Nasdaq is considering crypto trading as it pushes into digital assets
Nasdaq is expanding into the crypto market in a fresh sign that the world’s biggest financial institutions have not been deterred by the crash in digital asset prices.
The US exchange operator said on Tuesday that it is launching a digital asset services business that will begin with custody of crypto tokens for institutional investors. The New York company, which handles billions of dollars worth of shares every day in stocks such as Apple and Tesla, also said it is considering rolling out digital asset trading.
The push comes on the heels of other big Wall Street names also introducing crypto services, and shook off a turbulent summer for the market in which the most popular crypto tokens like bitcoin and ethereum fell in value, and the failed terra stablecoin project caused financial ruin for investors .
The size of the crypto market also fell from more than $3tn to less than $1tn, claiming once-prominent crypto firms such as Celsius and Three Arrows Capital as losses.
Asset management group BlackRock announced the launch of a spot bitcoin private trust made available to institutional clients and connected its trading network to Coinbase, the crypto exchange. Fidelity also said it would allow investors to add cryptocurrencies to their portfolios in 401(k) retirement plans.
Nasdaq said digital asset custody could lay the foundation for crypto trading services in the future.
“That’s progress that Nasdaq is seeing,” said Ira Auerbach, Nasdaq’s senior vice president and new head of the unit, called Nasdaq Digital Assets.
Auerbach, a former executive at digital exchange Gemini, added that trading is “certainly further down the line. We think custody is fundamental.”
He said market interest in the blockchain technology that underpins many digital assets had sustained market interest despite the crash. “Distributed ledger technology is transformative for business, for finance and for the entire world,” he added.
However, the market for custody of cryptoassets is growing competitively. Unlike traditional assets such as stocks or futures, the owners of the assets are just as responsible for protecting the asset, much as they would be for protecting their cash. A Nasdaq rival, Intercontinental Exchange, failed to make headway in the market with its depository venture Bakkt.
Auerbach said Nasdaq had “absolutely unmatched” institutional knowledge, and had spoken to market participants about “pain points for institutions” involved in the crypto space. “We believe we are in a unique position and have the right to win in that area both in custody and ultimately to build on top of that for other services,” he added.
Nasdaq said it would also be able to use its other capital markets services, such as monitoring, market abuse and financial crime software, which are widely used by traditional financial institutions. Last year, a record $14 billion worth of cryptocurrencies were used for illicit activity, more than double the figures from 2020, according to research firm Chainalysis.
“The problem is not going away, if anything it’s getting bigger,” said Valerie Bannert-Thurner, Nasdaq’s senior vice president of financial crime technology.
