Nasdaq halts plans for crypto custody service

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

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

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 reasonably well-known regulatory underpinning,” mentioned Adena Friedman, Nasdaq chief government on an earnings name on Wednesday. “That’s simply the place we’re snug. The basic alternative modified during the last 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 fitting time.”

In latest months US regulators — led by Gary Gensler’s Securities and Alternate 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 reveals how the shadow of the SEC’s crackdown on crypto is weighing down on the trade and impacting companies, prompting them to suppose twice

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

After final 12 months’s unprecedented crypto market crash, the security 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 significant setback for 2 causes,” mentioned Charley Cooper, former chief of employees on the Commodity Futures Buying and selling Fee. “The trade wants credible custodians, and Nasdaq is a family title with the respect of regulators. In the event that they’re chucking up the sponge, think about how troublesome it is going to be for lesser gamers making an attempt to arrange custody providers of their very own.” 

Nasdaq deliberate to custody consumer 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 shoppers 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 primarily based on the spot worth of bitcoin — one thing the SEC has beforehand rejected due to a scarcity of regulatory supervision of the underlying belongings.