Fidelity Digital Assets Services (FDAS), a crypto trading and custody division of investment giant Fidelity Investments, will likely delay support for Ethereum (ETH) for a while, a senior executive of the platform has said.
Fidelity’s digital asset subsidiary launched this quarter, with its initial plans being to support bitcoin and then ether.
However, according to the digital asset platform’s president Tom Jessop, FDAS will use an internal framework it has developed to evaluate any of the cryptocurrencies that may need to add.
Although FDAS had earlier indicated that it would add ether as well as other cryptocurrencies to the platform, Jessop’s latest remarks suggest that the process may not be that simple and straightforward.
The FDAS chief has said that other than the currently supported bitcoin, the platform has “designs to support other coins over the balance of the year,” although these will be subject to “several criteria.”
These conditions include using the platform’s selection framework that looks at among other things, the client demand for the asset.
Speaking to crypto news outlet Coindesk, Jessop explained that their framework seeks to establish several things about an asset.
For instance, the focus would be on how decentralized the coin is, or whether the coin’s protocol has any “peculiarities” that would dissuade FDAS from launching support or continue to provide access to any given cryptocurrency.
Jessop noted that the platform may list coins subject their market capitalization, because “that’s where the demand.” However, market cap and appearance among the top cryptocurrencies may not be enough to guarantee a coin’s listing on the trading and custody platform.
To this effect, he expounded that reasons may abound that mean refusal to list a coin, which may not have anything to do with client demand for particular crypto.
And that is what Jessop points to in reference to a delay in adding ether, currently crypto industry’s second-largest coin by market cap.
He reportedly told the publication that Ethereum’s upcoming hard fork and other network upgrades mean that “[FDAS] is trying to see how those things work out” first, before a deciding whether or not to add it to the platform.
Ethereum recently activated its Constantinople hard fork that introduced a number of improvement proposals (EIPs), among them one that seeks to cut block rewards. The network has another hard fork called Istanbul set for October this year.
Scaling FDAS over 2019
According to Jessop, the challenge that Fidelity has is to ensure that its FDAS platform protects investors- especially in the wake of the 51% attack that hit Ethereum Classic (ETC) at the beginning of the year.
Moving forward, FDAS has plans that the exec says will see the platform scale its services and add new clients to ensure they cover 90 percent of the U.S. market by the end of 2019. It will nonetheless be in areas where the business has “jurisdictional authority to operate.”
To achieve this, the firm will seek to secure regulatory approvals, including money service business licenses, with operations currently allowed in “a considerable number” of U.S. states.
Notably, also, the investment firm has upped its pursuit for registration as a qualified custodian, which Jessop said was a priority and will likely be granted this year.
Jessop added that the platform’s management team will double up on their efforts to identify and fix any potential bugs in the system.
Meanwhile, Fidelity’s platform continues to attract a significant number of clients from various sectors, including, hedge funds, family offices, crypto funds, and high-net-worth individuals.
FDAS has also attracted exchanges, which are looking to use Fidelity’s platform to offer custody solutions to their clients, with the firm set to see “hundreds of millions” in assets under management brought in via this business channel.
Also on the list of potential clients are pension funds, although that could take a while before many of these funds commit money to the crypto asset class.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.