While federal bodies across the world are contemplating ways to regulate digital assets and cryptocurrencies, mainstream banks and fintech companies are focused on introducing fee-based crypto-related services for bitcoin investment. Fidelity National Information Services (FIS), an American Fortune 500 fintech company listed on the New York Stock Exchange, is the latest to launch a Bitcoin investment service, according to their press release in the first week of May. The service will be available to Fidelity’s core banking clients.
Fidelity’s “Bitcoin investment in your Bank account” for Core Banking Clients
Fidelity’s “Bitcoin investment in your bank account” is the first of its kind initiative that will allow its core banking clientele to transact in bitcoins using a mobile app. The FIS Digital One Mobile app sports a dedicated interface for trading in bitcoin and can be viewed in tandem with your bank account. This module will also offer bitcoin custody services in collaboration with New York Digital Investment Group LLC (NYDIG).
Fidelity’s venture capital arm —- FIS Ventures, holds an undisclosed stake in NYDIG.
The press release quoted Head of Global Core Banking and Channels for FIS, Rob Lee saying that “As demand for bitcoin as a store of value continues to grow, FIS is focused on enabling our core banking clients to respond to growing market demand and better serve their customers.”
NYDIG is a fintech company with a focus on providing institutional solutions for bitcoin-related financial services. It disclosed plans to launch an exchange-traded fund (ETF) in an SEC filing dated 16 February 2021 for bitcoin investment. As per the filing, Morgan Stanley & Co LLC will act as the Authorized Participant to process transactions, whereas U.S. Bancorp Fund Services LLC will oversee administrative functions like taxation, accounting services, financial reporting as well as NAV calculations.
Before entering into the crypto-custody agreement, both Fidelity and NYDIG collaborated on the Quontic Bank’s Bitcoin Rewards debit card service in 2020.
What makes this service relevant?
Currently, in the digital assets domain, many enthusiasts are forced to turn towards unregulated entities, operating outside the purview of the conventional banking system for bitcoin investment. This is applicable even for basic services like opening an account to buy, sell and hold cryptocurrencies. It is not just the individual investors, even the corporates and institutional investors leaning towards cryptocurrencies have limited alternatives.
In the words of Robert Gutmann, the co-founder of NYDIG, “While bitcoin adoption is increasing, an accessibility and credibility gap remains for too many who want to buy, sell and hold. Our partnership with FIS, and their core banking clients, bridges this gap.” Since both the entities are federally approved financial intermediaries, Gutmann sees the commercial agreement with FIS as a credible solution for cryptocurrency adoption.
Impact of the crypto-boom on mainstream banks
The evolution of the cryptocurrency and DeFi ecosystem is forcing banks not only to re-invent their products and services but also reconsider their business strategies. With the increasing popularity of digital assets and cryptocurrencies, banks and financial intermediaries are not just facing a potential threat to business – but also a potential loss of critical resources from their talent pool.
A recent efinancialcareers publication claims that a key resource from Goldman Sachs, London decided to call it quits after making a fortune on cryptocurrencies. Reportedly, former GS managing director and head of emerging market sales, Aziz McMahon was riding the Dogecoin wave — a wave that witnessed a 95x surge on a year-to-date basis. The publication also listed Luyi Zhang (a former senior quantitative analyst with Bank of America, New York) and Jesse Bornstein (a former critical resource of Nomura’s Trade Finance Business in New York) among the people who switched over to new roles in the cryptocurrency domain.
About the author: Shankar Iyer is one of the full-time writers at Cryptowisser.com. With 13+ years of background in Investment Banking and Financial Services, from Lehman Brothers (up until the CDO-crash in 2008) to Deutsche Bank, Shankar has a comprehensive understanding of the financial markets and its problems. Today, he’s an avid researcher and writer on a wide variety of blockchain topics.