Nasdaq Halts Crypto Custody Plans Amid Regulatory Uncertainty

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  • Nasdaq has halted plans for a cryptocurrency custody service due to regulatory uncertainty in the crypto industry
  • SEC’s crackdown on crypto, along with enforcement actions against major players, influenced Nasdaq’s decision
  • Nasdaq’s focus will shift to assisting clients with potential crypto-linked exchange-traded funds amid the regulatory landscape

Nasdaq has decided to halt its plans to launch a cryptocurrency custody service, signaling the impact of a regulatory crackdown on the mainstream financial industry’s involvement with digital assets. The exchange operator had been actively exploring ways to offer a crypto custody service tailored to institutional clients, with its digital assets division set up in September. However, on Wednesday, Nasdaq cited regulatory uncertainty as the primary reason for shelving its custody service plans.

Nasdaq Pulls the Plug

Nasdaq announced its crypto custody project in September 2022 which aimed to offer institutional bitcoin holders the opportunity to safely store their holdings. As late as March 2023 the company was still talking up the move, targeting a launch by the end of July, but this had now been canned with just days to go.

Nasdaq had planned to offer custody services for bitcoin and ether following in the footsteps of BNY Mellon and fund manager Fidelity, which also provide safekeeping services for digital assets. However, the uncertainty surrounding regulatory scrutiny and the safety of customer assets following last year’s crypto market crash has prompted it to exercise caution before fully committing to cryptocurrency-related services, such as custody offerings.

Adena Friedman, Nasdaq’s chief executive, emphasized the importance of operating in environments with clear regulatory frameworks, which has become challenging due to recent changes in regulatory oversight. The Securities and Exchange Commission (SEC), led by Gary Gensler, has been actively pursuing enforcement actions against key crypto players, including Nasdaq-listed exchange Coinbase and the world’s largest crypto exchange, Binance.

Decision is Reflective of Broader Worries

The heightened regulatory scrutiny has had a noticeable impact on the industry, causing businesses to reconsider their involvement with cryptocurrencies. According to Ilan Solot, co-chair of digital assets at financial services firm Marex, Nasdaq’s decision reflects how the SEC’s crackdown is weighing down on the crypto industry.

Friedman also mentioned that, for the time being, Nasdaq’s focus would shift towards assisting clients with potential exchange-traded funds (ETFs) linked to crypto assets. Notably, several fund managers, including BlackRock, are striving to win approval for ETFs based on the spot price of bitcoin—a venture previously rejected by the SEC due to concerns about the underlying assets’ regulatory oversight.