Founded in 2018, Fidelity Digital Assets’ revenue decline can be attributed to a reduction in service level agreement fees. These fees relate to digital asset management services provided to its parent company, Fidelity Investments, and introductory fees earned when introducing and onboarding new customers.

Operating Expenses Increased 32% for Fidelity’s Crypto Custody Services. Operating expenses for the unit rose 32% on the previous year to £7.8m. The main reason for the increase was an increase in staff salaries and benefits, from £1.6 million to £3.2 million. Overall, Fidelity Digital Assets made a loss of £7.1m in 2023, up from £2.5m in 2022.

Despite financial difficulties, the company remains optimistic about its future prospects. Fidelity Digital Assets stated in its accounts that it continues to expand its products and services in the digital asset space. The company anticipates revenue growth as it anticipates increased business in custody and trading services along with the expectation of adding new customers. The global cryptocurrency custody industry is becoming increasingly competitive as well-known names in corporate finance enter the market.

For example, London-based cryptocurrency custodian Zodia Markets is owned by Standard Chartered, and Japanese bank Nomura entered cryptocurrency custody with the launch of Komainu in 2018.

BNY Mellon introduced its cryptocurrency custody platform in the US in October 2022, and Deutsche Bank began offering cryptocurrency custody services in September 2023 by partnering with Switzerland-based crypto startup Taurus. Additionally, State Street, the largest custodial bank globally, has its own digital assets division.

European Asset Managers Adopt Digital Assets. Several European asset managers have also made strategic moves to gain access to digital assets. Edinburgh-based Abrdn bought a stake in London-based digital securities exchange Archax, while Schroders took 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 European clients. Last year, HSBC Holdings said it aimed to offer a digital asset custody service that appeals to institutional clients seeking exposure to tokenized securities.

The global bank will offer the new service in collaboration with Metaco, a technology company owned by Ripple Labs. In addition, DZ Bank, one of Germany’s leading financial institutions with total assets of 300 billion euros, has launched its own blockchain-based custody platform.

Before this, it was revealed that Deutsche Bank and Standard Chartered’s venture capital firm SC Ventures were working on a solution that aims to enable seamless communication between blockchain-based transactions, stablecoins and central bank digital currencies (CBDCs).