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Fidelity Investments, a leading asset management firm, plans to launch a blockchain-based money market fund. This initiative is part of Fidelity’s ongoing efforts to integrate blockchain technology into its financial services, similar to other major financial institutions. The decision follows a data breach incident involving customer data leaks.
Fidelity Blockchain Money Market Fund
Documents submitted to the U.S. Securities and Exchange Commission (SEC) on September 26, 2024, indicate Fidelity’s intention to introduce a blockchain-integrated money market fund. The fund aims to enhance transaction speed and efficiency by utilizing blockchain technology. It is expected that the new fund will optimize financial procedures, enabling more investors to benefit from its simplicity.
This initiative places Fidelity in direct competition with BlackRock, the world’s largest asset manager. BlackRock’s similar blockchain fund has raised over half a billion dollars, demonstrating the willingness of more investors to integrate blockchain into mainstream finance.
Data Breach Raises Security Concerns
As Fidelity prepares to develop its blockchain platform, it faces the repercussions of a recent data leak. Between August 17-19, 2024, a third party unlawfully accessed two newly created customer accounts. Reports to the Maine Attorney General claim that this incident affected the personal data of over 77,000 individuals.
Fidelity stated that customer accounts were not closed during the data breach and that the incident impacted only a limited number of users. The company initiated an internal investigation to stop unauthorized access. Under pressure due to the exposure of personal information, Fidelity offers two years of free credit monitoring and identity restoration services.
The asset manager’s investment in blockchain and digital assets aligns with an observable trend in other financial services. In the first half of 2024, Fidelity International launched a Physical Bitcoin 
$103,051 ETP on the London Stock Exchange to reflect Bitcoin prices, marking its first step into the digital asset space in the UK.
While the FCA has restricted the use of cryptocurrency-backed Exchange Traded Notes (ETNs) to professional investors, this may strengthen the fund’s position in the U.S. digital finance sector. Due to frequent cybersecurity threats, Fidelity needs to adopt additional security measures as it transitions to blockchain technology.
Although the security features of blockchain, such as increased transparency and immutability, are praised, transitioning to this technology necessitates implementing greater security precautions. Fidelity’s blockchain-based money market fund could play a significant role in the future of digital finance. However, the company’s past data breaches highlight the challenges of ensuring security in new ventures, making it crucial for stakeholders to address security protocols alongside the advantages of blockchain technology.
