Nasdaq halts its crypto custody services launch

Nasdaq halts its crypto custody services launch

Time Stamp: July 28, 2023 2:00 AM
  • Nasdaq, a global securities marketplace, is an international stock market index with a significant influence on the world’s financial system.
  • In 2022, Nasdaq officially unveiled plans of developing crypto custody services to stabilize the industry.
  • CEO Friedman announced that the global security marketplace would stop all operations to launch the crypto custody services.

With Web3’s continuous growth in different industries, various international organizations have steadily embraced this new technology. Figureheads such as Mastercard, Visa and others have collaborated with crypto-based companies within the past decade. During Q1 2023, Nasdaq, a global securities marketplace, announced the development of new crypto custody services by the end of Q2. This significant milestone would have propelled digital asset adoption throughout the globe, but the wave of misfortunes soon caught up.

The SEC’s relentless crypto lawsuits have created a negative environment for development. As a result, Nasdaq has redacted its statements and has halted the production of its crypto custody service. It might be high time to acknowledge the threat the SEC poses to the entire web3 ecosystem.

Nasdaq ventures into the crypto industry

In the past decade, digital asset adoption has taken root in several industries. Despite its recent reputation from the FTX crash, digital asset adoption stems beyond the market. Governments and enterprises have each looked into developing their version of Digital assets. This led to an increase in native cryptocurrencies and talk of more CBDCs shortly. Despite this, one sector has had a mixed reputation with the industry; the stock market. 

Nasdaq, a global securities marketplace, is an international stock market index with a significant influence on the world’s financial system. It has over 1450 stocks representing the NASDAQ Global Market. Today, it is the most active stock trading venue in the US by volume and second on the list of stock exchanges by market capitalization of shares traded. Thus when this global securities marketplace announced its debut within the crypto market, the entire industry gained a glimmer of hope.

Also, Read The recent crypto slump and the tough lessons on custody and control.

In an interview with Bloomberg, Nasdaq officially unveiled plans of developing crypto custody services to stabilize the industry. The global securities marketplaces applied for a limited-purpose trust company charter from the New York Department of Finacial Services.

Nasdaq-global-stock-exchange

Nasdaq is an international stock market index with a significant influence on the world’s financial system.[Photo/CNN]

Nasdaq’s senior vice president and head of Nasdaq Digital Assets, Ira Auerbach stated that this new group would oversee the entire operations. They further explained that to avoid any illegalities, the group would commit its efforts to ensure it acquires the necessary regulatory approvals. 

Since its founding, this was Nasdaq’s first venture into the market, further elaborating the gravity of this step. To ensure smooth operations, its digital asset division intended to safeguard Bitcoin and Ether with pans that would build a broader set of services for them. According to Auerbach, this would include the exception for financial institutions.

Nasdaq initially mentioned the possibility in September 2022 after a financial gap developed through bankrupt crypto companies. The fall of the FTX company only clarified their assumption giving the green light to unveil its cry[to custody services. The global security marketplaces joined BNY Mellon and Fidelity as part of other financial firms offering crypto safekeeping. 

The entire web3 ecosystem gained a glimmer of hope with this announcement. The sheer influence Nasdaq has on the stock market could be enough to revive the market. Unfortunately, its dreams of improving digital asset adoption soon come crashing down. The SEC has launched multiple efforts to control the crypto market, making the industry unfavourable to growth and profit.

Nasdaq halt its operation due to the SEC

Since the start of 2023, the SEC has increased its efforts to safeguard its citizens from another crypto crash. This led to an intense crypto crackdown on the entire web ecosystem. The effects of the FTX cash significantly highlighted the potential;l dangers of digital asset adoption.

The SEC initiated a crypto hunt on exchanges that did not adhere to existing crypto regulations. Unfortunately, what started as a means of protecting users soon turned into a means of control. Throughout 2023, SEC has targeted small and large cryptocurrencies.

Currently, the SEC has challenged all three top crypto exchanges causing immense damage to the web3 ecosystem. As a result, the affected and unaffected [artists have avoided establishing a base in the US. In some scenarios, several crypto exchanges have shut down their operations.

This negative trend and aftereffects have unfortunately presented several problems for Nasdaq. CEO Friedman announced that the global security marketplace would stop all operations to launch the crypto custody services. He claimed, “This quarter, considering the shifting business and regulatory environment in the United States, we have decided to halt our launch of the US digital assets custodian business and our related efforts to pursue the relevant license.”

Also, Read Binance wins a court case against US SEC’s demand to shut down operations.

Given the unclear nature of crypto regulation, establishing a concrete base in serval regions has become a hindrance. Unfortunately, the SEC is not the only regulatory body weary of the rapid digital asset adoption rate. The FTX crash proved the fears of most governments, causing many to recede on their initial take on the web3 ecosystem.

The crash not only created prominent financial gaps but it is after effects significantly damaged the reputation of affiliate companies. Today, crypto exchange and fintech organizations with a previous relationship with the FTX are under intense scrutiny. In addition, they have also faced backlash from their clients. This downward trend and the crypto crackdown have made business especially hard for exchanges. 

Fortunately, Nasdaq has emphasized its intention to still monitor the market. Despite its crypto custody services facing a significant setback, the global securities marketplace still sees the potential of digital assets. Nasdaq CEO said, “We continue to build and deliver technology capabilities that position Nasdaq as a leading digital assets software solutions provider to the broader global industry. This includes advancing our custody solution as a technology platform to serve the broader, global digital assets marketplace.“

Conclusion

The current state of the web3 ecosystem has given mixed signals to individual users and organizations. The Nasdaq halting its operations in the market is no surprise.

Multiple collaborations within the crypt market have taken significant damage. In some instances, most have shut their operations amid the chaos. If the global securities marketplace manages to deploy its crypto custody service, it may change the tides. Alas, the SEC’s crypto crackdown is a significant hurdle that the entire market must phase.

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