The tech-heavy Nasdaq stock exchange is making a jump into crypto.
- The second largest stock exchange, Nasdaq, is taking its first big step into the world of cryptocurrency.
- As the demand for cryptocurrencies grows, Wall Street firms are upping their offerings in order to keep up.
- Nasdaq is creating a new group dedicated to digital assets that will offer custody services for bitcoin and ether to institutional investors, according to the company’s executive vice president Tal Cohen.
Why it’s news
Nasdaq has hired Ira Auerbach, who ran prime broker services at crypto exchange Gemini, to head up the new Nasdaq Digital Assets unit, according to Bloomberg.
“We believe this next wave of the revolution is going to be driven by mass institutional adoption,” says Auerbach. “I can think of no better place to bring that trust and brand to the market than Nasdaq.”
Nasdaq is looking to become a keeper of digital assets, although this is pending approval from the New York Department of Financial Services. By doing this, the company would be competing with crypto firms like Coinbase and BitGo.
A small number of financial firms, including BNY Mellon and State Street, also provide crypto custody for institutions, although a recent Securities and Exchange Commission accounting guideline has made holding tokens on behalf of clients more capital intensive, according to Bloomberg.
“Custody is foundational,” Cohen says. “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.”
Crypto regulation has been a conversation amongst federal agencies for years. It has been 13 years since the creation of Bitcoin, the first cryptocurrency, and it remains largely unregulated by the federal government, leaving investors without key protections from fraud and market manipulation, says The Wall Street Journal’s Paul Kiernan.
Many crypto advocates oppose the federal government taking on a regulatory role. They say regulation will stifle growth and prevent cryptos from becoming the dramatic, decentralized asset class that many hope they can become.
“We know how to operate under regulatory regimes, and we continue to innovate under the rules of the road,” Cohen said. “Embracing regulation as it comes is something we do. And institutions want us to operate under that framework.”