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Nasdaq is preparing to launch a crypto custody solution for institutions

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(Kitco News) - The allure of the cryptocurrency market continues to attract institutional players despite the crypto winter of 2022 as the New York-based Nasdaq stock exchange has reportedly begun preparing to offer digital assets custody services to institutional clients.  

Based on a report from Bloomberg, Nasdaq has created a new group that will focus on digital assets, beginning with Bitcoin (BTC) and Ether (ETH) custody services for institutions. The New Nasdaq Digital Assets unit will be led by Ira Auerbach, the former head of prime broker services at the cryptocurrency exchange Gemini. 

Auerbach previously suggested that institutional adoption will be the next major driving force of growth in the crypto ecosystem, and the world’s second-largest stock exchange is an ideal place to help facilitate the transition. 

“We believe this next wave of the revolution is going to be driven by mass institutional adoption,” Auerbach said in an interview. “I can think of no better place to bring that trust and brand to the market than Nasdaq.”

Following approval from the New York Department of Financial Services, Nasdaq will become a custodian of digital assets and compete with crypto firms like Coinbase, Anchorage Digital and BitGo.

According to Tal Cohen, Nasdaq’s executive vice president and head of North American markets, “Custody is foundational – Off the back of custody, we can start to develop other solutions, offer execution services, liquidity services, and think about how we support new markets.” 

Cohen noted that while the firm doesn’t currently have plans to launch a crypto exchange, it remains a future possibility based on the regulatory environment and competitive landscape. Up to this point, instead of competing with firms like Coinbase in offering access to cryptos, Nasdaq has made investments in software, data, and other offerings and has outsourced its software to crypto platforms. 

These steps were taken as part of its wider effort to diversify its revenue sources beyond the exchange business where shares in public companies trade.

U.S. Treasury is asking for public input to improve its crypto regulations

Overall, Nasdaq’s approach to crypto has been more cautious due to concerns around regulation, but as regulatory clarity begins to take shape, opportunities begin to open up as well. 

“We know how to operate under regulatory regimes, and we continue to innovate under the rules of the road,” Cohen said. “Embracing regulation as it comes is something we do. And institutions want us to operate under that framework.”

Under Auerbach and Cohen, Nasdaq is sourcing both internally and externally to build a team of 40 people for the new Digital Assets unit by the end of 2022. 

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