Fidelity Digital to Accept Bitcoin (BTC) as Collateral for Cash Loans
Asset manager Fidelity continues to embrace the premier cryptocurrency.
Fidelity Digital to Hold BTC as Collateral for Cash Loan
In what comes as the latest impetus for the adoption of the world’s largest cryptocurrency, Fidelity Digital recently announced that it would be accepting BTC as collateral for cash loans.
According to a Bloomberg report published on December 9, Fidelity Digital Assets – the digital assets offshoot of the Wall Street juggernaut – has announced that it would allow its institutional customers to pledge bitcoin as collateral against cash loans. This would be possible courtesy of a partnership with crypto startup BlockFi.
In an interview, Tom Jessop, president of Fidelity Digital Assets noted that Fidelity Investments will hold the digital asset and not make the loan itself. The target of this move is the bitcoin investors who wish to turn their digital stash into cash without selling. Further, the target also includes hedge funds, cryptocurrency miners, and over-the-counter trading desks.
Most notably, the new service by Fidelity comes shortly after the top cryptocurrency bested its 2017 all-time high value earlier in December before tumbling a little. In terms of price appreciation, bitcoin has risen 164% in 2020, hitting a high of $19,462 on December 3.
Jessop added that holding bitcoin to back loans is “a foundational capability.”
“As the markets grow, we’d expect that this becomes a fairly important part of the ecosystem.”
He added that while he envisions the loans to be longer-term than a typical repo trade, they’re still of a type – a tri-party agreement – something the Wall Street is comfortably aware of.
“We want to to develop a world-class brokerage capability for assets of all types,” he said.
Fidelity Continues to Ride the Bitcoin Train
Fidelity is inarguably one of the largest institutions to join the crypto bandwagon.
In August, BTCManager reported that Fidelity had announced that it was all set to launch its first bitcoin fund.
Similarly, in October, Fidelity went a step further, saying that stating that Bitcoin has a notably low correlation with other traditional assets like stocks or gold and that Bitcoin’s market cap has plenty of upside opportunities. In line with this, the firm considers investing 5% in BTC in one’s diversified portfolio.