Nasdaq Enters Crypto Business With Focus On Security

Nasdaq is taking its first steps into security-focused crypto services, entering the business with bitcoin and ether custody products for institutional investors.

Ira Auerbach, new head of Nasdaq Digital Assets, said: “Being able to hold customer funds in a safe, secure, scalable and accessible manner is an important starting point for all future endeavors,” said the former head of the Gemini Exchange’s Crypto His Prime His Brokerage. Added.

Storing cryptocurrencies is at the heart of not only Nasdaq’s digital asset ambitions, but the industry as a whole. Customers need to place a great deal of trust in their custodians, and retail investors are skeptical about letting go of that trust. This vigilance gave rise to the phrase “not your key, not your cipher”. This means that private keys, similar to passwords for accounts holding crypto assets, never fall into the hands of intermediaries. Financial institutions are unlikely to build their own infrastructure to store assets, so they should choose partners who are ready to store institutional-scale cryptocurrency accounts.

When asked why clients choose traditional financiers over crypto-native firms for custody of their digital assets, Auerbach knows what institutional clients need in order to use financial products. The Nasdaq said it was in a unique position because of the

“We have a long history of working with these institutions, we know their pain points, and we have products built in-house to address those pain points,” said Auerbach. I’m here. “We believe we can make institutions more comfortable and lead to greater adoption of the ecosystem.”

Alongside custody services, Nasdaq is expanding its anti-financial crime technology to eliminate money laundering, fraud and market abuse of digital assets. An advantage of Nasdaq is that the company has the ability to analyze potential fraud in both traditional markets and digital assets, said Valarie, Nasdaq’s senior vice president of anti-financial crime technology. Bannert-Thurner said.

“Criminals don’t just operate on-chain,” says Bannert-Thurner. “What we’re trying to do is look at the risks and try to identify the real players who are committing fraud or manipulating the market, and it’s not limited to on-chain or off-chain. We’re saying let’s look at it holistically.”

Bannert-Thurner said the knowledge Nasdaq has taken from its anti-crime business has translated to the world of cryptocurrencies, even though the underlying technology sometimes looks different. “The actual fraud is not that different from what has happened before,” says Bannert-Thurner. “Money laundering is still money laundering, but it is done a little differently because we need to find mechanisms to do it.”

Nasdaq sells financial crime-fighting technology as a service to clients such as cryptocurrency exchanges. The new Custody product is a separate effort, but it incorporates crypto-specific financial crime prevention technology. One of these protections involves screening details of the origin and destination of digital assets. Normally, users can send cryptocurrency to any address they like without the recipient’s consent. This is the same way someone who knows where you live can send you an email without your approval. This carries the risk of a practice known as wallet spamming or “dusting”. This became popular when the addresses associated with Tornado Cash, a cryptocurrency mixer, were licensed by the US Treasury Department. Individuals who used Tornado Cash began sending small amounts of cryptocurrency to the wallets of celebrities such as Jimmy Fallon to his address to protest the sanctions. For example, the Nasdaq screening tool flags funds coming from authorized wallets.

Nasdaq’s entry into digital assets comes as other players such as Blackrock and Fidelity are building crypto support. In August, Blackrock partnered with Coinbase to offer a private trust offering bitcoin exposure for institutional investors Earlier this month, Charles Schwab backed his EDX Markets
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Corp., Fidelity Digital Assets, Citadel Securities — launched this year with plans to trade select tokens. The increase in investment in digital assets comes despite continued market volatility and a 59% year-to-date drop in the price of the top asset, Bitcoin.

“The big companies are moving in now, and many are still investigating, but there are actually a lot of companies already trying to get into this space,” says Bannert-Thurner. “Certainly, we have yet to see the full participation of the institution.”