Nasdaq has focused on finding ways to make money outside from the exchange where shares of publicly listed companies are traded. Software, data, and other services have all been funded. The business also subcontracts its own software, which includes trading and monitoring capabilities, to bitcoin users.
As the second-largest stock exchange gears up to take advantage of big-money investors’ growing thirst for digital currencies, Nasdaq Inc. is launching its first significant foray into the cryptocurrency market.
According to Tal Cohen, the company’s senior vice president and head of North American markets, a new organization devoted to digital assets would first offer custody services for Bitcoin and Ether to institutional investors. Ira Auerbach, who oversaw prime broker services at cryptocurrency exchange Gemini, was appointed by Nasdaq to lead the new Nasdaq Digital Assets division.
The largest corporations on Wall Street are becoming more involved as institutional investor interest holds steady amid a slump that has lost jobs and driven down prices. To make it simpler for investors to trade Bitcoin, BlackRock Inc. teamed up with Coinbase Global Inc. and soon after launched its first investment product that was denominated in cryptocurrency. This year, certain tokens will be traded on EDX Markets, a new exchange supported by Charles Schwab Corp., Fidelity Digital Assets, Citadel Securities, and Virtu Financial among others.
According to Auerbach, the next phase of the revolution will be fueled by widespread institutional acceptance.
If Nasdaq became a custodian of digital assets, a proposal that is pending approval from the New York Department of Financial Services, it would face competition from cryptocurrency firms like Coinbase, Anchorage Digital, and BitGo. Despite the fact that a new Securities and Exchange Commission accounting regulation has increased the capital requirements for maintaining tokens on behalf of clients, a small number of financial institutions, such as BNY Mellon and State Street, also provide cryptocurrency custody for institutions.
Cohen stated in an interview that “custody is fundamental.” “Based on custody, we may begin to create other solutions, provide execution and liquidity services, and consider how we support new markets,” says the author.
Despite not currently having any intentions to do so, Cohen said Nasdaq will assess the possibilities in light of the legal framework and market conditions.
Nasdaq has focused on finding ways to make money outside from the exchange where shares of publicly listed companies are traded. Software, data, and other services have all been funded. The business also subcontracts its own software, which includes trading and monitoring capabilities, to bitcoin users. It already provides matching engine technology to cryptocurrency exchanges like Bitstamp.
Nevertheless, Nasdaq’s general strategy has been more conservative due to regulatory uncertainty, according to Chief Executive Officer Adena Friedman in a May Bloomberg interview. Cohen claims that regulation may also provide opportunities.
We know how to operate inside regulatory systems, and we keep innovating within the boundaries of the law, says Cohen. “When regulation is introduced, we support it. Institutions urge us to operate inside that framework as well.
According to Auerbach, who will serve as senior vice president and head of digital assets and report to Cohen, Nasdaq is also open to looking into joint ventures and other business prospects with companies that specialize in cryptocurrencies. However, it has no immediate plans to make an acquisition. To reach 40 individuals by the end of the year, he added that the team plans to grow internally and hire externally.
Through its Verafin and Surveillance products, which can assist in the investigation and reporting of instances of money laundering, fraud, and manipulation for banks and trading companies, Nasdaq has also increased the technology it provides crypto companies related to protection and anti-crime software.
