Nasdaq plans to launch its long-awaited cryptocurrency custodial service by the end of the second quarter to meet growing institutional interest and demand for cryptocurrency services.
In an interview with Bloomberg on Friday, Ira Auerbach, senior vice president and head of Nasdaq Digital Assets, said that Nasdaq is “working to get all the necessary technical infrastructure and regulatory approvals.”
Auerbach said the global exchange group has filed an application with the New York Department of Financial Services to be chartered as a limited-purpose trust company that will oversee the new business.
A new cryptocurrency escrow service that will offer institutional investors a secure way to dive into the digital asset industry marks the global securities market’s major foray into the crypto space.
Last September, the company reportedly said it planned to build custody services and appointed Auerbach to oversee a new Nasdaq Digital Assets unit.
Notably, the division will initially offer Bitcoin and Ether storage services. Other services, including execution services and liquidity services, will be included over time.
“Care is the basis. After custody, we can start to develop other solutions, offer execution services, liquidity services and think about how we support new markets,” Cohen said at the time.
Institutional interest in cryptocurrency remains high
Nasdaq’s move comes at a time when traditional finance’s interest in cryptocurrencies is growing.
An October survey by BNY Mellon found that 91% of the bank’s institutional investors are interested in investing in digital assets, with 97% saying that “tokenization will revolutionize asset management” and be “good for the industry.”
In addition, 70% of bank customers said they would increase the activity of their digital assets if services such as custody and execution became available from recognized, trusted institutions. Another 88% of the bank’s customers said they are moving forward with their plans despite the 2022 market crash.
The recent collapse of three major US banks within one week and the intervention of US regulators to prevent a banking crisis have also put Bitcoin and the wider cryptocurrency market back into the spotlight as an alternative banking system.
Yassin Elmanjra, an analyst at Ark Invest, argued that the growth is a sign of bitcoin’s value as a safe-haven asset. He argued that bitcoin’s recent price behavior also suggests that increased regulatory pressure has not affected the leading cryptocurrency, he wrote in the firm’s weekly newsletter.
Nasdaq becomes a direct competitor of Coinbase and Binance
The announcement also comes at a time when some of the world’s biggest cryptocurrency exchanges, including FTX , have collapsed in the recent cryptocurrency crash, and others such as Coinbase and Binance are facing increasing scrutiny from regulators.
Earlier this year, US authorities subpoenaed US hedge funds and market-making firms dealing with Binance, asking them to provide records of their communications with the exchange.
In addition, three US senators, including Elizabeth Warren, Chris Van Hollen, and Roger Marshall, recently asked Binance to “ensure transparency about potentially illegal business practices,” accusing the exchange of being a “hotbed of illegal financial activity.”
Meanwhile, the SEC also recently sent Coinbase a so-called “Wells Notice,” threatening the crypto exchange with legal action over some of its listed digital assets, its staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet.
All of this gives Nasdaq a great opportunity to transition and offer a trusted digital asset exchange for trading companies and other professional investors.
