Breaking news from Nasdaq, which has decided to temporarily suspend its plan to launch a crypto custody service due to regulatory complexities in the United States.
Earlier in March, the stock market operator announced its plans to develop the necessary infrastructure and obtain regulatory approval for the custody service.
However, regulatory challenges led to the decision to postpone the initiative to ensure compliance with current regulations. See below for full details.
Nasdaq’s plan for crypto custody service suspended: latest news
As anticipated, Nasdaq CEO Adena Friedman announced the withdrawal of plans to launch a crypto custody service, originally scheduled for the second quarter of this year.
In September 2022, the exchange operator had begun developing the infrastructure and seeking regulatory approval to offer the cryptocurrency custody service by submitting an application to the New York Department of Financial Services for a limited-purpose trust company that would oversee the custody business.
The decision to halt the plans was influenced by the “changing economic and regulatory environment in the United States,” Friedman said.
However, Nasdaq will continue to support the digital asset sector through partnerships with potential ETF issuers and by providing technology for cryptocurrency custody.
This move represents a blow to institutional adoption of cryptocurrencies in the United States, as regulators appear to be focusing on cryptocurrency companies and related services.
This has raised concerns about a potential exodus of these companies to more favorable jurisdictions. As we know, the US Securities and Exchange Commission has set a high bar for the involvement of publicly traded companies in cryptocurrency custody.
In April 2022, the SEC issued an accounting directive, known as Staff Accounting Bulletin No. 121, which advised companies to record obligations related to customers’ digital assets as liabilities on their balance sheets.
Will regulatory uncertainty push US cryptocurrency companies overseas?
Recently, Ripple CEO Brad Garlinghouse revealed that many crypto companies have already begun to move outside the United States.
Coinbase, for example, the largest US-based cryptocurrency exchange, is considering launching a trading desk abroad, while Circle, the issuer of the USDC stablecoin, is opening a new office in Paris, as France is considered a leader in the cryptocurrency industry.
Although the threat to leave the United States is for now mainly words and not concrete action, the debate about staying in the country is a frequent one among cryptocurrency companies.
Legal uncertainty is a major concern, with many gray areas requiring costly legal consultations.
In addition, confusion regarding the classification of cryptographic tokens as securities has frightened founders, leading some to consider avoiding token launches in the United States.
The government has imposed banking closures on crypto companies, in a situation reminiscent of the Obama-era Operation Choke Point, which denied financial services to legal but politically undesirable activities.
Meanwhile, the Securities and Exchange Commission (SEC) has taken enforcement action against major players in the industry, including Coinbase, accusing them of violating securities laws.
Hence, it is normal that this environment of uncertainty and restrictions is pushing crypto companies to consider other options abroad. We see that Antoni Trenchev, co-founder and managing partner of Nexo, a crypto lending platform, had the following to say about this:
“We had gotten to the point where keeping US customers actually created difficulties and costs that didn’t match the anticipated revenues. On the engineering side, some products couldn’t be offered in the same way in the US, so we had to rework the platform.”
In the end, the situation was “not viable,” so Nexo planned an orderly 18-month withdrawal.
Valkyrie spot Bitcoin ETF on SEC’s Nasdaq regulatory list
Valkyrie‘s proposal for a Bitcoin exchange-traded fund was recently accepted by the SEC for official review. The proposal was officially registered on 17 July, according to data from the SEC’s regulatory list at Nasdaq.
This proposal is the latest among those considered by the US SEC, following the recent submission of BlackRock‘s spot proposal for an exchange-traded fund (ETF) on 13 July.
The proposed fund, denoted “BRRR,” draws inspiration from a well-known meme in the Bitcoin community. If approved, the fund will trade under this distinctive symbol, adding a touch of humor and familiarity for Bitcoin enthusiasts.
With all eight applications entered into the Federal Register, the SEC’s approval of the spot Bitcoin ETF applications is now approaching.