“As general adoption in the digital assets space continues to evolve, we felt this was the logical next step for the marketplace and our clients,” said Mike O’Reilly, President of Fidelity Digital Assets, in a statement to Fortune.
The arrival of FIDD comes nearly a year after reports that Fidelity was testing a stablecoin, though at the time the company stated it had no plan to launch one.
Fidelity is known primarily as an upscale brokerage and asset manager that deals in traditional offerings like stocks and bonds. At the same time, it stood out during the early days of crypto as one of the first mainstream financial firms to embrace blockchain under longtime CEO Abigail Johnson, and even dabbled in Ethereum mining as far back as 2014.
In announcing FIDD’s launch, O’Reilly touted the company’s longtime experience in digital assets as a competitive advantage. This could be significant at a time when the stablecoin market has become increasingly competitive, and as it evolves rapidly following the recent passage of the Genius Act, a landmark piece of legislation that provides a U.S. regulatory framework for the digital dollars.
Currently, the total market for all stablecoins is around $315 billion. Market leader Tether has long dominated the sector with its flagship USDT token currently accounting for nearly 60% of all stablecoins. Nearly all of Tether’s operations, though, are nearly entirely overseas. In the United States, the clear stablecoin leader is Circle, whose USDC token currently has a market cap of around $72 billion.
The business of stablecoins has historically been highly lucrative since issuers of the tokens have traditionally kept all of the interest generated by the billions of dollars they hold as reserves. That model is currently in flux, however, as firms like Coinbase push to share stablecoin yields with their customers to boost adoption of the technology. The legality of doing so, however, remains murky as the fate of a follow-up bill known as the Clarity Act—which has big potential implications for stablecoins—remains unclear.
In any case, Fidelity could find it challenging to build traction for its new FIDD token. In the last two years, other prominent financial players, including PayPal and Ripple, have launched stablecoins of their own, but neither has been able to attain even 10% of Circle’s market cap. The space just became more competitive still as Tether this week launched a version of its stablecoin known as USAT that is compliant with U.S. regulations.
Fidelity, though, appears to believe in several key segments of the fast-growing stablecoin market. In its announcement, the company pointed to its expertise in reserve management—suggesting the firm may seek to manage stablecoins issued by other companies as well as its own.
Possessing its own stablecoin is also likely to make Fidelity’s various wealth management platforms more efficient since moving dollars on a blockchain is cheaper and faster than using traditional networks like ACH.
Fidelity’s O’Reilly, meanwhile, also indicated that the company envisions a role for stablecoins in its trading and retail brokerage operations.
“Many firms use stablecoins as the settlement mechanism on crypto platforms, and stablecoins have the benefit of supporting liquidity for providers and firms 24/7/365; done at a low-cost, in a low-friction environment,” he said. On the retail side, stablecoins can be used as payments on DeFi networks and used as a dollar-backed, one-to-one use system.”
