NASDAQ Halts Crypto Custodian Plans Amid Regulatory Shift

Nasdaq, the exchange operator, has announced the suspension of its crypto custodian business launch in the United States. Initially, the company had revealed intentions to provide custody services for Bitcoin and Ether to institutional investors, with a planned launch by the end of the second quarter.

Citing a changing business and regulatory environment, Nasdaq has decided not to pursue a license for this venture.

The decision reflects the rapidly evolving landscape of crypto regulations. Nasdaq acknowledges the importance of navigating this complex terrain effectively. Market manipulation is one of the significant concerns regulators have expressed regarding the crypto market. The Securities and Exchange Commission (SEC) has rejected several Spot Bitcoin ETF applications due to fears of potential manipulation and a lack of oversight in the crypto space.

Despite this setback, Nasdaq's CEO, Adena Friedman, maintains an optimistic outlook for the crypto industry. The company will continue developing its technological capabilities for handling crypto assets and supporting the growth and evolution of the digital asset ecosystem.

Friedman stated, "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 may not directly affect the approval of Spot Bitcoin Exchange-Traded Fund (ETF) applications by the SEC, it could have wider implications for crypto adoption in the financial industry. If regulatory concerns continue to impede established financial institutions from entering the crypto market, it may slow down their participation and limit options for investors.

This could potentially lead the SEC to approach approving Spot Bitcoin ETFs with greater caution, aiming to safeguard investors and prevent market vulnerability to manipulation.

Nasdaq has been actively fostering the growth of the crypto ecosystem through various avenues, including partnering with BlackRock Inc. for a Spot ETF that invests directly in Bitcoin.