It might be time for the Big Kahuna to enter the marketplace.
Last week, Nasdaq’s Chief Executive Officer Adena Friedman said during the exchange operator’ quarterly conference call that the bourse is open to the very notion of moving from its equity market roots and becoming a cryptocurrency exchange – either in whole or part. Her comments came as regulators carefully examine the sector – the currencies themselves, the exchanges and marketplaces and even how these digital assets are funded. She said the bourse could launch or migrate in part to a cryptocurrency exchange in the future as the regulatory environment evolves.
Adena Friedman, Nasdaq
Friedman, like other executives, has become keenly aware of the virtues of diversifying her exchange’s revenue stream and meeting the evolving needs of the financial marketplace. She made her comments following Nasdaq’s quarterly earnings call last week.
“Over time, if it ultimately does morph into a regulated environment, it does give us an opportunity to participate as a marketplace, but I think that is a longer road and it doesn’t have a certain path right now,” she said.
While some have likened the crypto-trading world to the Wild West in terms of risk, there are also those who see tremendous rewards as the asset class remains lightly regulated and ripe for innovation. But some are already applauding the possible entrance of a major global exchange entering the nascent world of crypto and bringing technology and prowess to the arena.
Joseph Weinberg, OECD Think Tank Special Advisor & Shyft Chairman told Traders Magazine that should Nasdaq become a crypto exchange, it would a major event.
Joseph Weinberg, Shyft Chairman
"This (Nasdaq entering the sector) could be a great thing,” Weinberg began. “Regulation, again, is a massive roadblock to something like this happening. You need to solve and create an informed model on self-regulation. By that, I mean how do you operate a bitcoin "marketplace" while at the same time enable a security token exchange”
He explained that Self-Regulatory Organizations (SROs) such take years to build from scratch and that is where Nasdaq’s experience in trading/order execution can take the crypto world to the next level in terms of confidence, technology and security.
“It's not an easy process, but the entity that cracks it unlocks the holy grail in completing the bridge between traditional and the crypto ecosystem,” Weinberg said. “There's a division right now between crypto marketplaces and security token exchanges. However, because it's all within the same asset class, a proper exchange should be both.”
Yo Kwon, Co-Founder of crypto exchange Coinsetter and CEO and Co Founder of Hosho, a blockchain security firm, was also in favor of a SRO heavyweight such as Nasdaq stepping into the crypto universe. While technically a potential competitor, Nasdaq, he said, could address the current questions surrounding crypto trading security.
"It's smart for traditional exchanges like Nasdaq to leverage knowledge from existing cryptocurrency exchanges such as Gemini,” Kwon said, referring to the recent announcement that Nasdaq is going to provide market surveillance to the Gemini Exchange, a crypto mart founded by the Winklevoss twins.
Yo Kwon, Coinsetter
“There are unique challenges from a cybersecurity perspective that need to be accounted for such as wallet management,” he continued. “Someone who has already had to deal with those challenges will put Nasdaq on a better footing before they seek professional cybersecurity consultation.”
Kwon finished: "Wallet management is highly complex when covering different coins and tokens that have a variety of capabilities and best practices available,” he explained. “Most tokens released are managed by a smart contract that may or may not be secure. Exchanges need to be wary of not only their own security practices, but the innate security of the coins and tokens themselves and their respective wallets. Many of the other aspects relating to cybersecurity of a prominent regulated exchange should already be taken care of."
