Nasdaq Inc., a household financial market infrastructure that operates three exchanges in the US, is about to take its first steps into the world of crypto, and that should do a lot to boost institutional adoption of crypto as an asset class.
The company, which forms part of the S&P 500 index and has a market capitalization of roughly $26 billion, expects to launch a digital asset custody service by the end of the first half of 2023.
According to a recent interview by the firm’s head of Digital Assets Ira Auerbach, Nasdaq Inc. is currently pursuing regulatory approvals and working on technical infrastructure.
Nasdaq Inc.’s plan is to initially offer custody services for Bitcoin and Ether, the two largest cryptocurrencies by market capitalization at present.
But the firm plans to expand its services, including the provision of execution for major financial institutions.
Nasdaq Inc.’s move comes as other major financial institutions, like BNY Mellon and Fidelity, move to offer crypto custody services.
The downfall of FTX and other major crypto custody firms like BlockFi appears to have opened a gap in the market that the likes of Nasdaq Inc. will be keen to exploit.
Nasdaq Will Spur Greater Institutional Adoption
As already noted, Nasdaq is a household name in the finance world. The fact that they are foraying into the provision of crypto custody services helps bring legitimacy to the nascent crypto asset class which many major traditional market players remain skeptical of.
By offering custody services, Nasdaq lowers the barrier to entry into the crypto world for institutional investors who want to get involved, but don’t want to have to deal with managing their crypto in their own wallet.
Taking self-custody of crypto requires an individual (or institution) to take responsibility for the management of wallet passwords, private keys and general security.
Many institutional investors who aren’t familiar with typical crypto security protocols (like safeguarding private keys and the use of hardware wallets) may prefer to leave this in the hands of an expert. And Nasdaq Inc. is looking to provide this expertise.
As Nasdaq Inc. grows its crypto services, such as execution services, it will make it easier for institutions to enter the crypto investment market. If Nasdaq handles order execution, institutions won’t have to buy or sell crypto on exchanges or transfer crypto between wallets.
While general institutional investor confidence in crypto took a big hit in 2022 amid the bear market, major companies like Nasdaq have continued moving to expand their crypto service provision, a vote of confidence in the future of crypto as an asset class.
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