Nasdaq aims to launch its much-anticipated crypto custody service by the end of the second quarter to meet the increasing institutional interest and demand for crypto services.
In an interview with Bloomberg on Friday, Ira Auerbach, senior vice president and head of Nasdaq Digital Assets, said Nasdaq is “pushing ahead to get all the necessary technical infrastructure and regulatory approvals in place.”
Auerbach detailed that the global exchange group has applied to the New York Department of Financial Services for a limited-purpose trust company charter, which would oversee the new business.
The new crypto custody service, which will offer institutional investors a safe way to dip their toes in the digital asset industry, marks a major foray by the global securities marketplace into the crypto space.
As reported, the company said in September last year that it was looking to establish custody services and appointed Auerbach to oversee Nasdaq Digital Assets, a new division.
Notably, the unit will initially offer custody services for Bitcoin and Ether. Other services, including execution services and liquidity services, will be included over time.
“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,” Cohen said at the time.
Institutional Interest in Crypto Remains High
The move by Nasdaq comes at a time when traditional finance interest in crypto is on the rise.
In an October survey, BNY Mellon revealed that 91% of the bank’s institutional investors are interested in investing in digital assets with 97% claiming that “tokenization will revolutionize asset management” and will be “good for the industry.”
Furthermore, 70% of the bank’s clients said they would increase their digital asset activity if services like custody and execution become available from recognized, trusted institutions. Another 88% of the bank’s clients said they are moving forward with their plans despite the 2022 market crash.
The recent collapse of three major US banks in a matter of one week and an intervention by US regulators to avert a banking crisis have also once again put Bitcoin and the broader crypto market in the spotlight as an alternative banking system.
Yassine Elmandjra, an analyst at Ark Invest, has argued that the rally is a sign of Bitcoin’s value as a safe haven asset. He claimed that Bitcoin’s recent price behavior also suggests the increasing regulatory pressure had no impact on the leading cryptocurrency, he wrote in the firm’s weekly newsletter.
Nasdaq Becomes a Direct Competitor to Coinbase and Binance
The announcement also comes at a time when some major crypto exchanges in the world, including FTX, have collapsed during the recent crypto meltdown, while others like Coinbase and Binance are facing increasing regulatory scrutiny.
Earlier this year, US authorities sent subpoenas to American hedge funds and market-making companies dealing with Binance, asking for records of their communications with the exchange.
Furthermore, three US Senators, including Elizabeth Warren, Chris Van Hollen, and Roger Marshall, have recently asked Binance “to provide transparency about potentially illegal business practice,” while accusing the exchange of being a “hotbed of illegal financial activity.”
Meanwhile, the SEC has also recently sent a so-called “Wells notice” to Coinbase, threatening the crypto exchange with legal actions regarding some of its listed digital assets, its staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet.
All of this gives Nasdaq a perfect opportunity to move in and offer a trusted digital asset exchange for trading firms and other professional investors.