Adena Friedman, Nasdaq’s CEO, said on Wednesday that the company has canceled its plans to launch a crypto-custody service in the second quarter.

The operator of Nasdaq’s stock exchange announced in September 2022 that it would be putting together infrastructure and regulatory approval for a cryptocurrency custody service. The firm applied to the New York Department of Financial Services for a limited purpose trust company that would oversee the business of custody.

Friedman stated that Nasdaq had decided to stop these plans, and to cease its efforts to obtain the license required “considering the changing business and regulatory climate in the U.S.

She added that the firm would continue to support the digital asset sector in many ways, including partnerships with potential ETF issues and providing technology for cryptocurrency custody. Nasdaq is the potential listing partner for BlackRock’s spot Bitcoin ETF application. This filing was made last month and lifted the spirits of the market.

Nasdaq’s move is a major blow to the institutional adoption of cryptocurrency in the U.S. where regulators are targeting crypto firms, and services related to crypto. This has led to concerns that such firms will migrate to more welcoming jurisdictions.

The U.S. Securities and Exchange Commission, in particular for crypto custody, has placed a high barrier on publicly traded companies to participate. Staff Accounting Bulletin No. 121, a directive issued by the SEC in April 2022 on accounting matters, was published. The SEC staff informed firms that hold digital assets for customers to include their obligations on the balance sheets of the company.

Read more about Not All Crypto Custody is Created Equal – Crypto Long and Short

UPDATE (19 July, 13:25 UTC). Adds background information and Friedman’s comments.

UPDATE (19 July 15:20 UTC: Adds details to the fourth paragraph and corrects date.

UPDATE: July 19, 17:00 UTC: Added background on SAB-121, Nasdaq and BlackRock ETF proposal.

Parikshit, Nelson Wang, and Marc Hochstein edited the book.