Nasdaq Shelves Crypto Custody Plan, Cites ‘Shifting Reg Environment’ in US

The American stock exchange operator, Nasdaq, has abandoned its plan to expand its digital asset offering by introducing cryptocurrency custody services to institutional investors. The launch of the service was initially planned as the Wall Street giant’s first major crypto project.

Nasdaq Drops Crypto Custody Plan

Earlier in March, Ira Auerbach, the Head of Nasdaq Digital Assets, disclosed that the marketplace operator had applied for a limited-purpose trust company charter from the New York financial services regulator. The exchange desires the license to float a digital asset custody service.

However, during an earnings call held today (Wednesday), Adena Friedman, the exchange’s Chief Executive Officer, told investors the company had decided to suspend the plan “considering the shifting business and regulatory environment in the US.”

According to CoinDesk, Nasdaq's CEO noted the firm will continue to support the digital asset industry, including efforts to secure approval for spot Bitcoin (BTC) exchange-traded funds (ETFs) from the US Securities and Exchange Commission (SEC).

Nasdaq, one of the biggest stock exchanges in the world, is a global financial services powerhouse. During the second quarter of 2023 ended June, the company generated $1.43 billion in revenue.

In September last year, the exchange launched its digital asset services division, with plans to diversify into crypto custody solutions. However, the new decision to halt the plan is a major blow to institutional clients who in recent years started showing enthusiasm for the crypto industry.

Nasdaq’s decision was made at a time the SEC is waging a legal battle against Binance and Coinbase, the largest crypto exchanges in the United States, alleging that both platforms are operating without permission and engaging in the sale of 'unregistered' crypto assets securities.

SEC Approves Spot BTC EFTs for Review

Meanwhile, in spite of the SEC’s crackdown on digital asset firms in the United States, institutional investors are showing renewed interest in spot bitcoin (BTC) exchange-traded funds (ETFs). Last month, Nasdaq filed an application to list BlackRock’s spot BTC ETF which is designed to track the price of BTC. The move triggered a flurry of submissions by other US-based asset management firms.

On Tuesday and Wednesday, six of these applications appeared on the Federal Register, signalling that the SEC has formally acknowledged them. The inclusion in the register is the first step in a process that leads up to the SEC’s decision on whether to accept or reject the applications. The applications that appeared in the Register are those filed by BlackRock, Bitwise, VanEck, WisdonTree, Fidelity and Invesco.

Finance Magnates reported that the applications must appear in the Federal Register before a final decision can be made on the applications. With this stage now completed, the SEC has between 45 and 90 days to make its decision on the six applications.

Earlier, the SEC sought public opinion on the ETFs in a move that marked the initial step for processing the filings. However, before then, Nasdaq and Cboe had to refile the applications on behalf of the Wall Street firms, this time including details on a surveillance-sharing agreement entered with Coinbase. The agreement, which is part of the recommendations set by the SEC, requires Coinbase to share any information about suspicious activities in the digital asset market with the agency.

In 2021, the SEC approved the first BTC futures ETF. However, it rejected applications for spot BTC ETFs made by firms, such as Fidelity and VanEck, saying they fall short of anti-fraud and investor protection standards.

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