Nasdaq, Inc., which operates the Nasdaq Stock Exchange, has canceled plans for a crypto asset (virtual currency) custody service that was scheduled to start in the second quarter of 2023. CEO Adena Friedman made the announcement at an earnings call on Thursday.
In September 2022, Nasdaq announced that it was preparing to develop the necessary infrastructure for crypto asset custody services and obtain regulatory approval. The company had applied to the New York Department of Financial Services (NYDFS) to create a limited-purpose trust company to oversee its custody business.
Due to changes in the business and regulatory environment
Friedman said Nasdaq has elected to suspend these plans and efforts to obtain the necessary licenses “in view of the changing business and regulatory environment in the United States.” On the other hand, he said that he aims to continue supporting the digital asset industry in various ways, such as partnering with companies that may issue ETFs (exchange-traded funds) and providing crypto-asset custody technology. Nasdaq was a potential exchange partner for the Bitcoin ETF filed last month by BlackRock, the world’s largest asset manager.
Nasdaq’s move will hurt institutional investors’ adoption of crypto assets in the United States. In the U.S., regulators are believed to be targeting cryptocurrency companies and related services, raising concerns that these companies may migrate to more tolerant countries and regions.
High hurdles for listed companies to become involved
The U.S. Securities and Exchange Commission (SEC) has set a high bar for public companies to get involved, especially when it comes to crypto custody. In an April 2022 accounting directive known as Staff Accounting Bulletin 121, the SEC staff recommended that companies that hold customer digital assets should record it as a liability on their balance sheets.
To be clear, this accounting treatment would be in conflict with every other asset that custodians safekeep. For example, State Street has over $40 trillion in customer assets under custody. Imagine them having to put those on their own balance sheet?
— Matt Walsh (@MattWalshInBos) July 17, 2023
｜Editing: Rinan Hayashi
｜Original: Nasdaq Halts Plan for Crypto Custody Service Due to US Regulatory Conditions