An ongoing cryptocurrency bear market is not dampening interest for Fidelity's new institutional cryptocurrency products.

Fidelity Digital Assets, a new company created by the investing giant last year, has quietly rolled out its cryptocurrency custody and trade execution operations. In the past few months it has been up and running with institutional investors like hedge funds and family offices, according to its top executive.

The collapse in cryptocurrency prices over the last year "haven't had an impact" on getting up and running, Tom Jessop, head of Fidelity Digital Assets told CNBC at the DC Blockchain Summit this week. "If you started a crypto fund at the height of the market you're probably hurting right now."

Bitcoin, along with thousands of other digital coins, sparked a buying frenzy among retail investors in late 2017. The world's largest cryptocurrency has dropped more than 80 percent since its high of almost $20,000 at the end of 2017 and was trading near $3,789 on Friday.

Still, Jessop said there's long-term interest from institutional investors to add some form of cryptocurrency to their portfolios. It's often seen as an uncorrelated risk, or a store of value in a crisis. Others see a trading opportunity given the sector's volatility. Fidelity commissioned research to gauge the level of that interest.

The firm interviewed roughly 450 institutions, everyone from wealthy families to hedge funds, pensions and endowments. About 22 percent of the respondents already own cryptocurrency, according to the findings. Those that already own it expect to double their allocation over five years.

"If anything, they are as encouraged now as they were when prices were higher," Jessop said.

Fidelity's new company will execute trades on multiple exchanges for these professional investors. It also handles custody, or the safe storage of digital assets. Until Fidelity, there had been a noticeable lack of a big U.S.-based company in that business.

Jessop said while the company is live, certain aspects are still a work in progress. Fidelity is expanding the jurisdictional coverage of where it can do business. And its offerings are not one-size-fits-all. Some customers were using the platform in January, while for other customers, it was March. Others may wait until September, he said.

"It really depends on the facts and circumstances of each client," Jessop said.

Fidelity, a roughly 72-year-old family-controlled firm, is known for managing retirement plans and mutual funds. But it also spends $2.5 billion per year on technologies like artificial intelligence and blockchain. The new digital asset company was born out of the Fidelity Center for Applied Technology, or FCAT as employees call it.

Jessop said many institutional investors are still in "wait and see" mode when it comes to putting money into crypto.

"At some point, there will be an attractive entry point," Jessop said. "But by the same token people don't want to be early even if we're well off the highs."

Much of that hesitation has to do with volatility, he said. The digital currency market has been known to jump or sink by 10 percent in a single day. While prices in 2019 have been relatively stable, institutions are still wary of those sudden price moves, according to the Fidelity survey. That issue should be solved as the market structure matures, Jessop said.

Education is another roadblock to greater acceptance by investors. Jessop said the more educated a firm was on the topic, the more likely they were to be holding cryptocurrency.

"They've approached us wanting to learn, which is an encouraging sign," Jessop said. "That's not to say that there's a cohort of people that once they get educated will still have a negative view."

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