On The Brink with Castle Island - Cynthia Lo Bessette and Matt Horne on Digital Asset Management at Fidelity (EP.519)

Episode Date: April 15, 2024

Cynthia Lo Bessette and Matt Horne of Fidelity Digital Asset Management join the show. In this episode we discuss: The history of digital asset innovation at Fidelity. The decision to operationalize a digital asset-management capability under Fidelity's Asset Management business unit. The launch of the Fidelity Bitcoin ETF and the path to getting this product to market. How Bitcoin ETFs are currently being consumed and the distribution of these products to various investor types and platforms. How Fidelity is approaching the tokenization of real world assets. Broader views on the future of public blockchain assets and the types of opportunities for asset managers. Learn more about Fidelity's Wise Origin Bitcoin Fund

Today on the podcast, I sat down with Cynthia Lobaset and Matt Horn at Fidelity Digital Asset Management. In this episode, we discussed the launch of the Fidelity Bitcoin ETF, the firm's views on the tokenization of securities, and the market structure evolution that's underway in the digital asset industry. I think you'll enjoy this one. So without further ado, here's my conversation with Cynthia and Matt at Fidelity. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle and investors. Guests and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific

inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing.

You print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called a Bitcoin. Bitcoin. Well, Cynthia and Matt, thank you for joining us today in our podcast studio. I like to do these in person. It's great to be here in person and thank you for having us today. So we've done a number of episodes with people at Fidelity largely on the custody and trading front. So we'd love to start off with some backgrounds and maybe introducing Fidelity Digital Asset Management.

Sure. I'd love to talk about the beginnings. We started out as a unit that was part of the overall digital asset business. It became clear about a little over a year ago now that with all of the work that had been ongoing in collaboration with asset management, that it made sense to move the small team for digital asset management into the asset management unit, which took place in the beginning of last year. What we've been doing over the last year-ish is really building out the infrastructure for investment management. That includes building out a research function, the data platform supporting investment research in the crypto token and crypto token ecosystem, and also building out functionality and operating platform support for tokenization of assets. That's awesome. So asset management at Fidelity is obviously the largest business unit, I believe, certainly from a revenue perspective.

What went into the decision to actually bring the crypto asset management capability under that umbrella versus keeping it separate and distinct? I think really largely it was a recognition that there was a new emerging asset class of crypto investments and wanting to build an asset management research-led culture around the investment management research function in this new investable asset class was a big part of the motivation. But I think the other part also was the broader recognition of where blockchain and blockchain and related technologies can really impact the way in which we're building solutions, expanding the universe of assets available to be incorporated into investment solutions and also thinking about

providing broader access to those solutions through tokenized assets. That's awesome. So Matt, you came at this space initially, I think, just from being really interested in the technology, but you were in the traditional asset management side. Tell us a little bit about your path to this role. So I joined Fidelity about 12 years ago. Before that, I was a submarine officer in the Navy, so a very different background there. but made the pivot into financial services.

The first half of my career fidelity was really spent with our traditional ETF franchise, building out that effort across fixed income equities, U.S., global, different exposures there. And I found myself around 2016, 2017, heavily interested into digital assets via podcast, really. I was podcasting as I was traveling for work, and I became really obsessed with this emerging space. So I made a decision, how can I marry my interests with my career? And I was able, fortunately enough, to be a fidelity to make a pivot around. around 2019 and really be one of the first employees to what is now Fidelity Digital Asset Management. So I now run a team of digital asset strategists where we work with all of our distribution

channels. So that's the retail channel, the intermediary channel, and our institutional channel, where we are really advocating on behalf of Fidelity Solutions in the space. That's great. And Cynthia, you come at this originally from a legal perspective, which I imagine is just incredibly valuable giving everything you have to encounter. But what was your path into being interested in digital assets. Yeah, your point about being familiar and understanding a lot of the debates around the securities laws and applications, regulation of this space. So I came to Fidelity in the late summer of 2019, started out as the General Counsel for

Asset Management. And a big part of my focus when I started was looking at building out our legal and regulatory capabilities for the alternative investment space. And one of those areas of looking after coverage was digital assets. So that was some of the early collaboration between asset management and the digital asset management business. In some respects, I felt very much a part of that early small team in building out their capabilities and the ability to put digital assets into traditional products, which in the early days of that business was limited partnerships and non-publicly registered vehicles. That

certainly was also part of the early days of looking at how else can we expand customer access. there was certainly a tremendous amount of interest across the customer base in getting access to digital assets. So there was a lot of early work, which ultimately led to the almost five-year journey in bringing the ETP to market. So this ETP, obviously, this is what we want to talk about first here, this Bitcoin ETF product. Is this the most successful launch of a ETF in the history of the company? Short answer is yes, on asset growth for sure. Yes. So talk a little bit about what that process was like actually getting this Bitcoin ETF to market. Obviously, it's been a long time coming for the industry dating back to, I think, 2013 with the Winklevoss twins filing first.

