Nasdaq Suspends Crypto Custody Service Plans Amid Regulatory Concerns

In a surprising turn of events, Nasdaq, Inc. (NASDAQ:NDAQ) has reportedly decided to put its plans for a cryptocurrency custody service on hold.

According to an article published by CoinDesk a short time ago, this announcement was made by CEO Adena Friedman during her company’s Q1 2023 Earnings Conference Call.

According to the transcript (from Seeking Alpha) of the earnings call, the Nasdaq CEO’s comments regarding crypto custody were made in response to questions from Andrew Bond from Rosenblatt Securities, who had asked:

“Did you see any impact from the recent banking crisis in terms of interest from potential customers? And thinking about the broader space, there are a number of players currently there and it seems to be some commoditization in terms of pricing. So, how does Nasdaq differentiate in terms of its offering in custody? And finally, is the launch still planned for this quarter?“

Friedman replied:

“Great. Thanks, Andrew. So starting with the last question first, again, on timing. I think that the way that we’re positioning ourselves is that we want to get regulatory approval, and we’re having constructive conversations with the Department of — New York Department of Finance. And so we’re hopeful we’ll get that approval this quarter. And we want to get the product ready by the end of the quarter.

“And with that, we’re moving — I think by May, we’ll be moving into user testing on our platform. I mean, we’ll be able to show kind of an end-to-end demo in production, which I think is going to be really helpful to curating our client prospects. And so — but whether or not we launch is going to be more dependent on definitely whether or not we have regulatory approval and whether or not the product is a go. And also just making sure that we engage the clients, so that we feel really good about how we’re going to grow the business over time. And so that launch is not set in stone. It’s more a matter of making sure the other parts are ready first.

“In terms of the client engagement and the institutional interest, I do think Nasdaq has an interesting right to win here in terms of just getting engaged more generally in the crypto space as regulation starts to come into the market, and certainly, as the regulators get a lot more engaged in crypto, I think we do have an ability to come in with a fair, a resilient and a very scalable solution. Our crypto custody is actually, we would say, a real improvement in the technology. We are using MPC, but we’re also using some really interesting techniques to make it so that we don’t have this kind of hard hot cold wallet construct, but rather continuous wallet that’s available, but hypersecure.

“And I think that we feel like that will be more attractive to institutional users to make it so they don’t have a lot of their value stored in somewhere that’s really inaccessible for, let’s say, a 24-hour period. And so we do think that we have kind of a unique value proposition to offer. And we are having really great engagement with clients. But it is dynamic. I mean, it is a very dynamic environment. So we’re calibrating our expectations to that. We’re making sure that we’re being very prudent in how we’re managing our expenses in this environment. But we are quite excited about what we have to offer. So we’re excited to be able to launch it.“

Featured Image Credit: Photo / illustration by “sergeitokmakov” via Pixabay

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