Fidelity Digital Assets faces a decline in revenue but remains optimistic. Increased competition from traditional finance giants like BNY Mellon and Standard Chartered entering the crypto custody space.
The Financial News reported that during the 12 months ending in December 2023, there was a notable decline in revenue from £1.34 million the year before to £545,000.
Reduced service-level agreement fees are to blame for the decline in revenue that Fidelity Digital Assets, a 2018 startup, has experienced.
The charges above pertain to digital asset management services rendered to Fidelity Investments, the parent organization, and introducer fees acquired during the onboarding process for new clients.
Crypto Custody by Fidelity Experiences a 32% Increase in Operating Expenses
The unit’s operating expenses increased by 32% annually, culminating in £7.8 million.
The primary catalyst for the increase was the substantial rise in staff compensation and benefits, which amounted to £3.2 million from £1.6 million.
In 2023, Fidelity Digital Assets incurred a cumulative loss of £7.1 million, indicative of an increase from £2.5 million in 2022.
Notwithstanding the financial obstacles, the organization maintains a positive outlook regarding its future.
Fidelity Digital Assets reported in its financial statements that it is persistently broadening its portfolio of products and services within digital assets.
Due to expected increased business activity in custody and trading services and the anticipation of gaining new clients, the organization anticipates an increase in revenue.
The global crypto custody sector is experiencing heightened competition due to the entry of well-known names in traditional finance.
Standard Chartered owns the London-based crypto custodian Zodia Markets, and the Japanese bank Nomura launched Komainu in 2018, delving into crypto custody.
In October 2022, BNY Mellon launched its cryptocurrency custody platform in the United States. In September 2023, Deutsche Bank partnered with the Swiss crypto startup Taurus to provide crypto custody services.
In addition, the largest custody bank in the world, State Street, operates its own digital assets division.
European Asset Managers Embrace Digital Assets
Several European asset managers have implemented strategic initiatives to increase their exposure to digital assets.
In 2022, Abrdn, an organization based in Edinburgh, acquired a portion of the London-based digital securities exchange Archax. Similarly, Schroders acquired a minority stake in Forteus, an organization specializing in blockchain and digital assets.
Asset managers, including VanEck, Invesco, Fidelity International, and DWS, have introduced crypto exchange-traded products (ETPs) for their European clients.
HSBC Holdings announced its intention to launch a custody service for digital assets last year, targeting institutional customers interested in tokenized security exposure.
The global bank will collaborate with Metaco, a technology firm owned by Ripple Labs, to introduce the new service.
Additionally, the well-known German financial institution DZ Bank, which has a 300 billion euro asset base, has unveiled its own blockchain-powered proprietary custody platform.
Before that, it was disclosed that SC Ventures, the venture subsidiary of Standard Chartered and Deutsche Bank, is investigating a solution enabling stablecoins, central bank digital currencies (CBDCs), and blockchain-based transactions to communicate seamlessly.
