We’ve chronicled the coming scale, architecture, institutional excitement, and pedigree of Bakkt on these pages for the past few weeks. Every crypto centric organization and personality of means is either financially or emotionally invested in the Bakkt launch and what it will mean for Bitcoin and the crypto ecosystem. Except for one big name…
In conversations with several sources in the know (some invested in Bakkt and some that are not; but still familiar with the equity offering) it came to our attention that Fidelity passed on a significant stake in Bakkt for one reason and one reason alone – they plan to compete directly with Bakkt in the crypto space with its own custody/warehousing and trading architecture.
This is the conversation in and around those in the know just beyond the ‘Bakkt story’.
Fidelity is said to have several working groups of scale preparing products and services within crypto that will compete directly with Bakkt for institutional clients, while on a faster path to offering those same products to its vast numbers of retail clients. A proposition that Bakkt has eschewed thus far.
One source with a deep understanding of Bakkt’s offering and knowledge of Fidelity’s decision to pass on an investment had this to say:
“The rumors out there stem from Fidelity passing on taking a stake in Bakkt and then have run amok from there. They’ve been just as secretive about their build as Bakkt was for nearly two years leading up to their announcement. All we know is what we hear from a couple guys that work at Fidelity, but even that is vague and a wink and a smile. But as we see stuff leaked via the media in some way it makes sense that they would scale up. Bakkt has all the institutional pipes, but Fidelity has that same access, but a massive retail name that can tap millions of customers.”
“The real intrigue here is the rumor that Fidelity considers themselves to be crafting a real competitor to Bakkt. That is a mouthful if you ask me. Bakkt is leveraging fifty plus years worth of exchange infrastructure to establish Bitcoin as a standard and then offer products that evolve from there. Fidelity is said to be further along in the way they plan to leverage that same architecture. If that is true, and that is a big if, it only furthers adoption, and the crypto ecosystem wins. Still, lots of chatter about what could come from a name like Fidelity.”
The paths that Bakkt and Fidelity seem to be taking are very different, at this point. If Fidelity is just as far along, why not announce it and also market it in some way via PR? Bakkt has decided to go that route by announcing its existence and an assumption of a launch in November. Interviews, profiles, social media, etc have all been a part of the branding. Fidelity has yet to go down that road.
From CCN, a couple months ago, a leak from inside Fidelity mentioned the work being done inside the firm:
“Citing anonymous sources with knowledge of the matter, the publication further reported that Fidelity, which currently manages $2.4 trillion in assets, has been planning the initiative for approximately one year.”
“The company is also seeking staff to develop “first-in-class custodian services for Bitcoin and other digital currencies.”The latter position falls under the Fidelity Digital Asset Service division, which handles the firm’s limited cryptocurrency-related services.”
“At present, select clients can link their Coinbase accounts to their Fidelity portfolios, enabling them to view their cryptocurrency holdings on the Fidelity platform alongside their other investments. This new service would allow Fidelity to hold crypto assets directly.”
“It’s not clear whether the cryptocurrency exchange would be made available on the main Fidelity platform or whether it would exist as a separate entity under the company’s umbrella. Nor is it clear when the venue would launch.”
Whether it is an exchange, structured products, NDF’s, ETF’s, or any derivative therein – the rumors have become loud and not so hidden. Fidelity is set to announce something, and choosing to pass on as sure a bet in crypto (Bakkt) just a couple months ago is as clear a marker as any.