New York’s DFS Recevies a Trust License Application from Fidelity Digital Assets Services (FDAS)
- Fidelity Digital Assets submitted an application in New York for a trust license, which could take six months to get approval.
- The head of the crypto arm discusses progress on the trading business with The Block.
In the state of New York, regulations within the Department of Financial Services state that any cryptocurrency platform that wishes to operate in their area must first obtain a license. According to reports from The Block, Fidelity’s cryptocurrency arm – Fidelity Digital Assets – has submitted their own application for a Trust License with the NYDFS. If approved, FDAS would be able to operate its custody business in the state, though it already does so in several other states.
This application is just one of the more recent developments for Fidelity in their mission to offer trading solutions with Bitcoin, positioning them against Coinbase and other rivals. In May, the firm was reportedly trying to expand beyond their custody business and launch broker services for institutional clients. For the advancement of their custody business, the firm has been working with traditional asset managers and crypto native firms, according to statements made by people that have an understanding of the situation.
Now, Fidelity Digital Assets is in the same bracket as Bakkt, the pending cryptocurrency platform of ICE, which applied for a trust license in New York to be considered a qualified custodian. A lawyer with Gibson Dunn, Arthur Long, commented that this trust license is much “more expansive” that the BitLicense, which is a license for cryptocurrency firms in New York. With a trust license, the firm is able to provide a broader range of services in the financial market, including financial advice.
FDAS was originally launched as an offshoot of Fidelity in October last year. Cryptocurrency custody was launched earlier this year, as the firm poached Chris Tyrer from the Barclay investment bank. Christine Sandler, a former executive with Coinbase, joined Fidelity Digital Assets recently, filling a sales head position.
Realistically, the approval for this trust license could take a while, but the approval would qualify FDAS to operate as a Limited Purpose Trust Company. When The Block spoke with Long in May, the lawyer stated that securing an approval takes about half a year. He added,
“Any bank or trust company is going to have to go through a substantial process so that the regulators understand the business.”
In the meantime, FDAS is working to expand their services. Tom Jessop, the head of Fidelity Digital Assets, described the trading business to The Block earlier this year, expressing that retail customers will not be able to participate. Speaking to The Block, Jessop commented that the firm would basically be an agent for clients, which is
“what our clients want.”
“Our clients want to avoid the issues associated with funding on multiple exchanges, both administrative risk, or otherwise, they want something resembling the best price experience, and so we’ll try to do that by bringing liquidity providers, and other sources of liquidity onto our platform. I think effectively a smart order router, or logic, that would interrogate the market, find the best better offer, and allow the client to execute at that price.”
So far, The Block has been unable to reach Fidelity for a comment on this matter.