Fidelity Investments launched its first stablecoin, Fidelity Digital Dollar (FIDD), in early February, marking a major move into on-chain finance by one of the largest traditional financial institutions.
FIDD is issued by Fidelity Digital Assets, a federally chartered national bank and a subsidiary of Fidelity. The Ethereum-based stablecoin will be redeemable for $1 on Fidelity’s cryptocurrency trading platforms (Fidelity Digital Assets, Fidelity Crypto, Fidelity Crypto for Wealth Managers) and will also be available on major cryptocurrency exchanges, according to a press release.
The company says it designed this product to meet growing customer demand and expand the utility of blockchain-based financial products.
“This is really just the next step in the evolution of our digital asset platform,” Mike O’Reilly, president of Fidelity Digital Assets, said in an interview. “Being able to offer a fiat-backed stablecoin is a natural fit with what our customers are looking for, especially when it comes to low-cost payments and settlements.”
FIDD is designed for use cases such as 24/7 payments for institutional investors and on-chain payments for retail users. It can also be transferred to an Ethereum mainnet address, allowing for widespread use across decentralized finance (DeFi) protocols and blockchain-based platforms.
“The right time”
The company confirmed that its reserves consist of cash, cash equivalents, and short-term U.S. Treasury securities, consistent with the requirements set forth in the recently passed GENIUS Act, a federal law that establishes clear standards for stablecoin payments.
O’Reilly said the GENIUS Act was a key factor in the launch. “This gives us a clear regulatory framework for what reserves should be and how they should be managed. This is good for the industry and makes it the perfect time for us to bring our products to market.”
The amount of coins issued and the value of the reserves will be published daily on Fidelity’s website, and the company will also issue periodic third-party certifications to verify the reserves. Fidelity will manage the coin’s reserves through its in-house investment advisor, Fidelity Management & Research.
FIDD will initially launch on Ethereum, but Fidelity said it may consider expanding to additional blockchains and layer 2 networks in the future.
new competitors
Fidelity’s entry into the stablecoin market puts the company in direct competition with crypto-native issuers such as Circle (USDC) and Tether. USDT$0.9988which together now control a market worth more than $308 billion. T
Ether on Tuesday announced its entry into the US market with the launch of USAT, a dollar-backed token.
O’Reilly said the new stablecoin will allow Fidelity to support a wider range of on-chain products in the future. “Having stablecoins within our ecosystem opens up the possibility for other financial services to be built on-chain by us and others. This becomes a building block for a more efficient infrastructure,” he said.
This announcement adds to Fidelity’s growing list of digital asset services, including the Fidelity Crypto App for cryptocurrency custody, trading and retail, and the Crypto IRA product introduced last year.
Read more: Wall Street consolidation will drive the next phase of cryptocurrencies, says Fidelity Digital Assets
