banks. While companies like Target run the risk of compromising its customers’ personal data, crypto exchanges run the risk of irreversibly losing hundreds of millions of dollars. The consequences in these cases are more dire and could in some cases mean the end of ones business.
While it’s great that a company like Fidelity is moving towards blockchain and digital asset adoption, the risk factors associated with the move are that much greater. Fidelity will potentially introduce a large number of users onto its exchange, which by extension, means a large amount of assets being moved around. Fidelity could expose themselves as hacker bait — the greater the bait, the more motivated hackers will be to get inside.
To preemptively avoid being hacked, Fidelity should partner with a third-party source capable of understanding the complexities that come with digital asset exchanges. In its move into cryptocurrency trading, Nasdaq brought Gemini onboard to help increase oversight on fraud and manipulation. I’d be surprised if Fidelity didn’t follow suit or, at the very least, take on advisors who have a proven track record of working with cryptocurrency exchanges.”