Nasdaq Takes Crypto Bet With Institutional Custody Service
The new digital assets unit at Nasdaq will first provide institutional investors custody services for the top two cryptocurrencies.
The second-largest stock exchange in the world is making a wager on digital asset development in the hopes of capitalizing on institutional investors’ rising interest in the sector. The news was initially reported by Bloomberg on Tuesday afternoon.
Bloomberg reports that Nasdaq Digital Assets would first provide custody services for Bitcoin and Ethereum. Ira Auerbach, a graduate of Gemini, will lead the new division, and the corporation intends to grow the team to 40 members by the end of 2022.
The acceptance of Nasdaq’s proposal to provide digital asset custody services is now pending at the New York Department of Financial Services. If NYDFS approves the proposal, Nasdaq will see crypto-native firms such as Coinbase and Anchored Digital as competitors. It will also face competition from BNY Mellon and State Street, two titans of conventional finance that have put comparable wagers on cryptocurrencies since the technology’s 2021 surge.
Although the crypto industry had a terrible year in 2021, with Bitcoin, Ethereum, and most other major assets selling over 70% below their highs from the previous year, Wall Street has taken a greater interest in the field, claiming rising institutional demand for Bitcoin and other crypto assets. Blackrock, the world’s biggest asset management, teamed with Coinbase and created a Bitcoin trust fund last month to provide access to cryptocurrencies for its wealthiest customers.
While the price of cryptocurrencies rose in 2021, the majority of market activity that helped assets like Solana and Dogecoin climb was generated by regular investors, not institutions. Typically, institutions must invest in regulated products to get exposure to the cryptocurrency market. Similarly, they must use custody services rather than maintaining private keys or retaining currencies on exchanges, creating a business opportunity for companies like Nasdaq.