And it's just remarkable to see how it's developed over only 90 days here. It's been incredible, the overall client demand and reception of the whole range of products. There were 10 products that went to market and launched in the beginning of January. The journey actually is quite comprehensive and complex for us. We began sometime in that later part of 2019, really looking at understanding the SEC's guidance and positions to date. I think there's a lot of us in the industry that would recognize that in 2013, those were the early days of Bitcoin having been launched as an asset and perhaps early days in getting the SEC and the overall regulatory infrastructure comfortable. The 10-year journey to bring this product to market did

involve a lot of education, education of policymakers and the regulators over how this asset It trades, how the market operates. The quant team within Fidelity did a lot of great research in looking at correlation analyses and the lead lag analysis on price discovery. That was also very much a part of the educational process and engagement with the regulators. And then ultimately, there's a whole body of work that went on. And I can certainly talk about all of the efforts in the go-to-market strategy for this product. So this was, I think, 65th ETF at the time when we launched it.

We have now 67 ETFs at Fidelity. But the ETF vehicle is still a fairly newer chassis for our distribution team. So just continual education on the ETP structure. This is our first Grinter Trust, which is slightly different than a 40-Ir registered product. So there are some nuances there we had to really educate on. But overall, the timing of this was quite good with our focus within NASA Management on growing our ETF franchise. So this launch was incredibly successful, I think, exceeded many people's expectations as a category.

It was really hard to handicap how this launch was going to go. You try to project how this would go. It's really hard to know. But it truly is a capital accessibility story where the ETP structure, it's like a Swiss Army knife for accounts. You can now hold this Bitcoin exposure in the IRA very easily or trust in estate planning type registrations, which was always a hiccup because clients generally like to have their positions together under one account or they can see it together.

Whereas for years here in the retail crypto space, you had to have a separate experience on a different platform to access digital assets. Well, this ETP vehicle now, our tickers FBTC, the Fidelity Bitcoin, that's a Fidelity-Wise Origin Bitcoin fund, it allows you to have easy access in any account type you want, any registration type you want, alongside your traditional stocks and bonds. So it's been a great experience for folks. I think it's probably very poorly understood how complicated the process was even just operationally. So the traditional authorized participants in the non-crypto ETF market, they're not all there. So it had to have been a heavy lift just to figure out how to actually

operationalize this product? Yes. And the time frame in which we built out some of that core infrastructure to be able to engage with authorized participants was compressed, given the engagement with the SEC was really begun late in the late summer, early fall of last year. And there was a lot of debate and also education and engagement with the SEC over the traditional ETF mechanism for engaging with APs involves both the in-kind contribution of assets held by the fund or cash contributions. Ultimately, the SEC got comfortable with cash contributions only. So the engagement will continue on wanting to allow for in-kind. That meant taking cash in from authorized participants and working with a platform of liquidity providers to trade that cash

and converted into BTC. We built out a trading function. And again, the wealth of knowledge and experience within the existing digital asset business really helped us to be able to shape the way in which we built out the capability. We've hired a couple of traders to staff that function within FDAM. And that alongside of the way in which we were able to design and build that product around the Fidelity Custody Solution, which is a differentiator and also the building of that pricing index. It's a proprietary methodology, which is easily available to all the market makers to understand. And it was built with the internal index team. That's awesome. So I won't put you on the spot talking about cash create versus in-kind, but hopefully we see some improvements to just the

overall mechanism for building these things in a movement towards in-kind. But what I would love to get your view on is just how these things get rolled out. So the flows have been staggering. I think there was a lot of public commentary around, well, people already have access to Coinbase and maybe these won't be as explosive as people think. That's clearly not the case. So we'd love to understand from your perspective, who are the first wave buyers of this product, what do those institutions look like, and where are we going? Because I know that this is not on all the private wealth platforms even yet. That's true. Building up to the rollout of this, I think we assumed it would be more intermediary and advisor heavy because they really hadn't been able to access this before.

