Nasdaq backs out of crypto business amid SEC’s crackdown

abdelaziz Fathi

Nasdaq’s CEO and President, Adena Friedman, announced during the company’s earnings call that the planned launch of the cryptocurrency custody service will not proceed this year as previously anticipated.

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The exchange operator is also abandoning plans to obtain a license related to its crypto activities, citing the shifting business and regulatory environment in the US. However, Friedman said they will continue to focus on developing the technology to cater to crypto-related services for its clients.

Nasdaq has been developing a prototype that eventually allows cryptocurrencies to pass through the same financial network it currently uses for investments in traditional assets like bonds and stocks.

“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 added.

In September 2022, the American stock exchange said it pursues a cryptocurrency custody service, initially scheduled to go live in the second quarter of this year. To support this initiative, Nasdaq had been building the required infrastructure and seeking regulatory approval, having filed for a limited-purpose trust company with the New York Department of Financial Services (NYDFS) to oversee the custody operations.

However, the company said it will reevaluate the appropriate timeline and regulatory requirements before proceeding with its cryptocurrency venture.

While a blow to the institutional adoption of cryptocurrencies in the United States, the move indicates that Nasdaq is taking the SEC’s actions seriously and is considering challenges faced by financial institutions in entering the crypto space. The watchdog filed lawsuits against both Binance.US, the American subsidiary of the largest cryptocurrency exchange globally, and Coinbase, the largest exchange in the United States. The SEC alleges that several tokens listed on these exchanges are unregistered securities, which violates securities laws.

Despite Nasdaq’s decision to back out of the crypto custody business, BNY Mellon, which oversees about $47 trillion in assets, continues to operate its new unit dedicated to providing clients with ‘an integrated service’ for digital assets.

Further, the custodian bank, which is sitting on $2 trillion in assets under management, states that even conservative clients are seeking exposure to digital assets. The new offering also targets native crypto firms, like Coinbase and other US exchanges, who are looking for BNY Mellon’s core investment services.

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