Asset management giant Fidelity Investments is reportedly preparing to launch a blockchain-based money market fund. The move comes as other major financial institutions, such as BlackRock, have integrated blockchain technology to enhance their financial services. Fidelity decided to adopt blockchain at a time when it was also facing data breach incidents involving customer data.
Fidelity Blockchain Money Market Fund
Fidelity plans to introduce a blockchain-integrated money market fund, according to a document filed with the U.S. Securities and Exchange Commission (SEC) on September 26, 2024. This will be the company’s first fund to rely on the application of blockchain technology to increase the speed and efficiency of transactions. The new fund is expected to optimize financial procedures and allow more investors to benefit from its simplicity.
Intel: Fidelity plans to launch first fund to trade on blockchain
— Solid Intel 📡 (@solidintel_x) October 10, 2024
The initiative positions Fidelity to compete with BlackRock, the world’s largest asset manager, which has launched a comparable blockchain fund. BlackRock’s fund has raised more than $500 million, proving that more investors are willing to invest in this space to apply blockchain to mainstream finance.
This is what the company is trying to achieve with its wealth management business, which manages $4.9 trillion in assets.
Data breach raises security concerns
As Fidelity Investments prepares to evolve its blockchain-based platform, the company is also struggling with the effects of a recent data breach. Between August 17, 2024 and August 19, 2024, a third party compromised two newly created customer accounts. A report to the Maine Attorney General’s Office claims the incident affected the personal data of more than 77,000 people.
Following the incident, the asset management company blocked unauthorized access and conducted an internal investigation. The company quickly went public, saying that no customer accounts were blocked and that the breach only affected a limited number of users. Despite this, Fidelity has been under pressure from customers over the disclosure of personal information, including names, and has been offering free credit monitoring and identity recovery services for two years.
“Fidelity announced that a data breach exposed the personal data of 77,000 customers.” pic.twitter.com/9icro9MhvO
— Roaringpika (@roaringpika) October 10, 2024
This is not the first time asset managers have faced security risks. In 2024, the company faced another data breach issue from a third-party service provider known as Infosys McCamish System (IMS). The breach resulted in the theft of information about Fidelity Investments Life Insurance customers, including names, social security numbers, and bank account information. The incident affected approximately 28,000 people.
Growing attention to digital assets
The move by asset managers to invest in blockchain and digital assets is a similar trend seen across other financial services. In the first half of 2024, Fidelity International, which is separate from Fidelity Investments, launched a physical Bitcoin ETP on the London Stock Exchange. The product reflects the price of Bitcoin and is the company’s first foray into the digital asset space in the UK.
This comes after the FCA announced that it would only allow professional investors to use exchange-traded notes (ETNs) backed by cryptocurrencies. The fund could then solidify the company’s position in the emerging U.S. digital finance space.
Fidelity has been repeatedly exposed to cybersecurity threats, which is especially concerning as the company experiments with blockchain technology. Blockchain is highly praised for its security features such as increasing transparency and providing immutability, but the transition to this technology requires additional safeguards to prevent further breaches.
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Kelvin Munene Murithi
Kelvin is a renowned author with expertise in cryptocurrencies and finance, and holds a bachelor’s degree in actuarial science. Known for his sharp analysis and insightful content, he has a strong command of the English language and excels at conducting thorough research and providing timely updates on the cryptocurrency market.
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