Nasdaq (NDAQ) CEO Adena Friedman announced during an earnings call that the company is abandoning its plans to launch a crypto custody service. The service, initially scheduled to go live in the second quarter of this year, aimed to offer secure custody solutions for Bitcoin (BTC) and Ethereum (ETH), with future plans to expand its offerings to include execution for financial institutions.
Back in March, Nasdaq had expressed its intention to venture into the crypto space, actively working on building the necessary infrastructure and obtaining regulatory approval for the proposed limited-purpose trust company, which would have overseen the crypto custody business. The move was seen as a positive step towards accommodating the increasing demand from institutional clients who sought access to digital assets.
This development by Nasdaq is a significant blow to the institutional adoption of cryptocurrencies in the United States. It comes amidst a regulatory environment that seems to be increasingly targeting crypto firms and related services. Nasdaq’s decision to back out of the crypto custody service reflects the challenges and uncertainties faced by financial institutions in entering the crypto space.
In October 2022, America’s oldest bank, BNY Mellon became the first mainstream lender to introduce crypto services, providing select clients access to Bitcoin and Ethereum alongside traditional products on the same platform. Shortly after, Fidelity announced its plan to offer institutional users access to Ethereum through its digital asset subsidiary.
The crypto industry had high hopes for Nasdaq’s entry into custody services, as it could have filled the void left by the bankruptcy of FTX. With Nasdaq’s withdrawal, there are concerns about how the crypto sector will continue to mature and grow, especially with more financial institutions expected to enter the space.
The adoption of digital assets continues to gain momentum globally, but Nasdaq’s cautious retreat may create uncertainty among potential institutional investors. The impact of this decision on the crypto sector is yet to be fully understood, as it might lead other institutions to reconsider their own plans for crypto-related services.