Fidelity Digital Assets to hold Bitcoin as collateral for cash loans

 

The new service from Fidelity comes after Bitcoin beat its 2017 highest price earlier this month before retreating in recent days

Fidelity Digital Assets will allow its institutional customers to pledge Bitcoin as collateral against cash loans in a partnership with blockchain start-up BlockFi.

The unit of Boston-based asset manager Fidelity Investments will hold the digital asset and not make loans itself, Tom Jessop, president of Fidelity Digital Assets, said in an interview. The target is Bitcoin investors who want to turn their digital stash into cash without selling, and potential customers include hedge funds, crypto miners and over-the-counter trading desks, Jessop said.

The new service from Fidelity comes after Bitcoin beat its 2017 highest price earlier this month before retreating in recent days. The world’s most valuable digital asset has risen 164% this year, hitting a high of $19,462 on December 3. It traded Monday at about $18,880. Other cryptocurrencies like Ether and Litecoin have also seen gains.

Holding Bitcoin to back loans is “a foundational capability,” Jessop said. “As the markets grow, we’d expect that this becomes a fairly important part of the ecosystem.”

Fidelity said institutional-investor interest in digital currencies is rising. A survey the asset manager conducted earlier this year found 36% of respondents held crypto in their portfolios. More than six out of 10 expressed interest in Bitcoin and other cryptocurrencies, up from 47% in a 2019 survey.

Fidelity began a Bitcoin custody service last year but this is the first time it’s allowing the coins to be used as collateral. To get a loan, a Fidelity customer will have to have an account with BlockFi.