Fidelity Digital Assets, the branch of Fidelity Investments that deals with cryptocurrency custody, has reported a significant decline in revenue and losses amounting to over £7 million for the previous year. According to a recent report from the Financial News, the company generated £545,000 in revenue during the 12-month period ending in December 2023, which is a notable decrease from £1.34 million in the previous year.
The decrease in revenue can be attributed to a decline in service-level agreement fees, which are associated with the digital asset management services provided to Fidelity Investments and the fees earned when new customers are introduced and onboarded.
Operating expenses for Fidelity Digital Assets increased by 32% year-on-year, reaching £7.8 million. This increase was mainly due to higher staff salaries and benefits, which rose from £1.6 million to £3.2 million. Overall, the company experienced a loss of £7.1 million in 2023, compared to £2.5 million in 2022.
Despite these financial challenges, Fidelity Digital Assets remains optimistic about its future prospects. The company stated in its accounts that it continues to expand its product and service offerings in the digital asset space. It anticipates increased business activity in custody and trading services and expects to onboard additional new clients, which will contribute to revenue growth.
The global crypto custody industry is becoming increasingly competitive, with traditional finance names entering the market. For example, London-based Zodia Markets is owned by Standard Chartered, and Nomura, a Japanese bank, ventured into crypto custody in 2018 with the launch of Komainu. BNY Mellon introduced its crypto custody platform in the US in October 2022, and Deutsche Bank partnered with Swiss crypto startup Taurus to offer crypto custody services in September 2023. State Street, the largest custody bank globally, also has its own digital assets division.
In addition, European asset managers are embracing digital assets and making strategic moves to gain exposure to them. Abrdn acquired a stake in London-based digital securities exchange Archax, while Schroders obtained a minority stake in Forteus, a firm focused on blockchain and digital assets. Various asset managers, including VanEck, Invesco, Fidelity International, and DWS, have launched crypto exchange-traded products for their European clients. HSBC Holdings also announced its plans to introduce a custody service for digital assets, catering to institutional clients seeking exposure to tokenized securities.
Furthermore, DZ Bank, one of Germany’s leading financial institutions, has launched its own blockchain-powered custody platform. Deutsche Bank and Standard Chartered’s venture arm SC Ventures are also exploring a solution that aims to enable seamless communication between blockchain-based transactions, stablecoins, and central bank digital currencies.
Overall, the cryptocurrency custody industry is evolving rapidly, with both traditional finance institutions and asset managers recognizing the potential of digital assets and investing in their infrastructure and services. Fidelity Digital Assets, despite its recent financial challenges, remains committed to growing its business and capitalizing on the increasing demand for custody and trading services in the digital asset space.