Nasdaq, the owner and operator of the second-largest stock exchange in the United States, is launching a group dedicated to digital assets. While its own crypto exchange might be prioritized in the future, the current plans primarily focus on the institutional custody business.
Nasdaq executive vice president Tal Cohen said that former head of prime broker services at crypto exchange Gemini, Ira Auerbach will lead the new digital assets unit, which will initially offer custody services for Bitcoin and Ether to institutional investors. Although the company has no immediate plans to launch a crypto exchange, Cohen said it would evaluate the opportunity based on the regulatory environment and competitive landscape.
Safe crypto custody
Nasdaq has applied to become a custodian of digital assets with the New York Department of Financial Service, an essential step that puts it in competition with crypto firms like Coinbase, Anchorage Digital and BitGo.
“Custody is foundational. Off the back of custody, we can start to develop other solutions, offer execution services, liquidity services, and think about how we support new markets. […] With our trusted brand and strong track record as a technology provider for the global capital markets, Nasdaq is uniquely placed to address industry pain points by improving liquidity, scalability, and resiliency, with the goal to engender greater trust and confidence in the digital assets ecosystem” – Tal Cohen, Executive Vice President Nasdaq
Some financial firms, notably BNY Mellon and State Street, have started providing crypto custody for institutions as well. However, a recent guidance from the Securities and Exchange Commission has made holding tokens on behalf of clients more capital intensive for public companies, essentially precluding banks from even being able to feasibly offer custodial services.
Wall Street clamoring
The turn comes as the latest in a string of Wall Street legacy titans making deeper strides into cryptocurrencies due to persistent interest on behalf of their institutional investors, despite the overall market downturn over the course of the past year.
“The technology that underpins the digital asset ecosystem has the potential to transform markets over the long-term. To deliver on that opportunity, our focus will be to provide institutional-grade solutions that bring greater liquidity, integrity, and transparency to support the evolution.” – Adena Friedman, President and Chief Executive Officer Nasdaq
For instance, BlackRock partnered with Coinbase Global to facilitate investing in Bitcoin for its clients, shortly thereafter offering its first investment product directly in the token. Meanwhile, Charles Schwab, Fidelity Digital Assets, Citadel Securities and Virtu Financial have partnered to launch a new exchange, EDX Markets, which is set to start trading tokens this year.