But once we launched, it was very much retail was involved in this first wave of purchasing here. And I do think it's back to the point I made earlier on, hey, I can buy this now in any account type I want, any registration type I want. My HSA, my IRA, anywhere I can buy an ETF, I can now buy spot Bitcoin exposure. So wave one of this, I would say it was definitely retail driven. We still see it there, but that doesn't mean other institutional type players weren't in the space because they definitely were. Wave two of this is going to be, I'd say, the broader advisor approval and adoption. And I think that's where we are right now. So when you say the word advisor, it depends which type of advisor you're talking about. If you're a registered independent advisor and RIA, you're independent, you're on your own,

you're your own fiduciary, you make your own investment decisions. Those are the ones we're seeing on the early curve of the advisor space adopt this because they have their own autonomy to go out and do as they please. And a lot of them were actually active in the crypto space before these ETPs came in. This is just an easier way for them to give client exposure to the spot Bitcoin price. The next wave here is really going to be broker dealer and wirehouse type advisors that we have to go through an onboarding process to the platform. There's home office gatekeepers that have multiple considerations before they approve a product for advisory. There's a lot of terms out there right now, so unsolicited or solicited. Upon launch of any really

registered products, they are available at any brokerage platform for the most part on an unsolicited basis, meaning you Matt Walsh can go to your account at some broker's platform and buy it yourself. It's your own decision. You're making this investment decision based off your best interest and no one's telling you what to do. But when you talk about the word solicited, it means you, Matt Walsh, have hired an advisor at some platform who is now making investment decisions on your behalf. And that's where we are right now is waiting for those advisors to have the ability to solicit trades on behalf of clients. And that's, I think, the next slide here is once you get more of these platforms to approve it for advisory, that's when you're going to see the new wave of

capital potentially come in here. And what does that discussion look like? Is that education around what is Bitcoin and why is it interesting in a portfolio? Or is this in the nuts and bolts of, well, here's how the cash moves in the system and here's how the custody actually works at Fidelity. What's the conversation? All the above. So back out a little bit broader to just ETFs in general. Any ETF, and this is my previous life I spent doing this with equities and fixed income ETFs, any ETF is going to go through an evaluation period before approval. And generally speaking, you need to see at least six months of performance track record and around 100 million or above in assets before most of these bigger platforms will even

approve you for advisory. These are a little bit different because they're new. There were 10 years who was going at once. There was a lot of, I'd say, pre-education on this. My team did a lot of work over the years, meeting with Home Office Gateke, Keepers just keeping them updated where we are, where we think we're going. What is Bitcoin, digital assets in general? So a few firms are accelerating those traditional timelines there. And they go into everything from secondary market trading to the create redeem process.

We spent a lot of time educating folks on the cash create redeem process because it was a later minute curveball than what was expected. But what is Bitcoin? Where does it fit in a portfolio? So it really runs the gamut of considerations there. So I'd imagine selling this product in a world where there's 11 other products, being Fidelity is a tremendous advantage because there's so much goodwill in the crypto industry around things that Fidelity has been involved with. But we'd love to understand just what the basis of competition is for these Bitcoin ETF products in the market. It was a challenging launch, to be honest, because you have 10 years who is going at once. We've never seen that before in any

other category. It's a 33 at Grinner Trust, so it's 100% of one asset in the portfolio. So you're really banking off of your distribution team, your goodwill, your relationships, your legacy in the space to really help differentiate here. So first and foremost, Fidelity's been in the space for a long time as you know. As far back as 2014, we built our own custody solution for institutional clients, which we leverage for the products. So that's a key advantage to is we truly understand what it takes to keep these assets safe. Trading of the assets. We have a thorough understanding of what it takes to trade various asset classes and crypto is no different. Bitcoin is no different. distribution. At the launch, the key was really getting that first wave of natural buying in the

secondary market, because in the land of ETFs, your secondary market liquidity is critical. You want the natural buying and selling in your product. So if an advisor wanted to allocate 50 to 100 million in a client account, they could easily do it in the secondary market without picking up a phone to try to get some OTC trade going. So that was key, and we achieved that. We have great liquidity in FBTC. The fees, we ended up waiving the fee for six months just to help ease adoption into our products, we know it was going to be competitive. We're operating at scale so we could obviously make that decision pretty easily. But that's another consideration is cost of ownership. If you have liquid product trading well in the secondary market, no fee up front, it makes it much

more palatable for adoption in a very competitive field. It's a really unique business model when you think about Fidelity Digital Asset Management because you have built custody. And so you have the ability to not have to go out to third-party custodians and negotiate a custody arrangement. But you also have almost a composable asset management capability where we're starting to see in the industry these global allocation funds indicate that they're interested in putting certain percentage of assets into Bitcoin exchange traded products. Obviously, Fidelity has a lot of other non-crypto products that potentially could go down that path.

