Nasdaq Inc. is making its first big push into crypto, as the second-largest stock exchange looks to capitalize on a growing appetite for digital currencies among big-money investors.
According to Tal Cohen, the company’s executive vice president and head of North American markets, a new group dedicated to digital assets will initially offer custodial services for bitcoin and ether to institutional investors. Nasdaq hired Ira Auerbach, who runs major broker services at crypto exchange Gemini, to head the new Nasdaq Digital Assets unit.
Wall Street’s biggest firms are deepening their involvement as institutional investor interest remains buoyant despite a slowdown that has dented jobs and prices. BlackRock Inc. partnered with Coinbase Global Inc. to make it easier for investors to trade bitcoin and shortly thereafter introduced its first investment product directly in the token. EDX Markets, a new exchange backed by Charles Schwab Corp., Fidelity Digital Assets, Citadel Securities and Virtu Financial, will begin trading certain tokens this year.
“We believe this next wave of revolution will be driven by mass institutional adoption,” Auerbach said in an interview. “I can’t think of any better place to bring that trust and brand to market than on the Nasdaq.”
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As a custodian of digital assets – a move that is pending approval from the New York Department of Financial Services – Nasdaq will compete with crypto firms such as Coinbase, Anchorage Digital and BitGo. Some financial firms, including BNY Mellon and State Street, also offer crypto custody for institutions, although recent Securities and Exchange Commission accounting guidelines have made tokenizing tokens more capital intensive on behalf of clients.
“Detention is basic,” Cohen said in an interview. “Behind custody, we can start developing other solutions, providing execution services, liquidity services, and thinking about how we support new markets.”
While Nasdaq has no immediate plans to launch a crypto exchange, it will evaluate the opportunity based on the regulatory environment and competitive landscape, Cohen said.
Nasdaq is focusing on diversifying its revenue sources beyond exchange trading where shares of public companies are traded. It has invested in software, data and other offerings. The company outsources its own software, which includes monitoring and trading tools, to crypto players. It already provides matching engine technology to crypto exchanges like Bitstamp.
rules of the road
Still, Nasdaq’s overall outlook for the space has been more cautious because of questions surrounding regulation, Chief Executive Officer Adena Friedman said in a May Bloomberg interview. But regulation can also provide opportunities, according to Cohen.
“We know how to operate under regulatory regimes, and we continue to innovate under the rules of the road,” Cohen said. “Embracing regulation is something we do. And institutions want us to operate within that framework.”
Nasdaq is also open to exploring partnerships and deal opportunities with crypto-native firms, although there are no plans in the short term to make an acquisition, said Auerbach, who will be senior vice president and head of digital assets, Cohen. will report. He said the team is looking to build internally and hire externally to reach 40 people by the end of the year.
Nasdaq also expanded the technology that crypto companies offer to security and anti-crime software, including the company’s VeraFin and surveillance products, which investigate and report cases of money laundering, fraud and manipulation for banks and trading firms. can help to do so.
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