Nasdaq halts plans for crypto custody service

Nasdaq has halted plans to launch a cryptocurrency custody service, within the newest signal {that a} US regulatory crackdown is inflicting mainstream monetary corporations to hesitate earlier than forging deeper hyperlinks with the digital belongings business. 

The tech-focused US alternate operator has been among the many leaders in established monetary markets in attempting to develop a crypto providing appropriate for its institutional purchasers. 

On Wednesday it cited regulatory uncertainty as the explanation for shelving plans to supply custody providers for crypto, which had been central to the digital belongings division it launched in September. 

“We wish to function in environments which have a fairly well-known regulatory underpinning,” stated Adena Friedman, Nasdaq chief govt on an earnings name on Wednesday. “That’s simply the place we’re comfy. The basic alternative modified over the past a number of months, after which the regulatory overhang modified as effectively, and I feel that simply made us determine that it’s not the precise time.”

In current months US regulators — led by Gary Gensler’s Securities and Change Fee — have issued a blitz of enforcement actions in opposition to a number of crypto bellwethers, together with Nasdaq-listed alternate Coinbase, and Binance, the world’s largest crypto alternate. Binance has additionally clashed with the Commodity Futures Buying and selling Fee, which in March accused the alternate of illegally accessing US clients. 

This exhibits how the shadow of the SEC’s crackdown on crypto is weighing down on the business and impacting companies, prompting them to suppose twice

“This exhibits how the shadow of the SEC’s crackdown on crypto is weighing down on the business and impacting companies, prompting them to suppose twice,” stated Ilan Solot, co-chair of digital belongings at monetary providers agency Marex. 

After final 12 months’s unprecedented crypto market crash, the protection of buyer belongings was thrust into the highlight after the collapse of alternate FTX and lender Celsius left traders ready in line at chapter courtroom. 

The Nasdaq resolution “is a serious setback for 2 causes,” stated Charley Cooper, former chief of employees on the Commodity Futures Buying and selling Fee. “The business wants credible custodians, and Nasdaq is a family identify with the respect of regulators. In the event that they’re falling by the wayside, think about how troublesome will probably be for lesser gamers attempting to arrange custody providers of their very own.” 

Nasdaq deliberate to custody shopper holdings of bitcoin and ether — the 2 hottest cryptocurrencies — by the tip of June, becoming a member of BNY Mellon and fund supervisor Constancy in providing safekeeping providers. 

Friedman added that the alternate’s focus for now can be serving to purchasers with potential alternate traded funds linked to crypto belongings. 

A number of fund managers, together with BlackRock, are at the moment engaged on successful approval for ETFs based mostly on the spot value of bitcoin — one thing the SEC has beforehand rejected due to a scarcity of regulatory supervision of the underlying belongings.