Nasdaq Considering Regulated Cryptocurrency Tokens Platform Launch

Nasdaq the second-largest stock exchange in the world, by total capitalization, is exploring a possible security token platform to support regulated initial coin offerings (ICOs), according to a report published Saturday. The stock exchange is interested in developing a platform for companies to offer security token offerings (STOs) to issue tokens and raise funding, the Block reported citing an unknown source.

The report said Nasdaq was speaking with a number of firms, including blockchain startup Symbiont, to launch the STO platform which would issue tokenized securities as well as allow their trade.

ICO refers to a token offering from a company or organization in order to raise capital for a project. At the moment, they are largely unregulated and therefore put investors at risk. An STO is a token offering that is similar to an ICO but unlike ICOs, STOs are regulated. STOs are registered with the Securities and Exchange Commission and have a lot of similarities to regular shares. Security tokens are intended to be tradable assets and are issued to investors for future profits.

If Nasdaq launches the platform, it would be in direct competition with other STO companies, including Overstock’s tZERO (a blockchain subsidiary of e-commerce company Overstock), AngelList's crypto spin-off, and CoinList (provider of STO services to financial services technology companies). Regulations in the crypto ecosystem could encourage more investors to put money into such projects.

Nasdaq has always been positive about cryptocurrencies. On April 25, CEO Adena Friedman said in an interview with CNBC: "Certainly Nasdaq would consider becoming a crypto exchange over time. If we do look at it and say 'it's time, people are ready for a more regulated market,' for something that provides a fair experience for investors."

Speaking at an industry conference in June, Friedman hinted at launching STOs, saying: “If you decide you want to do an ICO in a regulated manner then we’d be happy to figure out whether there is an opportunity to work with people to do that.”

Nasdaq also drew significant attention in July after it hosted a closed-door meeting in Chicago with representatives from various cryptocurrency exchanges. According to Bloomberg, the sole purpose of this meeting was to examine how to enhance the picture of the cryptocurrency-business and to exhibit its potential in the worldwide market.

In September, it was reported the stock exchange was preparing to add tools to its Analytics Hub that would predict the price movements of crypto assets. Analytics Hub is a platform that provides the buy side with investment signals derived from structured and unstructured data.

None of these reports were confirmed by Nasdaq but an older report of Nasdaq and Chain — a company that builds cryptographic ledgers to support financial products and services — partnering was confirmed In June 2015. This collaboration was to make digital ledger technology available to private companies that issue and transfer shares on the Nasdaq Private Market (NPM).

The overall Nasdaq Composite Index closed with an increase of 2.29 percent Friday after it fell Thursday, becoming the first major U.S. stock exchange to dip into a correction, dragged down by losses across all major technology-related companies. A correction is a financial term for when an index or an individual stock falls 10 percent or more from its most recent high.