Written by Hazel J. Greene, Senior Analyst

According to a recent Bloomberg report, Nasdaq, one of the leading exchange operators, has unexpectedly decided to halt the launch of its cryptocurrency custodian business in the United States. This sudden change in plans comes as Nasdaq aims to remain agile in the face of evolving business and regulatory dynamics.

Previously, Nasdaq had announced its intention to offer custody services for Bitcoin and Ether specifically targeting institutional investors. Originally scheduled to be launched by the end of the second quarter, Nasdaq has now announced that it will no longer pursue the necessary license related to this venture.

This strategic move by Nasdaq reinforces the recognition of the rapidly changing regulatory environment surrounding digital assets. By taking this step, the company aims to ensure its ability to navigate and adapt within a complex landscape that continues to evolve.

Among the primary regulatory concerns associated with the crypto market is the potential for market manipulation. The Securities and Exchange Commission (SEC) has previously expressed apprehension due to the lack of adequate oversight and regulation in the industry. This concern has led to the rejection of several Spot Bitcoin Exchange-Traded Fund (ETF) applications, primarily due to fears of market manipulation.

Despite this setback, Adena Friedman, the CEO of Nasdaq, remains optimistic about the future of the crypto industry. Friedman emphasized that Nasdaq will continue to enhance its technological capabilities to support the handling of digital assets. Moreover, the company remains committed to fostering the growth and evolution of the digital asset ecosystem.

In Friedman’s own words:

“More broadly, we remain committed to supporting the evolution of the digital assets ecosystem in a variety of ways, among them, through our ongoing engagement with regulators, the delivery of comprehensive technology solutions across the trade life cycle, and through our partnerships with potential ETF issuers to support tradable exchange-listed products.”

While Nasdaq’s decision to pause its plans for a digital-asset custody business may not directly impact the SEC’s approval of Spot Bitcoin ETF applications, it could have broader implications for crypto adoption within the financial industry.

If regulatory concerns persist as a significant barrier for established financial institutions, it may slow down their entry into the crypto market and restrict the range of options available to investors. Consequently, the SEC could become more cautious in granting approvals for Spot Bitcoin ETFs to ensure investor protection and safeguard against market manipulation.

However, it is crucial to acknowledge that Nasdaq continues to demonstrate its commitment to the growth and evolution of the crypto ecosystem through its partnerships with potential ETF issuers. Notably, the recent collaboration with BlackRock Inc. to apply for a Spot ETF that directly invests in Bitcoin exemplifies Nasdaq’s proactive efforts.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.