Yesterday, Nasdaq, the prominent, tech-forward U.S. stock exchange, announced it is calling off plans to launch a cryptocurrency custody service. The new business line, which would have been regulated as a special purpose trust in New York, was slated to launch in the second quarter of this year.
The news is a significant blow amid emerging signs of life in the crypto industry. Last month, an unexpected proposal from world’s largest asset manager, BlackRock, for a spotbitcoin exchangetraded fund (ETF) rekindled optimism for an asset class that was pummeled by regulators and bad news for at least the past 16 months.
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BlackRock signaled that, despite the recent, apparently-coordinated crypto clampdown by U.S. authorities (sometimes called “Choke Point 2.0”), there is still deep institutional interest in bitcoin and crypto. A flurry of other spot bitcoin ETF filings quickly followed, and the white-collar side of crypto scored a win after the U.S. Securities and Exchange Commission (SEC) missed its window to deny a different but similarly exciting type of bitcoin ETF to start trading. Markets sprang back.
On top of all that, a major concession to Ripple last week in a long simmering legal dispute with the SEC masked the Silicon Valley blockchain pioneer’s expensive technical defeat – after a district judge found that over $700 million of Ripple’s sales of XRP direct to hedge funds constituted illicit securities offerings – also buoyed sentiment. XRP short sellers were liquidated as a number of U.S. and international crypto exchanges announced plans to restart XRP trading, reversing a wave of delistings from 2020.
Nasdaq’s decision to exit the crypto custody business before it fully entered is likely not enough to derail the increasingly positive sentiment in crypto. But it is nonetheless a blow, and one that portends that much of the industry might be on its way to nowhere if the current regulatory regime stays in place.
In a quarterlyearnings call Nasdaq CEO Adena Friedman said the firm pulled out because of “the shifting business and regulatory environment in the United States,” a line that crypto has
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