Fidelity Readies Retail Bitcoin, Ether trades without commissions but with a fee

Fidelity Investments is preparing to offer bitcoin and ether trading to retail investors, according to the company’s website, which claims the upcoming service is commission-free, but there’s a catch: a 1% fee will be added to each transaction.

The company calls the fee a spread and defines it as “the difference between your strike price and the price at which Fidelity Digital Assets fills your order.” While the 100 basis point spread is slim pickings for conventional retail investment transactions, it is costly in the digital world, where the weighted average commission for cryptocurrency trading is just 12 basis points.

“Free commissions are a gimmicky way to stand out in a crowded field and still make a bundle via referrals,” says Javier Paz, director of data and analytics for Forbes Digital Assets. “The free commission conveys a good feeling to traders to think they are getting a deal, but only the savvy realize this is no free lunch.”

In response to Forbes’ requested for comment, a company spokesperson pointed to an earlier statement: “Where our clients invest matters more than ever. A meaningful portion of Fidelity clients are already interested in and own crypto. We provide them with tools to support their choices, so they can benefit from Fidelity’s education, research and technology.”

The site did not identify a start date for the crypto offering. It stated that invitations to access the service will be sent based on factors such as time of registration and state eligibility.

Last week, Fidelity Digital Assets, the company’s crypto arm, launched ether trading for institutional clients.

Cryptocurrency exchanges are engaged in a price war, ignited by Binance.US’s decision in August to eliminate fees on bitcoin trading. The commission-free model, popularized by stock and crypto trading app Robinhood at the start of the coronavirus pandemic, had proven useful in winning customers from more established competitors.

However, it has yet to result in a significant boost for Binance. Meanwhile, Coinbase COO Emilie Choi said in September that the country’s largest crypto exchange by volume has no plans to reduce retail fees to zero. “There are a bunch of problems with zero fees,” Choi said. “Wash trade and so on. We’re going to continue to play our own game.”

In addition to cryptocurrency trading, Fidelity also offers an ether index fund, which tracks the performance of the coin in US dollars, as well as an exchange-traded fund (ETF) focused on metaverse investments and another for crypto and digital payments. In April, Fidelity said it would allow employers to offer their employees access to bitcoin through an investment option in their core 401(k) retirement plans.