Capital markets News

Nasdaq shelves plans as digital asset custodian


During Nasdaq’s Q2 earnings call today, CEO Adena Friedman said the company had halted the rollout of its digital asset custody service, which was planned for launch in Q2. The news appears to be more than a pause, with the driver being regulatory uncertainty. She said that it was ‘possible’ that the company might enter the business in the future.

In the meantime it will support potential Bitcoin ETF listings and continue to provide index solution in the cryptocurrency space.

Last year Nasdaq announced it was creating a digital assets division, starting with a focus on custody and developed a proprietary solution. This March it was reported that it applied to the New York Department of Financial Services (NYDFS) for a trust company charter in order to operate as a custodian. 

Given Nasdaq already provides various technology solutions relating to digital assets, one question is whether it might sell the technology solution rather than the custody service.

Last year the SEC introduced an accounting rule requiring crypto custodians to put the custodied assets on their balance sheet. That’s not ideal, but a bigger issue for banks that must comply with Basel capital rules.

During the last month the SEC sued crypto exchanges Coinbase and Binance, and there was a summary judgement in the SEC’s lawsuit against Ripple regarding the XRP token. The case had the surprising outcome that only the institutional crypto sales were considered unregistered securities and Nasdaq operates in the institutional space.

Outside of crypto, Nasdaq continues to provide technology solutions for tokenization, recently announcing a deal with Chile’s Central Securities Depository, DCV.

Transcript of CEO digital asset comments

Here’s how Friedman responded to an analyst’s question asking whether the custody offering was postponed or shelved.

I try to avoid the word forever. What we’ve chosen to do is halt our efforts in deploying a custody solution as a custodian – being a custodian in the US crypto marketplace. The regulatory environment is fast changing. It’s at least trying to evolve into something that’s understandable. We’ll see how that does over the next several months and maybe years. 

We like to operate in environments that have a pretty well known regulatory underpinning. That’s just where we’re comfortable. It’s consistent with our risk tolerance. It’s consistent with how we know we can be successful. And the regulatory nature of the business has evolved a lot. And the lack of clarity has made it so as we looked at the opportunity set of just being a custodian – nothing else – just that one segment of the business. 

The fundamental business opportunity changed over the last several months and the regulatory overhang changed as well. And that just made us decide that it’s not the right time for us to enter that business. 

Will we ever enter that business? It’s possible. 

But we’d likely do it in connection with other things we’d might want to try and do in the digital asset space. 

But right now, our focus is on being a great technology provider, helping our clients with their potential for ETF listings, Bitcoin ETF listings. And continuing to provide index solutions in the cryptocurrency space.

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