Nasdaq Shelves Crypto Custody Plan, Cites ‘Shifting Reg Environment’ in US

<p>American
stock exchange operator, Nasdaq, has abandoned its plan to expand its digital
asset offering by introducing cryptocurrency custody services to institutional investors. The launch
of the service was initially planned as the Wall Street giant’s first major crypto project. </p><p>Nasdaq Drops Crypto Custody Plan</p><p>Earlier in
March, Ira Auerbach, the Head of Nasdaq Digital Assets, <a href="https://www.financemagnates.com/cryptocurrency/nasdaq-to-launch-crypto-custody-services-by-end-of-q2/" target="_blank" rel="follow">disclosed</a> that the
marketplace operator had applied for a limited-purpose trust company
charter from the New
York financial services regulator. The exchange sought the
license so as to float a digital asset custody service. </p><p>However, during
an earnings call held today
(Wednesday), Adena Friedman, the exchange’s Chief
Executive Officer, told
investors the company had decided to
suspend the plan “considering the shifting business and regulatory environment
in the US.” </p><p>According
to CoinDesk, the Nasdaq CEO, however, noted the firm
will continue to support the digital asset industry,
including efforts to
secure approval for spot Bitcoin (BTC) exchange-traded funds (ETFs) from the
US Securities and Exchange Commission (SEC). </p><p>Nasdaq, one
of the biggest stock exchanges in the world, is a global financial services
powerhouse. During the second quarter of 2023 ended June, the company <a href="https://www.financemagnates.com/forex/news-nuggets-19-july-rakuten-brings-ai-assistant-argo-raises-money/" target="_blank" rel="follow">generated $1.43 billion</a> in revenue. </p><p>In
September last year, the
exchange <a href="https://www.financemagnates.com/cryptocurrency/news/nasdaq-to-launch-crypto-custody-services-for-institutions/" target="_blank" rel="follow">launched</a> its digital asset services
division, with plans to diversify into crypto custody solutions. However, the new decision to halt the plan is a major blow to institutional clients who in recent years started showing enthusiasm for the crypto industry.</p><p>Nasdaq’s decision comes at a
time the SEC is <a href="https://www.financemagnates.com/cryptocurrency/after-binance-sec-sues-coinbase-over-illegal-operation-of-crypto-exchange/" target="_blank" rel="follow">waging a legal battle</a> against Binance and Coinbase, the largest
crypto exchanges in the United States, alleging that both platforms
are operating without permission and engaging
in the sale of 'unregistered' crypto asset securities.</p><p>SEC
Approves Spot BTC EFTs for Review</p><p>Meanwhile, in spite of
the SEC’s crackdown on digital asset firms in the United States, institutional
investors are showing renewed interest in spot bitcoin (BTC) exchange-traded funds
(ETFs). Last month, Nasdaq <a href="https://www.financemagnates.com/cryptocurrency/blackrock-seeks-approval-for-a-spot-bitcoin-etf-in-the-us/" target="_blank" rel="follow">filed an application</a> to list BlackRock’s spot BTC
ETF which is designed to track the price of BTC. The move <a href="https://www.financemagnates.com/cryptocurrency/ark-invest-joins-blackrock-and-fidelity-in-race-for-bitcoin-etf/" target="_blank" rel="follow">triggered a flurry of submissions</a> by other
US-based asset management firms.</p><p>On Tuesday
and Wednesday, six of these applications appeared on the Federal Register, signalling
that the SEC has formally acknowledged them. The inclusion in the register is the first step in a
process that leads up to SEC’s decision on whether to accept or reject the applications. Applications that
appeared in the Register are those filed by BlackRock, Bitwise, VanEck,
WisdonTree, Fidelity and Invesco. </p><p><a href="https://www.financemagnates.com/" target="_blank" rel="follow">Finance
Magnates</a> reported that the applications must appear in the Federal Register
before a final decision can be made on the applications. With this stage now
crossed, the SEC has between 45 and 90 days to make a decision on the six
applications.</p><p>Earlier,
the SEC <a href="https://www.financemagnates.com/cryptocurrency/sec-seeks-public-opinion-ahead-of-groundbreaking-decision-on-spot-bitcoin-etfs/" target="_blank" rel="follow">sought public opinion</a> on the ETFs in a move that marked the
initial step for processing the filings. However, before then, <a href="https://www.financemagnates.com/cryptocurrency/cboe-refiles-spot-bitcoin-etfs-following-surveillance-agreement-with-coinbase/" target="_blank" rel="follow">Nasdaq and Cboe had to refile the applications</a> on behalf
of the Wall Street firms, this time including details on a surveillance-sharing
agreement entered with Coinbase. The
agreement, which is part of the recommendations set by the SEC, requires
Coinbase to share with the agency any information about suspicious activities
in the digital asset market. </p><p>In 2021, SEC <a href="https://www.financemagnates.com/cryptocurrency/news/sec-likely-to-approve-bitcoin-futures-etf-next-week/" target="_blank" rel="follow">approved</a> the first BTC futures ETF.
However, it rejected applications for spot BTC ETFs made by firms such as <a href="https://www.financemagnates.com/cryptocurrency/news/financial-giant-fidelity-plans-to-launch-a-bitcoin-etf/" target="_blank" rel="follow">Fidelity</a> and <a href="https://www.financemagnates.com/cryptocurrency/news/us-sec-rejects-application-for-the-vanecks-bitcoin-backed-etf/" target="_blank" rel="follow">VanEck</a>, saying they fall short of
anti-fraud and investor protection standards. </p><p>
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This article was written by Solomon Oladipupo at www.financemagnates.com.