Fidelity’s Crypto Custody Business Reports 60% Revenue Decline, £7 Million in Losses

Fidelity Digital Assets, the cryptocurrency custody arm of Fidelity Investments, has revealed a drop in revenue of nearly 60% and losses exceeding £7 million for the previous year.

According to a recent report from the Financial News, the company generated £545,000 in revenue during the 12-month period ending in December 2023, a notable decrease from £1.34 million in the preceding year.

The decline in revenue for Fidelity Digital Assets, which was established in 2018, can be attributed to a decrease in service-level agreement fees.

These fees are associated with digital asset management services provided to its parent company, Fidelity Investments, as well as introducer fees earned when new customers are introduced and onboarded.

Fidelity’s Crypto Custody Sees 32% Rise in Operating Expenses

Operating expenses for the unit rose by 32% year-on-year, reaching £7.8 million.

The increase was primarily driven by higher staff salaries and benefits, which surged from £1.6 million to £3.2 million.

Overall, Fidelity Digital Assets experienced a loss of £7.1 million in 2023, up from £2.5 million in 2022.

Despite the financial challenges, the company remains optimistic about its future prospects.

In its accounts, Fidelity Digital Assets stated that it continues to expand its product and service offerings in the digital asset space.

The company forecasts revenue growth as it anticipates increased business activity in custody and trading services, with the expectation of onboarding additional new clients.

The global crypto custody industry is becoming increasingly competitive, with established traditional finance names entering the market.

For instance, London-based crypto custodian Zodia Markets is owned by Standard Chartered, and Nomura, a Japanese bank, ventured into crypto custody in 2018 with the launch of Komainu.

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 its own digital assets division.

European Asset Managers Embrace Digital Assets

Several European asset managers have also made strategic moves to gain exposure to digital assets.

Abrdn, headquartered in Edinburgh, acquired a stake in London-based digital securities exchange Archax, while Schroders obtained a minority stake in Forteus, a firm focused on blockchain and digital assets, in 2022.

Asset managers such as VanEck, Invesco, Fidelity International, and DWS have launched crypto exchange-traded products (ETPs) for their European clients.

Last year, HSBC Holdings said it aims to introduce a custody service for digital assets, catering to institutional clients seeking exposure to tokenized securities.

The global bank will offer the new service 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, has launched its own blockchain-powered custody platform .

Prior to that, it was revealed that Deutsche Bank and Standard Chartered’s venture arm SC Ventures are exploring a solution that aims to enable seamless communication between blockchain-based transactions, stablecoins, and central bank digital currencies (CBDCs).