Nasdaq is going crypto

Written By Vaclav Vincalek

Nasdaq, the second largest stock exchange by market capitalization, has decided it is time to enter the crypto market. Headlines from the major financial publications were full of excitement:


What exactly is Nasdaq doing?

It is creating a custody service for institutional investors. It will provide a safe and compliant space for investors to store their crypto assets. These investors control assets worth trillions of dollars worldwide. Nasdaq is here to provide the technology and structure for the institutional investors to stay compliant with all the rules and regulations required by the financial regulators. At the beginning, Nasdaq will keep custody of bitcoin and Ether, the two most used cryptocurrencies.

Why start with custody?

Imagine that you are an investor who wants to invest millions of dollars into this new thing called cryptocurrency. You wire money to an exchange and buy 10,000 bitcoins. At the current price, you have to wire about $194 million. You buy the bitcoin and store it in a crypto wallet. And then what? Where do you store this wallet? On a drive on your computer? A USB stick? No institutional investor wants to ever directly touch it.

That's where Nasdaq's solution comes into play. Directly from the exchange, the bitcoin is transferred to the custody provider for safe keeping with all the security protocols.

Why is this a big deal?

Nasdaq is a big name. By moving into this space, it provides a guarantee for investors that their money invested in the cryptocurrencies will be safe and properly handled. Unlike other crypto exchanges which have been around for a few years, Nasdaq brings stability into the market. Once Nasdaq becomes the custody provider, it is only logical that it will eventually provide the technology to trade the cryptocurrencies. In the not-too-distant future, they will provide that for any asset which is using the blockchain technology.

You might remember my earlier post from May, 2021 - The honeymoon is over for cryptocurrency. Now for the shotgun wedding... The big money is moving in and the vision (or illusion) that cryptocurrencies will become the instrument of the anti-government, anti-regulations movement is quickly disappearing. It is a technology which will help streamline business.

And that's the recurrent pattern: when thinking about new technology, try to see where it can remove any friction in business. Then follow the money.

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PS:

Everywhere there is money to be made, illegal activities to follow. In my Bitcoin Caveat emptor article from August, 2021, I wrote about precautions you should take when buying bitcoin directly from individuals. Here is another tool for you to check if the Wallet Address is on the Sanctioned list - Sanctioned Wallet Address Validator.

Here are a few articles from the Know-It-All project for people who want to learn about Algorithms used with cryptocurrencies, What is DeFi and What is Staking.

Vaclav Vincalek
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