Nasdaq Inc. has made the decision to withdraw from the digital assets market and renounce its intentions to establish a custodian business in the United States. The constantly shifting commercial and regulatory landscape that surrounds cryptocurrencies led to the making of this decision.
In addition, the company has decided that it will no longer work toward obtaining a license that is particularly relevant to this business. However, Nasdaq will proceed with the development and improvement of its technology in order to handle cryptocurrencies on behalf of its customers.
The Chief Executive Officer of Nasdaq, Adena Friedman, emphasized the company’s ongoing commitment to support the ecosystem of digital assets in a variety of ways, despite the fact that Nasdaq has exited the custodian business. This includes looking into the possibility of forming partnerships with companies that issue ETFs in order to make the development of the cryptocurrency market easier.
In the United States, financial regulators are becoming increasingly strict with regard to digital assets in order to preserve the reliability of the nation’s monetary system. As a direct consequence of this development, Nasdaq has exited the cryptocurrency market.
The United States Securities and Exchange Commission (SEC) has taken legal action against several major industry players, including Binance and Coinbase Global Inc., on the grounds that crypto-related businesses are subject to a number of inherent risks.
The lack of a clear separation between custody, market-making, and trading is a source of concern because it may lead to conflicts of interest. The potential risks that could be posed to banks that are insured by the federal government are also a source of concern.
The Chief Executive Officer of Nasdaq, Adena Friedman, expresses a preference for conducting business in an environment that is both highly regulated and characterized by a distinct regulatory framework. However, as the regulatory climate surrounding cryptocurrencies continues to change, the company has made the decision to pause all of its activities that are related to cryptocurrencies for the time being. Instead,
Nasdaq will put its focus on its technology and the operations of its listing businesses. The development of the regulatory framework will determine how much future participation there will be in the cryptocurrency market.
According to Friedman, Nasdaq has already developed the necessary products for its crypto custody business and is currently working to transform them into solutions that can be offered to other financial institutions. These solutions will allow other organizations to store digital assets.
In September, Nasdaq made public its intention to provide custody services to institutional investors who have an interest in cryptocurrencies like Bitcoin and Ether. In order to move forward with these plans, Nasdaq submitted an application to the New York Department of Financial Services requesting approval; however, the agency has not yet responded to the request.
The initial move by Nasdaq to enter the cryptocurrency custody industry was interpreted as a sign of increased interest and participation from traditional Wall Street institutions in the digital asset space. This was the case because the move was seen as a sign of increased competition among cryptocurrency custody providers.
The launch of the company’s custody service was originally slated to take place by the end of the second quarter, according to the initial plans. Recent events have seen Nasdaq forming a partnership with BlackRock Inc. in order to put in an application for an exchange-traded fund (ETF) that will directly invest in Bitcoin.
Long-term implications?
The Bank of New York Mellon has just recently begun offering custody services for various cryptocurrencies; however, the CEO of the company, Robin Vince, has stated that this particular product has never been the primary focus of the company’s efforts in the endeavor to enter the digital asset space.
The company has looked into a variety of other facets of digital assets, in addition to the custody services they offer.
The decision made by Nasdaq to stop operating in the US custody business will have a minimal effect on the company’s finances, which will result in a reduction in the company’s guidance for the growth of operating expenses for the full year.
The Nasdaq Stock Market has been actively working to expand its revenue streams beyond the traditional exchange activities, such as the trading of public company stock. The company has made investments in software, data, and other offerings in order to broaden the scope of its operations.
In addition, Nasdaq provides software solutions for the cryptocurrency industry. These software solutions include monitoring and trading tools for participants in the cryptocurrency market.