So how do you think about that in terms of other types of ETFs or other types of fund products that could actually be buyers of this product? So we can certainly talk about the different channels. And you've highlighted a couple of them right there in terms of models that advisors might want to gravitate towards incorporating asset allocation models and where FBTC or any of these other single asset commoditized products would be able to plug in is one aspect. We also think about building around a suite of exposures. So there's the single asset exposures and then as we think about other thematic and sector-oriented exposures, and this certainly goes beyond the single

asset, and that is the advantage of what we believe the research function is going to contribute in terms of product development. Maybe let's take a step back. So you have this Bitcoin and ETF product out there. It's been tremendously successful. What do you think could be next for your group at Fidelity in terms of the types of products that you'd be interested in exploring? I know you can't speak about products that you have active applications on like the Ethereum ETF, but obviously that's something that you're interested in. But how do you just frame what other types of products could be interesting? So I did mention a little bit of some of our product exploration right now is thinking about thematic exposures. And the research team is building out a research

platform that cuts across multiple tokens and thinking about their investability over the long term and how to construct multi-token portfolios from that standpoint. I think the ability to also work across our asset management divisions and thinking about asset allocation models is another area of exploration. And I know, Matt, you've been talking to some of our asset allocation teams on that front. So I think on the asset allocation side, education is paramount. And a lot of firms in the space have done a great job educating. There's still so much more work to do. And back to your question on allocation. You actually have a great, I think, proof of concept, if you will, where we had an advisor this week tell us they're going to build a custom model suite using

ETFs with a 3% position in the most aggressive portfolios in FPTC. Again, this is an RIA, so the earlier adoption of the advisor side. But the reason they made this decision was because that they consumed some thought leadership that we published back in January. We had a paper called the case for Bitcoin. It was a collection of researchers with infidelity, including Urien Timmer wrote the paper, essentially just laid out the case in a scenario analysis using Monty Carlos simulation of the impact on a Bitcoin position in a retirees portfolio over time. And that's literally how advisors think, because they're helping clients plan, save money, plan for retirement. That's literally how they run their business. And this paper put it in those

terms and it was really well received with this advisor and resulted in obviously a small position for clients. But I still think it's early days. A lot of these platforms we talked about before, There's been a massive movement over the years toward home office models, meaning the days of an advisor sitting up in an office in a city somewhere just picking stocks and bonds on behalf of a client. They're waning. It's moving much more toward a consolidated approach where there's a more centralized team-making investment decisions.

So I think once you get those teams now allocating to this asset class, that's when you're going to see more significant adoption here. And just passive flows coming into these products. That's really just what we'll see. It's been interesting to see the flows through the first. few weeks because it's hard to disentangle with GBT having all these outflows. So I've never seen anything like that where you have this product that launches. It obviously had been in the market. But is that a big factor in the flows? It's just people switching from GBTC into some of these

lower priced options. The trend in ETFs is always migration to a lower cost exposure. And I think you're definitely seeing that with some of the movement here. So I want to get your guys's view on tokenization. I've got a history of being skeptical of a lot of things that have seen in the, let's just tokenize the world. And there was a this wave in 2015 and 16 around private blockchains being the conduit to tokenize fine art and hotels in Aspen and things like that. This feels a lot different though. You've had Larry Fink come out and almost like his case for digital assets was Bitcoin, but then quickly into tokenization. So how are you guys thinking about that category? So absolutely agree with some of the history

in terms of the different waves of tokenization projects and activity. And maybe I'll start with The thesis that we've been working under from the standpoint of the opportunities that tokenization present is thinking about modernizing the existing capital markets infrastructure, but modernizing not necessarily in terms of an overnight replatforming, which may be some of the early euphoria around the idea that tokenization is going to completely create liquidity where illiquid assets had no liquidity. That is actually something that we talk a lot about, which is tokenizing an asset doesn't miraculously create liquidity. It makes it more easily tradable. And I think a lot of the efforts around tokenizing assets are incredibly important and creative.

