Stock market operator Nasdaq has ended its plans to provide its highly-anticipated crypto custody service, citing the ongoing regulatory conditions in the United States as the key reason for their decision. The service was scheduled to go live in the second quarter of this year. The sudden reversal of the custody plans marks a notable setback to the institutional adoption of crypto in the U.S.
Nasdaq Halts Plan For Institutional Crypto Custody Service
CEO Adena Friedman announced that Nasdaq has dropped its plans for a Bitcoin custody service during the company’s Q2 results call.
“This quarter, considering the shifting business and regulatory environment in the United States, we have made the decision to halt our launch of the U.S. digital assets custodian business and our related efforts to pursue relevant license,” Friedman indicated.
The Nasdaq boss stressed that the firm would “remain committed to supporting the evolution of the digital asset ecosystem.” Friedman highlighted intentions to pursue collaborations with potential ETF issuers:
“We continue to build and deliver technology capabilities that position Nasdaq as a leading digital assets software solutions provider to the broader global industry.”
A Bane For Crypto
News emerged last year that Nasdaq was intending to roll out a crypto custody service in a bid to capture institutional investor interest. However, regulators in the U.S. have embarked on their most harrowing crackdown on crypto yet — initiating lawsuits against a number of high-profile companies.
The exchange operator had been awaiting permission from the New York Department of Financial Services (NYDFS) by the end of June to start offering custodial services to customers. Nasdaq was targeting a launch by the end of this month.
But the company has decided to rethink its involvement in the crypto custody business and its efforts to seek the requisite licenses for the service amid the regulatory uncertainty and heightened scrutiny of crypto-related offerings.
This surprising turnabout is a big blow to greater institutional adoption as concerns of a possible exodus of crypto firms to more friendly jurisdictions arise. Sadly, the U.S. is becoming a hostile place for the crypto industry to do business. The actions of the SEC and its chair Gary Gensler against the world’s foremost exchanges, Coinbase and Binance, have the crypto sector reeling.
Even so, there does seem to be institutional demand in the industry: BlackRock — and a slew of other prominent asset management firms — have submitted applications to launch spot Bitcoin ETF products. In fact, Nasdaq has partnered with BlackRock— the world’s largest asset manager — for the application, which is presently being examined by the SEC.