To accommodate the growing institutional interest in cryptocurrency as well as the demand for cryptocurrency services, Nasdaq plans to introduce its highly anticipated cryptocurrency custody service by the end of the second quarter.
Ira Auerbach, senior vice president and head of Nasdaq Digital Assets, stated on Friday that the exchange is “moving ahead to get all of the essential technical infrastructure and regulatory permissions in place” in an interview with Bloomberg.
Auerbach provided specifics of the application made by the worldwide exchange group to the New York Department of Financial Services for a limited-purpose trust company charter. This charter would be responsible for monitoring the new business.
The global securities marketplace is making a significant entrance into the cryptocurrency field with the launch of a new cryptocurrency custody service. This service will provide institutional investors with a risk-free option to test the waters of the digital asset business.
According to what has been reported, the corporation announced in September of the previous year that it was going to establish custody services and named Auerbach to supervise Nasdaq Digital Assets, a new subsidiary.
Interestingly, the business will initially provide custody services for digital currencies such as Bitcoin and Ether. Over time, other services, such as execution services and liquidity services, will be incorporated as part of the package.
“Custody is the most important aspect. Cohen stated that at the time that “from the back of custody, we can start to create other solutions, offer execution services, liquidity services, and think about how we support new markets.”
Institutional Interest in Crypto Remains High
This decision by Nasdaq comes at a time when established financial institutions are showing an increased interest in cryptocurrency.
In a poll conducted in October, BNY Mellon indicated that 91 percent of the bank’s institutional clients are interested in investing in digital assets, with 97 percent of those investors stating that “tokenization will change asset management” and will be “positive for the sector.”
In addition, seventy percent of the bank’s customers have indicated that they would increase their use of digital assets if services such as custody and execution were made available by recognized and reliable institutions. Another 88% of the bank’s customers reported that they are proceeding with their plans in spite of the market catastrophe that occurred in 2022.
The recent failure of three large US banks within the span of one week and the response by US authorities to avert a banking catastrophe have once again brought Bitcoin and the broader cryptocurrency market into the spotlight as a potential alternative to traditional banking systems.
An analyst at Ark Invest by the name of Yassine Elmandjra has made the claim that the recent increase is evidence of the viability of Bitcoin as a safe haven asset. In the most recent edition of the company’s weekly newsletter, he made the assertion that Bitcoin’s recent price behavior also implies that the increasing regulatory pressure had no impact on the top cryptocurrency. He wrote this.
The cryptocurrency exchanges Coinbase and Binance now have direct competitors in Nasdaq.
The move also comes at a time when some large cryptocurrency exchanges around the world, such as FTX, have shut down as a result of the recent crisis in the cryptocurrency market, and others, such as Coinbase and Binance, are facing greater governmental scrutiny.
At the beginning of this year, US authorities issued subpoenas to US hedge funds and market-making companies that dealt with Binance. The summons requested documents of the companies’ communications with the exchange.
In addition, three United States Senators, including Elizabeth Warren, Chris Van Hollen, and Roger Marshall, have recently accused Binance of being a “hotbed of criminal financial activities” and requested that the exchange “give clarity regarding potentially illegal business behavior.”
In the meantime, the Securities and Exchange Commission (SEC) has just recently issued Coinbase a so-called “Wells notice,” in which it warns the cryptocurrency exchange that it may be subject to legal action in relation to certain of the digital assets it lists, its staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet.
All of this presents an ideal opportunity for Nasdaq to enter the market and establish itself as a reliable digital asset exchange catering to trading businesses and other types of professional investors.
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