Fidelity Digital Assets is now allowing its institutional clients to pledge Bitcoin as collateral against cash loans.
The new offering, according to a press release, will target large institutional clients like hedge funds, miners, and over-the-counter trading desks, allowing them to liquidate their Bitcoin holdings and access capital without having to sell their positions.
Fidelity is partnering with leading crypto lending platform and CME Bitcoin Futures liquidity provider, BlockFi, to facilitate its new digital offering. Fidelity will not author the loan itself, but will provide its custodial services to facilitate capital efficiency and keep assets safe.
On BlockFi’s part, the crypto lender will help manage risk by offering cash worth 60% of a loan backed by Bitcoin. To utilize the new feature, Fidelity’s clients will need to open an account with BlockFi.
Fidelity sats institutional interest in an uncorrelated store of value such as Bitcoin has grown significantly this past year as unprecedented fiscal stimulus brought with it a surge in inflation, while Bitcoin has surged 150% in 2020, becoming the year’s best-performing asset.
Fidelity Digital Assets head of sales and marketing Christine Sandler says that by combining risk-managed loans and in-class custody, institutions will be able to access more capital as well as continue to grow within the digital market.
“We continue to see demand for increased capital efficiency from institutions that maintain long bitcoin positions, and with this collateral agent capability, our customers seeking that efficiency can access more opportunity with the capital that they trust us to keep safe.
For Fidelity Digital Assets, this is an exciting first step into supporting the thriving lending market for digital assets and deepens our relationships within the digital assets ecosystem with leading firms like BlockFi which allows us to provide even more institutional-grade solutions to investors in this space.”