- While it was preparing for the launch, Nasdaq had already developed the essential products required to be a crypto custodian.
- Nasdaq is planning a launch by the end of July 2023.
Nasdaq President on Halting the Launch
In terms of volume, Nasdaq, the world’s 2nd largest stock exchange and the most active stock exchange in the United States, has backpedalled from digital assets and halted its plans to launch its cryptocurrency custodian service, which the company had announced would launch by the end of the 2nd quarter of 2023.
This move comes in view of regulatory risks and the changing business environment, as said by Adena Friedman, President of the Nasdaq.
The exchange has also suspended its efforts to obtain a licence for the crypto custodian business. However, it still plans on serving its crypto clients.
In the firm’s 2nd quarter results call, the President, Adena Friedman, stated that the firm is devoted to serving the digital asset community in all possible ways, and by partnering up with prospective ETF issuers. In addition, the President also claimed that Nasdaq will thoroughly monitor market conditions for future events.
The reason behind Nasdaq pulling back from the crypto custodian business was the widespread repression by the regulators that wanted the US’s financial system to be secluded from the risks associated with crypto.
With multiple banks across the US being warned about their exposure to crypto assets, the Securities and Exchange Commission of the United States has sued a few of the biggest players in the crypto market, including Coinbase Global Inc. and other leading crypto firms.
Among other concerns, one of the major ones for the decision is the risk that it could topple the federally insured banks, along with some parts of the crypto platforms falling through the cracks. These parts include custody, market-making, and trading, which can potentially result in a conflict of interest.
In a conversation with Bloomberg, Nasdaq President, Adena Friedman remarked that Nasdaq prefers to work in a neat environment with a regulated framework. She further said, “Since this regulatory framework is transitioning, Nasdaq has halted its efforts towards the crypto custodian and decided to focus on its tech and listings businesses”. She also added that Nasdaq’s return to the crypto business will entirely depend upon the pertaining market conditions.
The Backstory of Nasdaq’s Plans Regarding its Entry into the Digital Asset Scenario
In September 2022, Nasdaq made it public that it would accept the custody of digital assets like Bitcoin and Ether from institutional investors. The firm has also sent an application to the New York Department of Financial Services to issue a licence for carrying out these services.
Nasdaq’s previous attempt to put its foot into the waters of digital assets was viewed as a sign of Wall Street Institutions’ vested interest in digital assets. The launch of this service was planned for the end of the second quarter.
In addition to this, Nasdaq has partnered up with Blackrock Inc., the world’s largest Asset Management Company, to file for Bitcoin ETFs to make Bitcoin investing easier.
Robin Vince, the CEO of Bank of New York Mellon, which recently launched crypto custody services, has remarked that the product, crypto custody services, was never in the front seat of the company’s digital assets journey.
Nasdaq’s decision to halt the launch of its crypto-custodian business reflects the regulatory risks and changing environment surrounding the crypto industry. The focus on serving the digital asset community through partnerships while monitoring market conditions indicates a cautious approach. The future reentry into the crypto space will depend on prevailing market conditions and regulatory developments.