It has been a tumultuous time for cryptocurrencies. Just this month, the Securities and Exchange Commission filed charges against two prominent cryptocurrency trading sites, Binance and coin base. In November, the second largest exchange, FTX, collapsed following allegations of fraud.
Investors lost billions of dollars when the value of their digital currencies fell after the recent cryptocurrency crashes. It is understandable that many investors and viewers have soured on cryptocurrencies.
But cryptocurrency and its underlying technology, blockchain, still have a strong following in the Boston area. That includes big financial players like Fidelity and State Street, which continue to invest in digital assets, including cryptocurrencies.
"We believe there is value in this technology," said Ramine Bigdeliazari, chief product officer for Fidelity Digital Assets. โWe've heard from our customers that they want access to this,โ she said, and Fidelity aims to give them a safe and reliable way to dive into cryptocurrency.
Fidelity was one of the first investors in crypto. The company started mining the most popular cryptocurrency, Bitcoin, in 2014, and it still mines it to this day.
Despite all the recent negative news about cryptocurrencies, Fidelity last year added the option to hold and trade a second digital currency, Ether. It is the second most popular cryptocurrency.
"In order for us to understand it, we have to use it and be in the industry," Bigdeliazari said. โWe are starting to see more and more large players in existing financial markets start to do the same. I don't think it can be ignored."
Another big player from Massachusetts who is not ignorant of the more than $1 trillion crypto market is State Street.
"Actually, I think we made more investments in the last few months than in the first few years that I was here," said Jay Biancamano, who leads the digital funds team at State Street.
Biancamano said the FTX crash last year slowed down some investors. But many customers are still curious about cryptocurrencies. That's why, Biancamano said, State Street plans to increase options for investing in cryptocurrencies by the end of this year.
Big companies like State Street are betting that this type of technology will one day transform the financial industry. Biancamano envisions a future where blockchain and digital currency are part of everyday life, and it's much easier to move between different types of investments.
Imagine walking into a Starbucks, he said, "and you can actually pay for your Starbucks coffee by liquidating a portion of your Apple stock."
Ultimately, the big financial firms want to offer more investments to their clients. This is how they make money. Digitization opens up a whole world of new possibilities. In addition to cryptocurrencies, there are now investments such as digital art, digital real estate, and startups that are based on blockchain.
But working with a largely unregulated pool of assets has been challenging for legacy companies, and a spate of investor losses and fraud allegations hasn't helped. According to a recent bank survey75% of Americans who have heard of cryptocurrencies said they do not trust them.
Crypto has also earned the ire of powerful skeptics, such as Massachusetts US Senator Elizabeth Warren, a Democrat, who called this type of digital money a "potential threat to financial stability."
Lynne Marlor, president of the Boston Blockchain Association, said that unlike nimble start-ups that have been able to "fly under the radar," legacy companies cannot avoid scrutiny from regulators and investors. "These financial institutions cannot go unnoticed," she said.
But Marlor added that the slower, more careful approach to cryptocurrency and other digital investments could be to the advantage of companies like Fidelity and State Street.
"In my opinion, they are the best prepared because they have taken the traditional financial markets and understand them," he said. "Now they take them and create innovative ways [of doing business]."
After all, he acknowledged, the "average consumer" still doesn't understand digital investing. Companies with a long track record have earned a level of trust among the general public. They may be in a good position to help broaden the appeal of digital assets.
