9/20/22, 2:02 PM Nasdaq Makes First Big Crypto Push to Lure Institutional Clients - Bloomberg

Technology

Nasdaq Makes First Big Crypto Push

to Lure Institutional Clients
Firm hired Gemini alum Ira Auerbach to run digital division
Plans to offer crypto custody and expand to other services

By Katherine Doherty and Yueqi Yang

September 20, 2022 at 1:30 PM GMT+2

Nasdaq Inc. is making its first major push into crypto, as the second-largest stock exchange prepares
to capitalize on increasing appetite for digital currencies among big-money investors. 

A new group dedicated to digital assets will initially offer custody services for Bitcoin and Ether to
institutional investors, according to Tal Cohen, the company’s executive vice president and head of
North American markets. Nasdaq hired Ira Auerbach, who ran prime broker services at crypto
exchange Gemini, to head up the new Nasdaq Digital Assets unit.  

Wall Street’s biggest firms are deepening their involvement as institutional investor interest persists
despite a downturn that cost jobs and depressed prices. BlackRock Inc. partnered with Coinbase
Global Inc. to make it easier for investors to trade Bitcoin and shortly after offered its first investment
product directly in the token. EDX Markets, a new exchange backed by Charles Schwab Corp., Fidelity
Digital Assets, Citadel Securities and Virtu Financial among others, will start trading some tokens this
year.

“We believe this next wave of the revolution is going to be driven by mass institutional adoption,”
Auerbach said in an interview. “I can think of no better place to bring that trust and brand to the
market than Nasdaq.”

Read More: Citadel Securities-Backed Crypto Exchange Is Poised for Kickoff

As a custodian of digital assets -- a step which is pending approval from the New York Department of
Financial Services -- Nasdaq would be competing with crypto firms such as Coinbase, Anchorage
Digital and BitGo. A small number of financial firms, including BNY Mellon and State Street, also
provide crypto custody for institutions, although a recent Securities and Exchange Commission
accounting guideline has made holding tokens on behalf of clients more capital intensive.

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9/20/22, 2:02 PM Nasdaq Makes First Big Crypto Push to Lure Institutional Clients - Bloomberg

“Custody is foundational,” Cohen said in an interview. “Off the back of custody, we can start to
develop other solutions, offer execution services, liquidity services, and think about how we support
new markets.” 

While Nasdaq has no immediate plans to launch a crypto exchange, it will evaluate the opportunity
based on the regulatory environment and competitive landscape, Cohen said. 

Nasdaq has been focused on diversifying its revenue sources beyond the exchange business where
shares in public companies trade. It’s made investments in software, data and other offerings. The
company also outsources its own software to crypto players, including surveillance and trading tools.
It already provides matching engine technology to crypto exchanges such as Bitstamp. 

Rules of the Road

Still, Nasdaq’s overall approach to the space has been more cautious because of questions around
regulation, Chief Executive Officer Adena Friedman said in a May Bloomberg interview. But regulation
can also provide opportunity, according to Cohen. 

“We know how to operate under regulatory regimes, and we continue to innovate under the rules of
the road,” Cohen said. “Embracing regulation as it comes is something we do. And institutions want us
to operate under that framework.”

Nasdaq is also open to exploring partnerships and deal opportunities with crypto-native firms, though
has no plans in the short-term to make an acquisition, said Auerbach, who will be senior vice
president and head of digital assets, reporting to Cohen. The team is looking to build internally and
hire externally, reaching 40 people by year-end, he said. 

Nasdaq also expanded the technology it offers crypto companies tied to protection and anti-crime
software including through the company’s Verafin and Surveillance product, which can help
investigate and report instances of money laundering, fraud and manipulation for banks and trading
firms. 

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