Fidelity Investments, an asset management giant, is reportedly preparing to launch a blockchain-based money market fund. This move comes in the wake of other big financial institutions such as BlackRock integrating blockchain technology in an effort to enhance their financial services. Fidelity has made this decision to adopt blockchain at a time when the company is also facing a data breach incident that involved customer data.
Fidelity Blockchain Money Market Fund
According to documents filed with the U.S. Securities and Exchange Commission (SEC) on September 26, 2024, Fidelity is planning to introduce a blockchain-integrated money market fund. This will be the first fund of the company that rely on the application of blockchain technology for increasing fast and effectiveness of the transactions. The new fund is expected to optimize the financial procedures making it possible for more investors to gain from its simplicity.
INTEL: Fidelity is planning to create its first fund that will trade on a blockchain
— Solid Intel (@solidintel_x) October 10, 2024
The initiative positions Fidelity against BlackRock, the largest asset manager globally, which has started a comparable blockchain fund. BlackRock’s fund has gathered more than half a billion dollars in capital, proving that more investors are willing to invest in this sector to apply blockchain in mainstream finance.
This is something the company is aiming to do in the asset management business where it has $4.9 trillion in assets under management
Data Breach Raises Security Concerns
As Fidelity Investments prepares to advance its blockchain-based platform, the company is also struggling with the repercussions of a recent data leak. In the period between August 17 and August 19, 2024, a third party breached two newly created customer accounts. In its report to the Maine Attorney General, this incident was claimed to have affected more than 77,000 individuals’ personal data.
The asset manager, in reaction to the incident, has closed down the unauthorized access and conducted an internal investigation. The company has moved quickly to come out and state that no customer accounts were shut out and the breach only impacted a limited number of users. Nevertheless, Fidelity has come under pressure from customers over the exposure of their details, including names, and has offered them free credit monitoring and identity restoration services for two years.
“Fidelity says data breach exposed personal data of 77,000 customers” pic.twitter.com/9icro9MhvO
— roaringpika (@roaringpika) October 10, 2024
This is not the first time the asset manager is experiencing a security risk. In the year 2024, the company faced its another data breach issue with third party service provider known as Infosys McCamish System (IMS). In that breach, information related to the customers of Fidelity Investments Life Insurance was stolen including their names, social security numbers and their bank account information. Approximately 28,000 people were impacted in that particular case.
Increasing Focus on Digital Assets
This shift by the asset manager to invest in blockchain and digital assets is a similar trend being seen across other financial services. In the first half of the year 2024, Fidelity International which is different from Fidelity Investments, rolled out a Physical Bitcoin ETP on the London Stock Exchange. This product was to mirror the price of Bitcoin and was the firm’s first foray into the digital asset space in the UK.
This came after the FCA announced that it had permitted the use of cryptocurrency-backed Exchange Traded Notes (ETNs) for professional investors only. Subsequently, the fund will likely cement the company’s position in the emerging digital finance sector in the US.
Fidelity has had numerous exposure to the cybersecurity threats and this becomes a concern especially when the company is experimenting on the blockchain technology. Although blockchain is praised for its security features that include the provision of increased transparency as well as immutability, the shift to this technology demands more safety measures to prevent any further breaches.
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