Nasdaq, the second largest stock market in the world behind New York Stock Exchange, has conducted a closed-door meeting to discuss various regulatory frameworks and policies surrounding the crypto and blockchain sector.
Institutionalization of Bitcoin
Earlier this week, Nasdaq invited representatives from six traditional exchanges and digital asset trading platforms including Gemini, a strictly regulated cryptocurrency trading platform based in the US operated by the Winklevoss twins, to outline policies and infrastructures that the cryptocurrency sector will need to assist cryptocurrencies in evolving into a major asset class.
Since 2017, Adena Friedman, the CEO and President of Nasdaq, has emphasized the necessity of practical regulatory frameworks to facilitate the growth of businesses within the cryptocurrency and blockchain space.
In July, Nasdaq disclosed its partnership with five cryptocurrency exchanges including Gemini and SBI Virtual Currencies, utilizing its technologies and tools to improve the internal management systems of digital asset trading platforms.
More on the matter
Earlier this year, Gemini also hired Nasdaq to conduct market surveillance on bitcoin and ether to prevent price manipulations which may impact the value of bitcoin futures on the Chicago Board Options Exchange (Cboe) and CME Group.
“I do believe that over time we’re going to find that there is real utility in cryptocurrencies,” said Friedman in an interview with Bloomberg, expressing her enthusiasm towards cryptocurrencies as a rapidly maturing asset class.
The support of Nasdaq and other major regulated financial institutions such as Goldman Sachs, JPMorgan, and Morgan Stanley will be crucial in convincing the government and financial authorities in the US that bitcoin is worthy of US markets.
This week, SEC commissioner Hester Peirce publicly stated that she dissents the decision of the SEC to reject the Winklevoss bitcoin ETF. She said:
“In addition, I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the bitcoin market. More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order.”
While the Winklevoss bitcoin ETF was rejected due to the involvement of Gemini in the process of valuing the ETF, with support from Peirce and her argument that a growing number of financial institutions have started to support cryptocurrencies as a new asset class, the probability of approval for VanEck/SolidX and Cboe bitcoin ETFs has increased substantially.
The approval of a bitcoin ETF will be a key regulatory change and an important shift in the stance of the US government in regards to digital assets. But, before the government can gain confidence in supporting a new asset class, digital assets will have to demonstrate support from commercial organizations in the traditional finance sector.
Nasdaq’s forward-thinking approach to embrace cryptocurrencies and discuss the impact future regulations could have on the long-term growth of digital assets may prove to be a monumental factor in the development of cryptocurrencies as a robust asset class.
What Happens Next?
Institutions like Nasdaq are currently preparing for the expected influx of investors into the cryptocurrency space subsequent to the approval of the first bitcoin ETF. Analysts have stated that the Cboe and VanEck/SolidX ETFs have a high probability of being approved by the SEC, and depending on the outcome, institutional investors in the US could make a move in the cryptocurrency market through trusted custodianships such as Coinbase Custody.
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