Fidelity's Really Trying To Make This 'Bitcoin' Thing Happen

We get it, dad, you heard about a thing on the internet.
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Technological change isn't some passive, inevitable process driven by invisible forces of history. Instead, it takes individuals of uncommon passion and foresight to disrupt the way we live. Henry Ford envisioned a car in every garage, so he pioneered the assembly line. Steve Jobs saw a computer on every desktop, so he engineered the Mac.

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Today, Fidelity Investments imagines a bitcoin in every portfolio. So the company is, well, uh:

Employees of Fidelity can now pay for their canteen lunch using bitcoin — a mark of the determination of Abigail Johnson, the company’s chief executive, to position the asset manager as a digital currency pioneer.

That's one way to induce mass adoption of a hyper-volatile digital asset backed by no authority other than its anonymously authored code and heretofore known best as a way to buy drugs and extract ransoms. It may not be the best way, however; fewer than 100 Fidelity employees have actually paid for lunch in satoshis.

But that's not all Fidelity is trying:

Fidelity to date has worked with bitcoin platform Coinbase Inc. to allow charitable giving in bitcoin, enabled bitcoin payments in its cafeteria and is studying applications for distributed ledger technology. Ms. Johnson said the firm will soon make it possible to display bitcoin assets held through Coinbase on Fidelity.com.

It's not hard to see why Fidelity is angling to be the cool dad of Bitcoin. Its core businesses – managing retirement accounts, brokering stocks, selling mutual funds – are all undergoing convulsive disruption. So it's incumbent upon Fidelity to get out ahead of new technologies. As Johnson explained:

“I am in a traditional financial services business — but we at Fidelity can see that the evolution of technology is setting our industry up for disruption,” she said. “What if this technology could do for the transfer of value, what the internet did for the transfer of information?”

If bitcoin (or more broadly, blockchain) could do for money what the web did for everything else, Fidelity is probably getting in while the gettin's good. But there are plenty of reasons for doubt. Bitcoin is not a stable store of value. And the blockchain is remarkably inefficient at its central and only task of recording transactions. Fewer than 400,000 bitcoin transactions per day reach completion, while another 100,000-plus transactions are waiting in limbo to be confirmed at any given time. For comparison, Americans make more than 90 million credit card transactions a day. Most work!

Perhaps using incomprehensibly difficult cryptological as a means of ensuring trades makes sense between anonymous counterparties on a distributed ledger, but such a system is unnecessary and wasteful when it's, say, Fidelity settling a trade with BNY Mellon. There's already a rather efficient system for that.

Surely Fidelity has some ideas for blockchain that go beyond gimmicky attempts to have employees purchase sandwiches in bitcoin. Johnson mentioned academic partnerships and venture investments in blockchain startups. That's something. But it's hard to see so far what specific purpose bitcoin will serve in Fidelity other than ginning up some publicity. Though on that front: Congrats!

Fidelity allows workers to use bitcoin in company canteen [FT]
Fidelity CEO: Bringing Blockchain to the Masses ‘Harder Than It Seemed’ [WSJ]

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