- Nasdaq scraps plan to enter the crypto custody market amid U.S. regulatory turmoil.
- The service was scheduled to go live in the second quarter of this year.
- The company remains committed to supporting the evolution of the digital asset ecosystem.
The stock market operator Nasdaq has ended its plans to provide its highly-anticipated crypto custody service, citing the ongoing regulatory turmoil in the United States. The service was scheduled to go live in the second quarter of this year. The sudden reversal of the custody plans marks a notable setback to the institutional adoption of crypto in the U.S.
Nasdaq CEO Adena Friedman announced the decision during the company’s second-quarter earnings call on July 19, indicating that the U.S.’s most important exchange for technology listings may revisit the decision if there’s more clarity over-regulation of the crypto sector in the future.
Friedman stipulated:
“This quarter, considering the shifting business and regulatory environment in the United States, we have decided to halt our launch of the U.S. digital assets custodian business and our related efforts to pursue relevant licenses.
The CEO added that the firm would “remain committed to supporting the evolution of the digital asset ecosystem,” as he highlighted intentions to pursue collaborations with potential ETF issuers:
“We continue to build and deliver technology capabilities that position Nasdaq as a leading digital assets software solutions provider to the broader global industry.”
Nasdaq first revealed the plans for its crypto custody project in September 2022 with the initial goal of offering customers custody services for Bitcoin (BTC) and Ether (ETH). The collapse of FTX in November and the attention it attracted from regulators resulted in an unfriendly environment for crypto firms and digital assets in the U.S. as the Securities and Exchange Commission (SEC) brought the hammer down on the industry.
Nasdaq pauses the rollout of custody services
However, Nasdaq’s decision comes amidst evolving criticism in the U.S. of the SEC’s regulation strategy by enforcement. Two prominent Republican politicians have added to calls for the regulator to focus instead on providing the industry with greater clarity by building a comprehensive regulatory framework.
The SEC has since filed lawsuits against the significant cryptocurrency exchanges in the world – including Binance, Coinbase, and Kraken – with a variety of charges, such as the unregistered sale of securities and a failure to register the offer and sale of crypto asset staking programs.
Nasdaq took these lawsuits as a sign to pause the rollout of custody services to ensure that the eventual release is done in full regulatory compliance.
The exchange operator had been awaiting permission from the New York Department of Financial Services (NYDFS) by the end of June to start offering custodial services to customers. Nasdaq was targeting a launch by the end of this month.
But the company has decided to rethink its involvement in the crypto custody business and its efforts to seek the requisite licenses for the service amid the regulatory uncertainty and heightened scrutiny of crypto-related offerings.
The U.S. exchange operator has always been known for its tech focus, spearheading the creation of crypto products appropriate for its institutional clientele. Further, Nasdaq’s CEO has stated the company is still committed to digital assets. He explained:
“We remain committed to supporting the evolution of the digital asset ecosystem in various ways, among them through our ongoing engagement with regulators and the delivery of comprehensive technology solutions across the trade lifecycle.
