- Fidelity CEO Abigail Johnson called traditional financial processes scary.
- She said the industry was trapped in using “primitive technologies”.
- Competitive forces and regulation will drive blockchain technology forward.
The CEO of a $15 trillion Wall Street giant just called the technology behind traditional finance “really scary.”
Abigail Johnson, who runs Fidelity, says the current financial system is the most complicated web of reconciliation processes built primarily on “primitive technology” – and that blockchain will eventually replace it.
But it won’t be an easy path.
“It has to be an evolving process and it will be a combination of competitive forces and regulatory standards that will kind of push it forward,” Johnson said at an A16Z crypto event on Dec. 4.
Johnson’s critique reveals the extent to which even mainstream financial leaders view the current system as fundamentally broken. The industry is stuck at the “lowest common denominator” of decades-old technology, with a combination of inertia and the inability of smaller players to upgrade keeping everything intact.
Cue blockchain, a technology Johnson has been betting on since 2013.
Kicking and screaming
But enthusiastic adoption of blockchain won’t be enough to push the industry, according to Johnson.
Rather, it will be a forced migration.
On the one hand, competitive forces mean that establishments that do not modernize lose market share to those that do. If a bank offers instant settlement with blockchain while its competitors take three days using existing systems, customers will shift their business. If one brokerage can hold Bitcoin while another cannot, advisors and clients interested in crypto assets will go elsewhere.
Fidelity, with Johnson at the helm, has experienced these headwinds firsthand.
The company has faced “surprisingly immature but very strong” anti-crypto sentiment from traditional financial executives for years, Johnson said. “I just had to be patient and keep going so the noise would go away.”
Indeed, the noise has passed.
Over the past year, some of Wall Street’s biggest banks have begun experimenting with crypto, while digital asset treasuries and exchange-traded funds have deployed billions to buy Bitcoin, Ethereum and other cryptocurrencies.
Then there are regulatory standards. This means that governments are demanding improvements in the features enabled by blockchain, whether it is transparency, speed of settlement or interoperability.
All over the world, regulations are already coming into force. In the United States, the Genius Act is already in force while the market structure bill, called the Clarity Act, awaits Senate approval, hopefully by early 2026. And in Europe, MiCA has been active since the end of 2024.
Existential challenge
Ultimately, the problem is not necessarily that financial institutions do not want to modernize. It’s because they can’t.
“There is a real existential challenge for the industry because at least some of the larger players would like to upgrade the broader infrastructure a little more quickly,” Johnson said.
“But the industry is a democratic place and there are a lot of smaller players who just don’t have the means to participate in this kind of upgrade.”
Since everything is interconnected, the weakest link determines the overall capabilities of the system. And this weakest link relies on decades-old technology.
Betting on Bitcoin
Fidelity has been banking on blockchain for over a decade.
In 2013, the company pioneered Bitcoin custody services for its clients, while also setting up mining operations. In fact, Fidelity’s Bitcoin mining company gave the company “probably the highest return on investment,” Johnson said.
The company’s ETF, FBTC, holds the second largest number of Bitcoins after BlackRock, with approximately $20 billion in assets under management, according to Dune Analytics.
Fidelity recently launched a tokenized money market fund designed to interact with stablecoins, allowing customers to earn yield and then turn to crypto when needed. And in mid-November, the company saw its new Solana ETF debut.
Still, Johnson admitted she underestimated how long the transition would take.
“I haven’t fully understood how slow change is in our traditional business, because there are so many forces that keep everyone united and stuck together to do what they’ve always done,” she said.
Updated December 9: The story has been updated to more clearly reflect that Johnson spoke about the technology behind traditional finance.
Pedro Solimano is DL News’ markets correspondent in Buenos Aires. Do you have any advice? Send him an email to psolimano@dlnews.com.
