The same company, Fidelity Investments, served as a launching pad for some of the most notable participants in the digital assets market.
The legendary powerhouse of mutual funds, Fidelity, is a pillar of the established financial system that bitcoin and other cryptocurrency creators aimed to overthrow. However, the 77-year-old business became a pioneer in bitcoin mining in 2014, when the token was trading at about $400. It pushed staff members to explore blockchain technology and create new products, which resulted in the formation of its cryptocurrency business unit four years later.
It developed a strong talent pipeline for the sector along the way.
Some of Fidelity’s initial employees later left as a result of the company’s growing reluctance to grow too quickly in an uncertain industry.
Perhaps it was best to be cautious in the end. After several high-profile firm failures last year that culminated in the bankruptcy of exchange FTX, regulators launched a crackdown on the cryptocurrency industry. Binance and Coinbase Global, two of the biggest cryptocurrency exchanges, were recently sued by the Securities and Exchange Commission for, among other things, providing unregistered securities.
Bitcoin is currently trading at roughly $26,000, far below its high from two years ago, despite a price recovery in 2023. Since the start of last year, the sector has lost tens of thousands of jobs, and after the fall of Sam Bankman-Fried and other once-heralded crypto visionaries, sceptics are skeptical about its future position in finance.
Members of Fidelity’s crypto alumni club include startup founders, heads of research, and venture capitalists. They jokingly refer to themselves as the Fidelity mafia, similar to the PayPal mafia of former employees who afterwards founded their own technological enterprises.
The group comprises Matt Walsh, founding partner at crypto venture firm Castle Island Ventures, Alex Thorn, head of firmwide research at cryptocurrency financial services company Galaxy Digital, Juri Bulovic, head of mining at bitcoin miner Foundry, and more than a dozen other individuals.
Since Fidelity has been working on cryptocurrencies for a lot longer than any other traditional financial institution, there are many of us who have done so, according to Thorn, who founded a Telegram chat group with former coworkers.
Fidelity’s cryptocurrency venture, supported by Chief Executive Abby Johnson, started out by trading and storing bitcoin for major investors like hedge funds. It also increased the use of cryptocurrency for novice investors throughout the ensuing years. Businesses can include bitcoin in the retirement plans offered by Fidelity to their employees, and the vast majority of Fidelity’s 43 million customers have the opportunity to trade bitcoin and ether.
Thorn said, they were traditional, so it wasn’t like they were learning about this wild crypto thing with child gloves on. They made a significant investment in it, which helped Fidelity become a talent magnet early on.
In 2009, Thorn began working in the legal division of Fidelity as an entry-level analyst. Early adopter of bitcoin, he volunteered to assist with Fidelity’s earliest crypto trials, earning Johnson the moniker “Bitcoin Viking”. Later, he shared management of a cryptocurrency startup firm connected to Fidelity.
Other ex-employees concur that Johnson’s early support for bitcoin attracted them to Fidelity.
According to Walsh, who joined Fidelity in 2014 straight out of business school, she gave bitcoin a rare vote of confidence in 2017 when she pushed for making the token more accessible for people and institutions.
Walsh said that at the time Jamie Dimon claimed it was pointless to look into bitcoin since it was nothing more than a tulip bubble. Abby was holding it entirely in the opposite direction.
Despite her enthusiasm, Johnson, whose family controls 49% of Fidelity, encountered internal and external criticism regarding the company’s future being too heavily dependent on cryptocurrencies.
Johnson claimed in a speech last year that she had put together a plan in 2014 to spend $200,000 on purchasing bitcoin mining equipment from Chinese vendors. She noted that both Fidelity’s financial and security teams rejected the proposal.
She had to sort of go into people’s offices and say, Look, it’s $200,000, we’re doing this, she recalled.
Some Fidelity officials had their doubts about the broad acceptance of cryptocurrency even years later. According to Kathleen Murphy, who was then in charge of Fidelity’s expansive personal investments division, the company’s cryptocurrency products would only be available to experienced investors due to regulatory issues in 2018.
Some former employees said that these remarks deterred workers who were interested in contacting smaller investors. Murphy opted not to respond.
When U.S. Labour Department officials stated that Fidelity’s intention to permit clients to deposit bitcoin in their 401(k) plans would threaten the retirement security of Americans, it brought Fidelity’s cryptocurrency ambitions to a greater level of public scrutiny. The business responded to this criticism by restating its commitment to digital assets as a crucial component of the financial industry of the future.
Former workers suggested that Fidelity’s efforts in the cryptocurrency space could have been more aggressive. They were upset that Coinbase, which was established in 2012—just two years before Fidelity entered the bitcoin space—had acquired their custody-related clientele. Others claim that Fidelity’s well-established money-management division barred it from entering a high-risk business without clear regulatory guidance.
Bulovic, who left Fidelity in 2021 after eight years, believes that Fidelity could have established itself as a household name for buying and selling cryptocurrency similar to Coinbase is today.
As the pandemic progressed and bitcoin prices soared, eventually crossing $60,000, Fidelity would find it difficult to retain its crypto talent. Companies with a focus on cryptocurrencies had plenty of venture capital and a strong desire to hire people with relevant experience.
Thorn left Galaxy Digital, a cryptocurrency financial services company with operations in trading, investment banking, asset management, and mining, in 2021 to establish a research division there. Galaxy Digital is owned by billionaire Mike Novogratz. A $2.4 billion cryptocurrency portfolio is being managed by Galaxy.
In order to satisfy his urge to start a business, Walsh resigned in 2018. His cryptocurrency venture company, Castle Island, has around $360 million in assets under management and is supported by Fidelity.
At Fidelity, cryptocurrencies are still seen as a potential source of long-term gain. The company houses billions of dollars in customer cryptocurrency holdings, and its crypto unit now employs more than 600 people, up from just a few dozen in 2018.
The business is also competing to introduce the first exchange-traded fund that really contains bitcoin. Investors would be able to purchase and sell the token through a brokerage account just like they could buy and sell shares of stock if authorities gave their approval.
Tom Jessop, president of Fidelity’s cryptocurrency operations, stated they are currently collaborating with all of the company’s business units on what he would refer to as a long-term digital asset strategy.