But in order for a client to care about that asset, there has to be some utility and a market for that client to not only be able to access the asset, but to know that they can actually trade it. So what I think about is, as we identify the infrastructure that's necessary for a digital asset ecosystem to be able to be interoperable with existing traditional back offices, that's really where I think the power of tokenization into market adoption is going to come from, which means that there needs to be interoperability infrastructure to be able to translate those digital assets and have them be incorporated into traditional investment solutions. The client's not going to come in and say they want to buy a digital asset. They're looking for solutions that are better constructed and have

more diversity because there are assets now being introduced through tokenized form to be more tradable and then incorporated into traditional solutions. That makes sense. remember the first wave of discussion around this, there was all this talk around taking an asset, tokenizing it. And then you'd get into the details and you'd say, well, how do you settle it? How does it trade in the back office? And my fund administrator, what are they going to do in terms of evaluating? And by the way, my auditor's going to come in and want to know exactly how that asset is custody. How does that interoperate with my existing back office? How does that work? So I remember in the first wave, it was, okay, well, you just send a wire transfer. You go through

and it's a T plus three at the time settlement, I think. But stable coins seem to me like they have the potential to be really important to just the settlement of these securities. I know that we're not there yet in terms of institutional scale stable coins, but do you see them as a category being compelling to actually make this tokenization story work? 100%. When we talk about, again, back to that interoperability, in order for a client or any

asset allocator to be able to access that digital asset token and incorporate that into their traditional solutions. I think about stable coins and tokenized money market funds as being two sides of that liquidity layer that's necessary to be able to facilitate the movement of those tokenized assets. So stable coins as being, as you described, the easy way to be able to trade in and out of digital assets, but for a customer that is going to hold digital assets, there may be a cash portion of their portfolio. And rather than having to go back and forth through the onramp into Fiat, being able to hold those assets in a risk-off environment in a tokenized money market fund is going to be incredibly important to continue to facilitate the expansion of that ecosystem.

I look at public equities, and it seems pretty daunting to put them all on a blockchain and figure out the settlement process. But there are these other categories that are quite large in the alternative space that seem to me like they could be very much early adopters. How do you think about those categories and the types of assets that might be interesting to investors on chain? I think you're absolutely right. When we think about prioritization of which asset classes would naturally lend themselves more to that thesis of expanding the range of assets that are tradable, assets today, publicly traded equities are easily tradable in solutions today. So they wouldn't

necessarily lend themselves in the immediate sense to be tokenized. But private equity and private credit are areas that are of great interest from an alternative investment in corporation into solutions. So this is where I think tokenization would make those assets more easily tradable, more easily incorporated into investment solutions, and also potentially increasing access as well. It's no surprise to me, at least, that a lot of the large alt managers are looking at the space, because I suspect that they're looking at this and saying alternatives as a percentage of model portfolios right now are quite small, but they probably should be quite a bit larger, just giving retail access to things like venture capital, private equity, real estate. Do you see

this as part of that narrative or is that a distinct phenomenon? I think potentially a lot of those firms have gone down market, especially into the advisor space to source new capital, but also that's where a lot of the returns are happening now. So it is demand for access to those solutions because companies go private, they stay private longer before the IPO. So I think it is part of that narrative for sure. But once you interact with the crypto space, as you know, and you go back to the Tradfi rails, and especially the private world where you're dealing private funds, it's fairly clunky from a user experience standpoint. So I do think everything Cynthia mentioned is spot on. And ultimately, it'll result in hopefully a better client experience for these types of asset

classes. I think once you get into the defy world and just bringing some of these primitives, if you can actually make that work with tokenization, so if you hold shares in a reet and you want cash today, could you imagine using something like an Ave or a compound style interface to actually take out a loan and have a stable coin, for instance. It's pretty powerful when you think about it. It's almost like giving securities lending to the masses at scale in a safe way, potentially. It's another way to think about capital allocation and maybe further down the road in terms of seeing more stability and scalability for those solutions. But in the first instance, as we think about where to prioritize and deploy this technology, thinking about how that interoperates with

existing solutions seems to be the natural first place to start. I suspect it would be a lot easier to do things in this category if banks and broker dealers were able to do more things in this category. And I think the last time I checked, there were something like 45 broker dealers that had applied with FINRA to get a classification that they could custody digital assets. And I don't think any of that has really moved forward at scale. So maybe talk about some of the unlocks or some of the things that you ideally like to see in order to pursue the strategy. Maybe part of the threshold here is more infrastructure that's institutional grade and scalable. So back to your point about banks and broker dealers being able to participate in this ecosystem the same way that they do today in our traditional capital markets is going to be an important

part of seeing more adoption. I think because this is a new technology, there's a lot of focus on ensuring risk management and controls and thinking about the overall systemic risk. That's an important part of how we think about constructing these solutions. and how we think about interoperability into existing back office processes as well. But having more participation in the banks, as you pointed out, and broker dealers are very interested because of the ability to offer their clients some of the same things that we've talked about, which has increased access to assets.

