A new group dedicated to digital assets will initially offer custody services for Bitcoin and Ether to institutional investors, as representatives state. Following the trend, BlackRock partnered with Coinbase to make it easier for investors to trade Bitcoin and shortly after offered its first investment product directly in the token. EDX Markets, a new exchange, will also start trading some tokens this year.
Nasdaq is waiting for the approval from the New York Department of Financial Services to receive the status of custodian of digital assets. Once that is done it would be competing with crypto firms such as Coinbase, Anchorage Digital and BitGo. A small number of financial firms are also crypto custody for institutions, although a recent Securities and Exchange Commission accounting guideline has made holding tokens on behalf of clients more capital intensive.
While Nasdaq has no immediate plans to launch a crypto exchange, it will evaluate the opportunity based on the regulatory environment and competitive landscape, representatives said.
As recent history shows, Nasdaq has been focused on diversifying its revenue sources beyond the exchange business where shares in public companies trade. It’s made investments in software, data, and other offerings. The company also outsources its own software to crypto players, including surveillance and trading tools. It also provides matching engine technology to crypto exchanges such as Bitstamp.
Nasdaq’s Chief Executive Officer Adena Friedman says that the company’s overall approach to the space has been more cautious because of questions around regulation. But regulation can also provide opportunity, as Tal Cohen, the company’s executive vice president says. He goes on to acknowledge that Nasdaq is used to operate under regulatory regimes, and they can still try to innovate under the rules of the road. Institutions are used to operating under frameworks and they feel safer that way.
Nasdaq is also open to exploring partnerships and deal opportunities with crypto-native firms, though it has no plans in the short-term to make an acquisition. The team is looking to build internally and hire externally, reaching 40 people by year-end.
The company also expanded the technology it offers to crypto companies tied to protection and anti-crime software including through the company’s Verafin and Surveillance product, which can help investigate and report instances of money laundering, fraud and manipulation for banks and trading firms.
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