Nasdaq Drops Crypto Custody Service Amid US Regulatory Challenges
Nasdaq has scrapped plans for a cryptocurrency custody service amid recent regulatory challenges.
During an earnings call on Wednesday, Nasdaq CEO Adena Friedman said the company has opted to drop its plans due to the changing business and regulatory landscape in the United States.
“Given the changing business and regulatory environment in the US, we have made the decision to halt our launch of the US digital asset custody business and our related efforts to obtain a relevant license,” it said.
“However, we continue to build and deliver technology capabilities that position Nasdaq as a leading provider of digital asset software solutions to the broader global industry.”
Friedman explained that the decision comes even as Nasdaq has made a significant effort to establish the necessary infrastructure and obtain regulatory approval for the custodial service.
In fact, the firm had even applied to the New York Department of Financial Services (NYDFS) for a limited purpose trust company to oversee the custody business.
The CEO noted that Nasdaq will continue to engage with cryptocurrency companies, partnering with potential exchange-traded fund (ETF) issuers.
“More broadly, we remain committed to supporting the evolution of the digital asset ecosystem in a variety of ways, including through our ongoing engagement with regulators, the delivery of end-to-end technology solutions throughout the business lifecycle, and through our partnerships with potential ETF issuers. to support publicly traded tradable products,” Friedman added.
Nasdaq crypto custody was highly anticipated
As reported, Nasdaq announced in March that it aims to launch its long-awaited crypto custody service by the end of the second quarter to meet growing institutional interest and demand for crypto services.
Custody services are considered a critical component for institutional investors who want to safely navigate the crypto asset class, providing secure storage solutions and protecting digital assets from theft or loss.
The unit was expected to initially offer custody services for Bitcoin and Ether, with plans to include other services, including execution services and liquidity services, over time.
Meanwhile, Nasdaq’s decision to drop its cryptocurrency custody plans highlights the challenges financial institutions face when trying to enter the cryptocurrency space.
This is especially true in light of the increased scrutiny of crypto companies by US regulatory agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.
Last month, the SEC sued both Binancethe world’s largest cryptocurrency exchange, and coin basethe largest US-based cryptocurrency exchange
The commission has also taken enforcement action against cryptocurrency exchanges. kraken and bittrexas well as a crypto lending platform nexus so far this year
Recently, Congressman Ritchie Torres wrote an open letter to SEC Chairman Gary Gensler, expressing his dissatisfaction with the agency’s failure to issue clear guidance for the cryptocurrency industry.
“Under Chairman Gensler, the SEC has not issued a single rule on crypto assets, nor has it given any clear guidance,” Torres said. “All it has done is send mixed messages, one after the other. [other]not only contradicting the CFTC but often contradicting itself.”