Some of the most prominent players in the digital-assets industry cut their teeth at the same place: Fidelity Investments.

A storied mutual-fund powerhouse, Fidelity is a cornerstone of the traditional financial system that the founders of bitcoin and other cryptocurrencies intended to disrupt. Yet the 77-year-old company became a bitcoin pioneer in 2014, mining the token when it was trading around $400. It encouraged employees to experiment with blockchain technology and develop new products that led to the launch of its crypto business unit four years later.

Along the way, it built a deep talent pipeline for the industry. Fidelity eventually grew wary about expanding too quickly in an unproven field, causing some of its earliest employees to depart. That caution may ultimately prove wise. Regulators have waged a crackdown on the crypto industry after a string of high-profile company failures last year that culminated in the collapse of exchange FTX. The Securities and Exchange Commission recently sued Binance and Coinbase Global, two of the largest crypto exchanges, for offering unregistered securities, among other things.

And despite a rebound in prices in 2023, bitcoin is hovering around $26,000, well below its high from two years ago. The industry has lost tens of thousands of jobs since the beginning of last year, and skeptics question its future role in finance after the downfall of Sam Bankman-Fried and other leaders who were once considered crypto visionaries.

Fidelity’s crypto alumni group features venture-capital investors, heads of research and startup founders. They playfully call themselves the Fidelity mafia, much like the PayPal mafia of alumni who went on to launch their own technology companies. The group includes Alex Thorn, head of firmwide research at crypto financial-services firm Galaxy Digital; Juri Bulovic, head of mining at bitcoin miner Foundry; Matt Walsh, founding partner at crypto venture firm Castle Island Ventures, and more than a dozen others.

“There are a lot of us that have worked on crypto for so long because Fidelity has worked on crypto much longer than any other traditional financial firm,” said Thorn, who set up a Telegram chat group with former colleagues. Championed by Chief Executive Abby Johnson, Fidelity’s crypto initiative began by trading and storing bitcoin for big investors such as hedge funds. Over the following years, it made crypto more accessible for small investors as well. Companies can include bitcoin in the Fidelity retirement plans they offer their employees, and Fidelity gives the majority of its 43 million customers the option to trade bitcoin and ether.

“It wasn’t like we were learning about this crazy crypto thing with kid gloves on because we were traditional,” said Thorn. “We took a huge step into it, and that made Fidelity an early magnet for talent.” Abby Johnson, Fidelity Investments CEO, was a champion of Fidelity’s earliest crypto initiatives. Photo: Andrew Harrer/Bloomberg News

Thorn started out as an entry-level analyst in Fidelity’s legal department in 2009. An early bitcoin believer, he volunteered to help with Fidelity’s first crypto experiments, winning the nickname “Bitcoin Viking” from Johnson. He eventually co-managed a Fidelity-affiliated crypto venture firm. Other former employees also say Johnson’s early commitment to bitcoin drew them to Fidelity.

She gave a rare vote of confidence to bitcoin at a conference in 2017 when she urged making the token more accessible for individuals and institutions, according to Walsh, who joined Fidelity out of business school in 2014. “This was when Jamie Dimon said that bitcoin was tulip bubbles, and there was no use looking at it,” Walsh said. “Abby was taking the total opposite end of it.” Despite her enthusiasm, Johnson, whose family owns 49% of Fidelity, faced internal and external pushback about staking too much of the company’s future on crypto. In a public speech last year, Johnson said she put together a proposal in 2014 to spend $200,000 to buy bitcoin mining equipment from suppliers in China. The plan was rejected by Fidelity’s finance department and security staff, she recalled. “I kind of had to walk down to people’s offices and say, ‘Look, it’s $200,000, we’re doing this,’” she said.

Even years later, some Fidelity executives continued to doubt crypto would reach a mainstream customer. Kathleen Murphy, then head of Fidelity’s sprawling personal-investments business, told the Dallas Business Journal in 2018 that the firm’s crypto offerings would be limited to sophisticated investors due to regulatory concerns.

Those comments discouraged employees interested in reaching smaller investors, some former employees said. Murphy declined to comment.

Fidelity’s crypto ambitions were criticized on a bigger stage last year when U.S. Labor Department officials said its plan to allow investors to put bitcoin in their 401(k) accounts would risk the retirement security of Americans. The company pushed back against that criticism, reiterating its commitment to digital assets as key to the future of finance. Some former employees said Fidelity could have been more aggressive with its crypto efforts. They were frustrated about losing custody-business clients to Coinbase, which was founded in 2012, just two years before Fidelity delved into bitcoin. Others say Fidelity’s traditional money-management business prevented it from diving into a high-risk venture without regulatory clarity.

“Hindsight is 20/20. When I look back now, I think Fidelity could have become a household name for buying and selling crypto like Coinbase is today,” said Bulovic, who left Fidelity in 2021 after eight years. Fidelity would struggle to hold on to its crypto talent during the pandemic when bitcoin prices skyrocketed, eventually rising above $60,000. Crypto-focused companies were flush with venture cash and hungry to recruit employees with subject expertise.

Thorn left in 2021 to build a research department at billionaire Mike Novogratz’s Galaxy Digital, a crypto financial-services firm with businesses in trading, investment banking, asset management and mining. Galaxy’s asset-management arm oversees $2.4 billion of crypto. Walsh resigned in 2018 to scratch his entrepreneurial itch. His crypto venture firm, Castle Island, is backed by Fidelity and has about $360 million in assets under management.

Today, crypto continues to be viewed as a long-term growth opportunity at Fidelity. The company stores billions of dollars in customer crypto assets, while the head count in its crypto unit has steadily risen to more than 600 from just a few dozen in 2018. The company is also in the race to launch the first exchange-traded fund that holds actual bitcoin. If approved by regulators, it would allow investors to buy and sell the token through a brokerage account as easily as shares of stock.

“We are now working with every business unit of Fidelity on what I would call long-term digital-asset strategy,” said Tom Jessop, president of Fidelity’s crypto operations.