Fidelity’s Digital Asset Management Insights

While Cynthia Lo Bessette, the head of Fidelity’s digital asset management division, is pleased with market reception of bitcoin and ether ETFs, she remains skeptical about alternative cryptocurrency ETFs.

“The way that we have been thinking about our product roadmap, it is primarily driven by demand from our client base as well as how we evaluate the market in terms of its ability to support such a new product,” Lo Bessette told The Block in a recent interview. “It’s not clear at this point that there is an obvious next ETP following Bitcoin and Ethereum, like Solana.”

This skepticism is crucial considering Lo Bessette’s role at Fidelity is to research and identify innovative investment products for various digital assets. She has a wealth of experience, having joined Fidelity five years ago as the legal chief and has risen to her current position.

Fidelity’s Wise Origin Bitcoin Fund is the second-largest exchange-traded product of its type and ranks as one of the top ETFs traded in the U.S. this year. As of July 31, it managed nearly $12 billion in assets, while the Fidelity Ethereum Fund attracted $259 million since its July launch.

“Where many of us were very surprised was the velocity of that demand certainly was very significant,” Lo Bessette said. “The asset growth has been generally as we’ve expected, given the overall market cap and the size of Ethereum compared to Bitcoin.”

Raising Stakes

Lo Bessette mentioned that the U.S. Securities and Exchange Commission (SEC) has yet to approve an ETH ETF that can stake the underlying assets, but she believes this could change in the future. Staking is seen as integral to the Ethereum ecosystem and investment opportunity.

“Whether that happens over whatever time period, think it’s more a matter of when it happens and not necessarily if,” Lo Bessette added. She noted constructive discussions with SEC staff regarding this topic.

Additionally, Lo Bessette indicated that Fidelity is exploring ways to enhance product trading, such as enabling in-kind contributions. Currently, all BTC and ETH ETFs settle in cash.

Getting Assets Onchain

What’s on Fidelity’s product roadmap as a company involved with blockchain for over a decade? Like many major financial firms, their focus includes tokenization.

Lo Bessette explained that her team is assessing not only “whether an asset can be represented on-chain,” but also whether it should be. This aligns with client demand and whether blockchain can enable activities not possible in traditional capital markets.

Stablecoins represent one clear value from tokenization.

“We think stablecoins, from the standpoint of representing tokenized cash, are certainly an obvious use case,” she stated. “The next evolution post-stablecoins is tokenized Treasury products. Post that, we’ve seen a lot of interesting project work in the credit and structured product space that we’re also researching.”