Fidelity Opens Retail BTC— Is ETH Trading Exploiting Bank Crisis?

• Fidelity Investment allowed BTC and ETH trading access, benefiting from the recent bank crisis 
• The US banking industry suffers from the recent Silvergate, SVB, and Signature Bank collapses

Fidelity Investment opened access to BTC and ETH trading to fill the void created by the closure of crypto-friendly banks. United States regulators closed Silicon Valley Bank and Signature Bank after the collapse of Silvergate to curtail the crisis in the banking industry. 

Fidelity Investment is trying to fill the GAP

All the banks that shut their doors were bridges between traditional finance and the crypto industry. Their closure has hampered easy operations; Fidelity Investment is trying to fill the gap by offering trading options. Previously it provided services to only institutional and a few select customers. Earlier this month, they opened their doors to the general public.   

Now individual investors can buy and sell BTC and ETH using their custodial and trading services provided by Fidelity Digital Assets. However, clients, for now, aren’t allowed to transfer cryptocurrencies to and from their Fidelity accounts. There is no clear timeline for this facility, but rumors are it might be available by November 2023, a few days after announcing the waitlist.

The GAP created by recent Closures

Silvergate Capital collapsed after fighting FTX exposure, Terra connection, and other factors for months on March 3, 2023. This created a domino effect leading to the fall of Silicon Valley Bank, and Signature bank, both of which were closed by authorities to control the banking crisis. However, the investors and customers of SVB and Signature were made whole by FDIC. 

This incident created a massive gap between traditional finance and the crypto industry, which Fidelity Investment is trying to fill and cash on while doing.  

Fighting the Custodial Terror

Fidelity retains the custody of the assets by exploiting the scenario where investors are separated from the passwords, their private keys, and the inability to transfer their holdings. However, the terror of allowing third-party intermediaries custodial rights was multiplied by numerous bankruptcies and collapses in the crypto industry. Fidelity’s size and stature could be enough to calm the fear down. 

The timing of this move is spot on, as the US crypto industry is facing heavy regulatory pressure. Because of numerous collapses and bankruptcies that rocked the crypto world in 2022. Along with the recent collapse of crypto-friendly banks, SIlvergate, SVB, and Signature. 

The trading option is only open for US citizens aged 18 years and above residing in 36 states where Fidelity Digital Assets offers services.

The Catch in the Offering

Fidelity is supposedly following the footsteps of Robinhood, a stock trading app and the biggest crypto exchange. As they proclaimed the commission-free offerings, but there lies the catch. For each transaction, a 1% fee will be added. They can either call this fee the spread while defining it as the difference between the execution price and the price at which Fidelity Digital Assets fill orders with. 

Ric Edelman, financial advisor and founder of the Digital Asset Council of Financial Professionals, said that the Fidelity service innovatively offers the credibility required by the industry and offers the opportunity for investors as most of them rely on their financial advisors for investment strategies. 

Along with crypto trading, Fidelity also offers Fidelity Ethereum Index Fund, tracking the performance of the second biggest cryptocurrency in USD. In December 2022, they filed three trademark applications to provide investment services in NFTs and metaverse. 

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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