Author: Vicky Ge Huang, The Wall Street Journal; Translation: Mia, Chaincatcher
Let’s look back at the entire digital asset industry, where some of the most outstanding industry leaders have emerged at Fidelity Investments.
Fidelity, a well-known mutual fund giant, represents the cornerstone of the traditional financial system, while the founders of cryptocurrencies led by Bitcoin are planning to disrupt this system. However, in fact, this traditional financial giant with 77 years of history became a pioneer in the Bitcoin field as early as 2014 – it was the first to start mining Bitcoin when the price was around $400 and encouraged employees to try blockchain technology, develop new products, and launched its cryptocurrency division four years later.
Along the way, Fidelity has contributed many talents to the crypto industry.
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With the rapid expansion of the cryptocurrency industry, Fidelity has become more cautious from its previous open attitude, which eventually led to the departure of some early employees in the crypto industry.
And it turned out that this cautious attitude may also be a wise move. After a series of cryptocurrency company bankruptcies and the collapse of the cryptocurrency exchange FTX last year, regulatory agencies began to crack down on the crypto industry. The U.S. Securities and Exchange Commission (SEC) recently filed lawsuits against two cryptocurrency exchange giants, Binance and Coinbase Global, for providing unregistered securities trading, among other reasons.
Although the price of Bitcoin rebounded in 2023, it still hovers around $26,000, far below its peak two years ago. Since the beginning of last year, the crypto industry has shrunk tens of thousands of jobs. After industry leaders like Sam Bankman-Fried, who were once seen as the “future of crypto,” fell from grace, the future role of the crypto industry in the financial field has begun to be questioned.
Fidelity’s crypto alumni include venture capitalists, research directors, and founders of startups. Just like the “Mafia” of PayPal, Fidelity’s crypto alumni jokingly call themselves the “Fidelity Mafia” and have since started their own tech companies.
The “Fidelity Mafia” includes Alex Thorn, research director of crypto financial services company Galaxy Digital; Juri Bulovic, mining director of Bitcoin mining company Foundry; Matt Walsh, founding partner of crypto venture capital firm Castle Island Ventures, and a dozen other members.
Alex Thorn, research director of Galaxy Digital, once said in a Telegram group he established with former colleagues: “Many of us have been working in the crypto field for a long time because Fidelity has explored the crypto field much longer than any other traditional financial company.”
Under the advocacy of Fidelity CEO Abby Johnson, Fidelity’s cryptocurrency plan has shifted towards trading and storing Bitcoin for hedge funds and other large investors. In the next few years, Fidelity’s cryptocurrency plan will also make it easier for retail investors to invest in cryptocurrencies. Companies can incorporate Bitcoin into Fidelity’s retirement plans offered to employees, and Fidelity has provided the option of Bitcoin and Ethereum trading for the majority of its 43 million customers.
Alex Thorn said, “We did not overly cautiously approach this ‘crazy’ cryptocurrency because of our background in traditional finance. Instead, we took a big step into the crypto field, which also attracted early crypto talents to Fidelity.”
Alex Thorn started as a junior analyst in Fidelity’s legal department in 2009. As an early believer in Bitcoin, he volunteered to help Fidelity with its first cryptocurrency experiments. Abby Johnson called him the “Bitcoin Viking” and he eventually became involved in managing a Fidelity-owned crypto venture capital firm.
Members of the “Fidelity Mafia” all expressed that it was Abby Johnson’s early commitment to Bitcoin that attracted them to join Fidelity.
Matt Walsh, founding partner of crypto venture capital firm Castle Island Ventures, joined Fidelity after graduating in 2014. He said that Abby Johnson urged individuals and institutions to have easier access to Bitcoin at a conference in 2017, which gave confidence to the development of Bitcoin. “At the time, Jamie Dimon believed that Bitcoin was a tulip bubble and had no use, but Abby Johnson held the opposite view.”
Although Abby Johnson’s family owns 49% of Fidelity, she also faces resistance from within and outside the company in terms of betting too much on cryptocurrencies for the company’s future.
Abby Johnson mentioned in a public speech last year that she proposed a plan in 2014 to spend $200,000 to purchase Bitcoin mining equipment from Chinese suppliers, but the plan was rejected by Fidelity’s finance and security departments at the time. “I had to go to the office and say, ‘Look, this is $200,000, we are doing this.'”
Even today, some Fidelity executives still express doubts about whether cryptocurrencies can reach mainstream customers. In 2018, Kathleen Murphy, then head of Fidelity’s personal investments business, told the Dallas Business Journal that Fidelity’s cryptocurrency products would be limited to experienced investors due to regulatory concerns.
Members of the “Fidelity Mafia” expressed that Murphy’s comments dampened the enthusiasm of employees focused on retail investors.
Last year, Fidelity also faced criticism for its expansion in the cryptocurrency field. Officials from the U.S. Department of Labor believed that Fidelity’s plan to allow investors to put Bitcoin into 401(k) accounts could threaten the retirement security of the nation. Fidelity countered and reiterated its commitment to digital assets as the key to the financial future.
Members of the “Fidelity Mafia” believe that Fidelity could have been more actively involved in the cryptocurrency business, but instead handed over custody business clients to Coinbase (which was founded in 2012, two years earlier than Fidelity’s involvement in Bitcoin business). Additionally, some people believe that Fidelity’s traditional asset management business prevented it from entering high-risk businesses in the absence of clear regulations.
The mining supervisor of Bitcoin mining company Foundry, Juri Bulovic, said, “In hindsight, I believe Fidelity could have become a well-known cryptocurrency trading company like Coinbase today.” Juri Bulovic left Fidelity in 2021 after working for 8 years.
During the pandemic, when the price of Bitcoin soared and eventually exceeded $60,000, it became difficult for Fidelity to retain its crypto talent, as companies focused on cryptocurrencies had access to large amounts of risk capital and were eager to hire knowledgeable employees.
Alex Thorn left Fidelity in 2021 and established a research department at billionaire Mike Novogratz’s cryptocurrency financial services company, Galaxy Digital. It is reported that Galaxy Digital is focused on trading, investment banking, asset management, and mining, and currently manages over $2.4 billion in crypto assets.
Matt Walsh resigned from Fidelity in 2018 and embarked on his entrepreneurial journey. With the support of Fidelity, he founded Castle Island, a cryptocurrency venture capital firm that currently manages approximately $360 million in crypto assets.
Today, Fidelity still sees cryptocurrencies as a long-term growth opportunity and stores billions of dollars of client crypto assets. The number of employees in its crypto division has steadily increased from dozens in 2018 to over 600. Recently, Fidelity has also submitted an application for the first spot Bitcoin ETF. If approved by regulatory agencies, it will allow investors to easily trade Bitcoin through brokerage accounts, similar to buying and selling stocks.
Tom Jessop, head of Fidelity’s crypto business, said, “We are working closely with various departments at Fidelity to develop a long-term digital asset strategy.”
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