Fidelity rumored to make “seismic” crypto move soon

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Rumors are Fidelity will buy out Grayscale or file a spot Bitcoin ETF application, as BlackRock did last week.

Fidelity is rumored to be planning a “seismic move” in the crypto markets, according to Andrew Parish, co-founder of Arch Public.

The asset management firm describes itself as “crypto-curious,” having mined Bitcoin since 2014. By 2018 it launched a separate cryptocurrency-dedicated business – Fidelity Digital Assets (FDA,) which has since received a New York Trust Charter and launched its European operations in 2020.

Examples of FDA initiatives include its Fidelity Crypto offering – enabling users to trade Bitcoin and Ethereum alongside traditional stocks – pushing for 401(k) digital asset investing.

Rumors suggest that Fidelity, the world’s third-largest asset manager with $4.24 trillion under management, may be considering either a buyout of Grayscale or an application for a Bitcoin spot ETF.

Parish also speculated that, with these potential moves and other recent events, BlackRock and Fidelity could dominate the U.S. digital asset space.

Grayscale conversion

Grayscale operates 17 cryptocurrency trusts comprised of single and multi-asset funds. The largest by assets under management (AUM) is the Bitcoin Trust (GBTC) at $16.5 billion.

Grayscale trust products allow accredited investors exposure to the underlying crypto asset(s) via shares in the trust. Like an ETF product, Grayscale trusts have SEC reporting requirements, providing strong investor protection.

However, the critical difference is that a spot Bitcoin ETF would allow for redemption in BTC, something the Grayscale Bitcoin Trust cannot offer.

Grayscale has been attempting to convert the GBTC to a spot Bitcoin ETF for a while. However, the Securities Exchange Commission (SEC) denied the conversion, leading to Grayscale suing the agency in June 2022.

Hot on the heels of BlackRock

BlackRock, the world’s largest asset manager, submitted a Bitcoin spot ETF application on June 15.

The move was generally seen as positive for the cryptocurrency space, including as a bullish price driver and in legitimizing the industry.

However, questions remain about the likelihood of the application’s success and BlackRock’s motives. Decentralization advocate Chris Blec also warned of a possible Bitcoin Proof-of-Stake fork as a potential outcome.

By: Samuel Wan

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