Yesterday, Nasdaq, the prominent, tech-forward U.S. stock exchange, announced it is calling off plans to launch a cryptocurrency custody service. The news comes as a significant blow amid emerging signs of life in the crypto industry, such as BlackRock’s proposal for a spot bitcoin exchange-traded fund (ETF). Despite the recent clampdown by U.S. authorities, there is still deep institutional interest in bitcoin and crypto.
Nasdaq CEO Adena Friedman said the firm pulled out because of “the shifting business and regulatory environment in the United States”. The company initially announced its custody plans in September alongside the formation of a new unit Nasdaq Digital Assets, to which the firm remains committed. Friedman added the firm still plans to “build and deliver” crypto software, including other custody solutions, and list BlackRock’s spot bitcoin ETF if that is approved.
It’s still unclear why exactly Nasdaq is backing out – whether there’s proximate cause or if this is just an example of a corporation reading the tea leaves. In February, the SEC voted to expand its existing regulations over all trading and lending firms by requiring them to keep customer assets with “qualified custodians”. This rule, which needs approval to go into effect, implicates more asset classes than just crypto, but seems designed to curtail full-stack crypto companies like Coinbase that offer both trading and custody services.
Nasdaq’s decision to exit the crypto custody business before it fully entered is likely not enough to derail the increasingly positive sentiment in crypto. But it is nonetheless a blow, and one that portends that much of the industry might be on its way to nowhere if the current regulatory regime stays in place.