The CEO of the second-largest stock exchange by volume, the Nasdaq, has revealed it is open to incorporating cryptocurrencies if the regulatory environment becomes suitable. At the same time, bitcoin exchange Gemini has announced an agreement to use Nasdaq surveillance technology to prevent manipulative trading.
The two key revelations for Nasdaq may signify a turn in the direction of cryptocurrencies for the multibillion-dollar institution. Nasdaq interest in trading cryptocurrencies may be a significant step forward for cryptocurrency markets.
Nasdaq Would Consider Becoming a Cryptocurrency Exchange
Speaking to CNBC on Wednesday, April 25, 2018, Nasdaq CEO Adena Friedman confirmed the stock exchange would consider becoming a cryptocurrency exchange. She added that regulatory issues would need to be ironed out first:
"I believe that digital currencies will continue to persist. It's just a matter of how long it will take for that space to mature. Once you look at it and say, 'Do we want to provide a regulated market for this?' Certainly Nasdaq would consider it."
Friedman appeared bullish on cryptocurrencies, but less convinced by initial coin offerings (ICOs), agreeing with tentative indications from the Securities and Exchange Commission (SEC) that these might be classified and regulated as securities.
Nasdaq is also exploring the provision of bitcoin-based futures and is involved in a number of blockchain technology projects.
Gemini Teams up with Nasdaq to Protect Against Market Manipulation
Friedman's comments come on the same day that Nasdaq announced a partnership with US-based cryptocurrency exchange Gemini to use the former's SMARTS surveillance technology.
Nasdaq Inc. sells its SMARTS software to other market operators, mainly in the global equities and derivatives markets, and considers itself "the industry benchmark for real-time and T+1 cross-market surveillance platforms."
Nasdaq has confirmed it is also in discussions with other cryptocurrency firms regarding the provision of its technology, which monitors real-time activity and raises alerts with operators when it discovers unusual trading patterns.
The Gemini exchange was founded in 2015 by Cameron and Tyler Winklevoss, becoming the world's first licensed Ether exchange. Gemini's stated goals are to be "regulated, secure, and compliant."
"Since launch, Gemini has aggressively pursued comprehensive compliance and surveillance programs, which we believe betters our exchange and the cryptocurrency industry as a whole," said Tyler Winklevoss. "Our deployment of Nasdaq's SMARTS Market Surveillance will help ensure that Gemini is a rules-based marketplace for all market participants."
Gemini's daily auction price is used to determine the performance of bitcoin futures offered by Cboe Global Markets, making the prevention of market manipulation all the more important for Gemini.
Valerie Bannert-Thurner, senior vice president and head of Risk & Surveillance Solutions for Nasdaq, described the partnership as "a major milestone in the application of SMARTS and an important indicator of our commitment to expand the use of our market technology into non-traditional marketplaces."
Both developments may indicate a reduction in the gap between institutional trading and cryptocurrency trading, as global acceptance and adoption slowly continue.