I noticed that you did not mention Coinbase as a vehicle to use cryptocurrency; what would be the risks of opening an account with coinbase vs stockbrokers. Thank you.

Eoin Treacy's view

Thank you for this question which is highly topical for anyone considering buying cryptocurrencies via an exchange. The reason Fidelity’s move to provide custody is such a big deal is because it lends security to your holding.

Cryptocurrency exchanges have a sorry record of being hacked so it is dangerous to leave your holding on their books because of the risk of catastrophic loss. If exchanges are to be used then you really should be very clear on whether they are holding assets in cold storage and/or have a fund set up to recompense you in the event of a hack. The alternative is to create a wallet and transfer your crypto onto it once purchased. Just don’t lose whatever item you have transferred the crypto onto. 

The provision of custody services is therefore a major financial innovation because it opens up the market to institutional buying.