Nasdaq has decided to abandon its plans for a cryptocurrency custody service due to regulatory challenges in the United States. The announcement was made by Nasdaq CEO Adena Friedman during an earnings call on Wednesday. Friedman stated that the company made the decision considering the changing business and regulatory landscape in the US.
Friedman mentioned that although Nasdaq had invested significant efforts in establishing the necessary infrastructure and gaining regulatory approval for the custody service, they have chosen to halt the launch. The company had even applied to the New York Department of Financial Services for a limited-purpose trust company to oversee the custody business.
However, Nasdaq will continue to engage with crypto companies and explore partnerships with potential exchange-traded fund (ETF) issuers. Friedman emphasized Nasdaq’s commitment to supporting the evolution of the digital asset ecosystem and delivering comprehensive technology solutions across the trade life cycle.
The discontinued crypto custody service by Nasdaq was highly anticipated. The company had announced its plans to launch the service in March to meet the growing institutional interest and demand for crypto services. Custody services are crucial for institutional investors looking for secure storage solutions for digital assets.
Initially, Nasdaq’s custody service was expected to offer services for Bitcoin and Ether, with plans to expand into other areas over time. However, Nasdaq’s decision to abandon these plans further highlights the challenges faced by financial institutions in entering the cryptocurrency space.
This is particularly evident due to the heightened scrutiny of crypto firms by regulatory agencies such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission. The SEC has recently taken enforcement action against major crypto exchanges like Binance, Coinbase, Kraken, and Bittrex, as well as the crypto lending platform Nexo.
The lack of clear guidance from the SEC has also been a point of concern. Congressman Ritchie Torres wrote an open letter to SEC Chairman Gary Gensler expressing disappointment with the agency’s failure to issue clear rules and guidance to the cryptocurrency industry. Torres criticized the SEC for sending mixed messages and contradicting itself in its approach to crypto assets.
