Additionally, below is a quote from Anthony Tu-Sekine, partner and head of the Blockchain and Cryptocurrency Group at Seward & Kissel LLP.
“Many industry observers agree that the next domino that needs to fall in order for crypto assets to reach wide-spread adoption is large scale entry into the market by institutional investors. So far, custody of crypto assets has been one of the significant barriers for institutional investors; many of the custody providers that are currently willing to hold crypto assets are either relatively small, fairly new or not operating in a fashion that traditional institutional investors are accustomed to.
The creation of Fidelity Digital Assets may remove that obstacle and should make it easier for institutional investors to have access to a custodian with which they are comfortable. Unfortunately, it is not clear from the information made available by Fidelity so far whether the creation of Fidelity Digital Assets answers all of the issues that need solving. For instance, it is not clear which crypto assets other than bitcoin and Ether Fidelity will custody, and whether it would be willing to custody crypto assets that are deemed to be securities under U.S. laws. It is currently easier to find a well-established custodian for “common” crypto assets like bitcoin and Ether than for more-thinly traded crypto assets, particularly those that may be deemed securities.
Fidelity Digital Assets also does not make it clear whether the new custodian is a new business line for one of its existing entities or a separate, new legal entity, and whether the entity providing the service is of a type that would make it a “qualified custodian” for purposes of the Security and Exchange Commission’s “custody rule”; many funds and their advisers are required to have certain fund assets held by such “qualified custodians.”
If Fidelity Digital Assets is a “qualified custodian” and is willing to hold a large number of different crypto assets, this could result in the entrance of a substantial amount of additional investments in crypto assets by institutional investors.”
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