Fidelity Digital, a cryptocurrency-oriented arm of Fidelity Investments, will allow institutional clients to use bitcoin (EXANTE: Bitcoin) as collateral for cash loans, Bloomberg has learned.
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The new service became possible thanks to a partnership with blockchain startup BlockFi.
The Boston-based crypto arm of Fidelity will only hodl cryptocurrency, Tom Jessop, president of Fidelity Digital Assets told Bloomberg. Hence, the company wants to allow bitcoin investors to turn their cryptocurrencies into fiat without selling the asset, he added.
"As the markets grow, we would expect that this becomes a fairly important part of the ecosystem," Jessop says.
The actual fiat payments will be processed by BlockFi, which will also risk-manage BTC by offering cash worth 60% of a crypto loan. In August 2020, BlockFi attracted $50 million in Series C funding led by Morgan Creek Digital.The company also raised investments from Valar Ventures, CMT Digital, Castle Island Ventures, Winklevoss Capital, and others. This is the third investment round over the past 12 months.
Meanwhile, Fidelity Digital signed a partnership with Stack Funds, a Singaporean company focused on crypto services, to attract new wealthy clients in the Asian market. Stack will offer FDAS a secure cryptocurrency custody services to meet high demand from high-net-worth investors and family offices in the digital assets market.
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