Asset manager Fidelity has received approval from Canadian regulators to become the country's first Bitcoin custodian. The move paves the way for more Canadian institutions to invest in Bitcoin, including pension funds, portfolio managers, mutual funds and ETFs.
Fidelity Canada will offer its new service in the form of a bitcoin trading and custody platform for institutional investors. According to a press release, they have received the green light from regulators to become the country's first bitcoin custodian.
"Demand for investment in digital assets is growing significantly, and institutional investors have been looking for a regulated dealer platform to access this asset class." - Scott Mackenzie, President of Fidelity Clearing Canada
As valuations of digital assets reach historic highs and interest in alternatives increases, the billion-dollar financial services firm says demand is growing for a reliable and secure platform to trade this emerging asset class. The new offering has been developed to the same high standards as Fidelity's other platforms, leveraging the unique capabilities of blockchain technology.
Guidelines have paved the way for Fidelity
To meet this demand and better protect investors, the Canadian Securities Administrators (CSA) and IIROC published new guidelines on platform regulation at the beginning of the year. They address the trading and custody of cryptocurrencies and contracts involving cryptocurrencies. Fidelity Clearing Canada (FCC) has received rulings from the CSA and approval from IIROC that meet expectations related to the FCC's new institutional digital asset service.
This has prompted the company to expand its offering to the Canadian investment community. Earlier this week, Fidelity Investments Canada ULC filed a preliminary prospectus with regulators to also launch its own bitcoin ETF and bitcoin fund. The Fidelity funds will join the growing list of existing bitcoin funds already launched in the Canadian market.
Investing directly in Bitcoin
Institutional investors in Canada, such as mutual funds and exchange-traded funds (ETFs), have previously had to rely on custodians in the United States. With the FCC's introduction, more of these investors can potentially invest directly in Bitcoin. In addition, Fidelity Investments Canada ULC has filed preliminary prospectuses for the Fidelity Advantage Bitcoin ETF. This ETF would utilize the services of the FCC as a custodian.
With the filed application for a Bitcoin exchange-traded fund and a mutual fund, the company also aims to target retail investors. As of September, Fidelity managed more than $4.2 trillion in assets worldwide. FCC provides services to more than 100 investment companies in Canada. Together with Fidelity Investments Canada ULC, they represent more than $222 billion in assets under management as of June 30.
Secure platform for customers
The launch of the new platform is Fidelity Canada's first step toward institutional bitcoin adoption. However, Fidelity Investments Inc. launched a similar product in the U.S. in 2018. Fidelity Digital Assets has since offered bitcoin custody and trade execution services to institutional investors. Fidelity Investments' first U.S. bitcoin fund, which is open only to accredited investors, raised $102 million from wealthy investors by May this year.
The institutional custody platform includes a secured cold wallet, physical, digital and operational controls, as well as multi-level innovative security measures. It will target institutions such as pension funds, portfolio managers, mutual funds, and exchange-traded funds (ETFs) seeking direct exposure to bitcoin. However, the platform could also be extended to other digital assets such as non-fungible tokens (NFTs).
