Nasdaq pauses crypto custody plans citing the ‘shifting’ regulatory climate

Nasdaq is pausing its plans to release a crypto custody business, CEO Adena Friedman said on the company’s earnings call Wednesday.

“Considering the shifting business and regulatory environment in the U.S., we’ve made the decision to halt our launch of the U.S. digital assets custodian business and our related efforts to pursue a relevant license,” she said. “However, we continue to build and deliver technology capabilities that position Nasdaq as a leading digital asset software solutions provider to the broader global industry.”

Nasdaq still provides the company listing for Coinbase and filed paperwork for recent bitcoin exchange-traded fund applications from BlackRock and others.

“More broadly, we remain committed to supporting the evolution of the digital asset 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,” Friedman added.

The exchange operator first revealed plans to develop the custody solution in September along with the formation of its crypto business, Nasdaq Digital Assets. It expected to launch in the second quarter of this year as it waited for approval from the New York Department of Financial Services.

Crypto’s custody problem is seen among institutions as the key to pushing the industry into the mainstream in a post-FTX world. Efforts have been underway this year to create new solutions that decouple the trading and custody functions of crypto exchanges.

The pause by Nasdaq comes as a minor disappointment for those who have been encouraged lately by the momentum around spot bitcoin ETF filings by BlackRock and other institutions, as well as the recent court ruling in the SEC’s lawsuit against Ripple. Investors and other market participants were hoping some of the regulatory pressure that had weighed on the industry since the start of the year had been derisked, and that allowing regulated products into the market might bring some clarity.

Meanwhile, Societe General’s crypto arm received approval Wednesday from France’s financial regulator to offer crypto services, including crypto custody. This adds to worries the U.S. could lose its crypto edge as its regulators continue to crack down on the industry while other jurisdictions embrace it.