America’s second-largest stock exchange, Nasdaq Inc. is ready to start capitalising on the growing institutional interest in cryptocurrencies, according to a new report.
Additionally, Nasdaq is launching its own specialised Digital Asset Unit, which will be led by Ira Auerbach, former Global Head of premium brokerage services at the US-based crypto exchange Gemini.
This significant move from Nasdaq will need to be carefully executed. While crypto custody services are extremely profitable, the custody business is both highly competitive and new guidelines are seeing it become increasingly capital intensive.
The Nasdaq’s decision to enter the crypto custody market is currently pending approval from the New York Department of Financial Services.
Once the approval goes through, Nasdaq will be competing with major crypto exchanges like Coinbase and Gemini, in addition to traditional finance firms like BNY Mellon. Additionally, a new accounting guideline from the Securities and Exchange Commission (SEC) has seen the cost of token custody increase.
Some good news for crypto
Cohen said that offering custody is a “foundational” pathway for the Nasdaq in developing future products and services centred around digital assets.
“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.”
The decision by Nasdaq to offer custodial services signals its move away from just being a platform where cryptocurrencies are traded and into being an actual service provider in the digital asset industry.
According to Auerbach, the new head of the digital asset unit and Nasdaq’s senior vice president, the company is leaving the door open for exploring partnerships and deal opportunities with crypto-native firms.
Auerbach added that while Nasdaq isn’t looking to get involved in the mergers and acquisitions business any time soon, the new unit is looking to grow to a size of 40 people by the end of this year.
While public interest in digital assets may have waned with the recent cratering of crypto prices — Bitcoin is down 72% from its all-time-high ten months ago in November last year — institutional interest in digital assets seems to be deepening.
These recent downward prices have emboldened critics of cryptocurrency, so the Nasdaq’s move here adds a further layer of legitimacy for digital assets, which may help sway stubborn institutions that still view cryptocurrency as nothing more than “magic internet money”.