Nasdaq, the second-largest stock exchange in the world by market capitalization, is planning to launch a crypto asset custody service by the end of Q2 2023, according to a report by The Block.
The move is part of a broader trend of traditional finance, or TradFi; firms entering the crypto space and offering institutional-grade products and services.
Bank of America (BAC), one of the largest banks in the U.S., said in a note Thursday that institutional demand is driving the development of the crypto ecosystem, despite the market correction and bankruptcies witnessed last year.
Bank of America said that institutional investors remain engaged and focused on the “disruptive nature of blockchain technology over the longer term.”
However, the bank also said that it expects crypto company collapses to slow institutional trading as they “reevaluate counterparty risk and ensure that custody, exchange and broker-dealers are separate entities or siloed.”
The bank argued that these collapses create a void in the crypto ecosystem that “trusted and experienced TradFi firms offering institutional-grade products may fill.”
BAC cited the U.S. Securities and Exchange Commission’s (SEC) Enhanced Safeguarding Rules, which could limit the ability of registered investment advisers to provide custody for clients’ tokens on most crypto-native exchanges, as a factor that will further drive TradFi institutions into the space.
“Our view is that TradFi institutions remain the counterparty of choice,”
analysts Alkesh Shah and Andrew Moss wrote.
Nasdaq is not the only TradFi firm that is expanding its crypto offerings. Other examples include Fidelity Investments, which launched a Bitcoin exchange-traded fund (ETF) application in March; Goldman Sachs, which reopened its crypto trading desk in February; and BNY Mellon, which announced plans to offer crypto custody and administration services in February.
