Fidelity Digital Assets, the cryptocurrency custody division of Fidelity Investments, has reported a nearly 60% revenue drop and losses surpassing £7 million for the last fiscal year.
Revenue and Losses
A recent Financial News report indicated that the company generated £545,000 in revenue for the 12-month period ending December 2023, a sharp decline from the £1.34 million earned the previous year. The revenue drop for Fidelity Digital Assets, founded in 2018, is mainly due to a reduction in service-level agreement fees.
These fees are related to digital asset management services offered to its parent company, Fidelity Investments, as well as introducer fees earned from onboarding new clients.
Rise in Operating Expenses
32% Increase in Operating Expenses
Operating expenses for Fidelity Digital Assets increased by 32% year-on-year, reaching £7.8 million. This rise was primarily driven by higher staff salaries and benefits, which jumped from £1.6 million to £3.2 million.
Overall Financial Performance
The company experienced a loss of £7.1 million in 2023, up from £2.5 million in 2022. Despite these financial setbacks, Fidelity Digital Assets remains optimistic about future growth. The company is expanding its product and service offerings in the digital asset sector, forecasting revenue growth with increased business activity in custody and trading services, and plans to onboard additional clients.
Competitive Landscape in Crypto Custody
The global crypto custody industry is becoming increasingly competitive, with many traditional finance companies entering the market. Notably, London-based crypto custodian Zodia Markets is owned by Standard Chartered, and Nomura, a Japanese bank, launched its crypto custody service Komainu in 2018. 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. Additionally, State Street, the largest custody bank globally, has established its own digital assets division.
European Asset Managers Embrace Digital Assets
Strategic Moves by European Asset Managers
Several European asset managers have made significant moves to gain exposure to digital assets. Abrdn, based in Edinburgh, acquired a stake in London-based digital securities exchange Archax. In 2022, Schroders obtained a minority stake in Forteus, a firm specializing in blockchain and digital assets. Asset managers such as VanEck, Invesco, Fidelity International, and DWS have launched crypto exchange-traded products (ETPs) for their European clients.
HSBC and DZ Bank Initiatives
HSBC Holdings announced plans to introduce a custody service for digital assets, targeting institutional clients seeking exposure to tokenized securities. This new service will be offered in collaboration with Metaco, a technology firm owned by Ripple Labs. Furthermore, DZ Bank, one of Germany’s leading financial institutions with assets totaling 300 billion euros, launched its blockchain-powered custody platform. Deutsche Bank and Standard Chartered’s venture arm SC Ventures are also exploring a solution to enable seamless communication between blockchain transactions, stablecoins, and central bank digital currencies (CBDCs).