So from where I sit talking to startups all day, a lot of these startups are actually in some of the banks, in some of the broker dealers, are selling products, custody services, compliance services. So it's not like these banks and broker dealers are just sitting around. and waiting, but it strikes me that it's more of a regulatory impediment to actually get this through. Would you agree with that? I think getting more regulatory clarity will certainly introduce more participation more broadly across banks and broker dealers. But I think to your point, we've engaged with quite a number of probably most every one of the names that you can think of

in terms of how we can work together to build that ecosystem and the infrastructure necessary to be able to bring more assets on chain. And I think that's important work, recognizing that the banks are also seeing the power of the operational efficiency and the increase in access. So while all of this is happening on the business side, the industry is not slowing down in terms of just net new blockchains that are being introduced to the world, improvements to the EVM, ways to actually make transactions happen faster, cheaper, and with more resiliency on these public chains. So how are you guys staying up to speed on just the developments in net new L1s and L2s? Obviously, listening to the podcast like yours is one way to do it. But actually,

I think mentioned it before, but we have a research team within Fidelity Digital Asset Management who's looking at this space all day long. So it's just constantly being at their side, understanding what's interesting, what's real, what's not real. So it's really leveraging our in-house research team. And I'd even expand it beyond that. As you remember, we have quite a few areas within Fidelity that actually also are focused on research and also development experimentation. And that would be our FCAF, Center for Applied Technology and the labs area. We have regular engagements there. And we have actually quite a few other venture teams across the organization. And they also are equally engaged, talking to startups, talking to developers. So having that

network of people in the ecosystem also adds tremendously to how we shape our ideas and priorities. Awesome. One of the things that I think about a lot, and it's probably more of a 10, 15 year out thing. And it would only be an issue if you're hyper successful is just the concentration of these assets at the custodians. It would be one thing if we had all of the custody banks that were actually playing in the space. But I think about just the definition of custody. And the interesting thing about public blockchains is that you can shard keys and you can actually have collaborative custody schemes. And personally, as a consumer, what I would love to do is have one key with a fidelity, maybe one key with myself and decide on a third participant maybe. Is that something

that's ever going to be possible? Do you think? Obviously, it's technically possible. But what's your outlook on just the definition of custody changing as a result of this technology. So I think phase one is just someone do it for me that I trust. And I think that's where we're at with our retail offering with Fidelity Crypto. You sign into Fidelity crypto. Fidelity holds the Bitcoin or Ethereum in your behalf. You trust Fidelity. And that's how it's set up today. I think as this space grows over time and people understand it better, there will be demand for individuals that want to have a multi-sig setup, like what a CASA has, but more than an institutional level. So I do think over time that will happen is just going to take probably a decade or so to get there.

So I will add on to what Matt just said is to say, I can think of and conceive of for individuals more of a safe deposit type concept, which you have multiple keys and you can certainly create a little bit more redundancy and security from that standpoint. From a fiduciary standpoint in being able to demonstrate that you've got control and that you actually are safekeeping the assets, does that allow for this multi-party and sharding? That's an interesting question and maybe continuing evolution of the way that policymakers and the regulators will think about what actually safekeeping and control means from a fiduciary standpoint, is it safer if you are able then to create multi-party custody solutions? I guess it's a lot easier in the tokenization form, because if you have

an interest in a company, it's not like the company's just going to disappear. So it's more of an issue with these bearer assets, I suppose. It's exactly right. Well, this is super exciting. Congratulations on all the flows. This is refreshing the flow, one of those flow pages every day and just seeing the net new flows. I don't think you guys have had a negative day yet, which is remarkable. Oh, we're going to keep crossing our fingers. It's a great streak we've been on. Well, where can we send people to learn more about what's going on at Fidelity Digital Asset Management? On the retail side, you can go to Fidelity.com and learn more about some thought leadership and our products there. On the advisor side, on the institutional side,

it's institutional.fidelity.com. And again, that's the retail. where the thought leadership would sit and information on our products. Thanks for coming on the podcast. Thank you for having us. Thanks, Matt. Appreciate it. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island.

To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just click on the tab in our website. Thanks for listening.