Nasdaq keeping distance from ICOs

New York-based exchange using blockchain but wary of cryptocurrency offerings

Adena Friedman, president and chief executive of Nasdaq, says the exchange is staying away from ICOs. Joshua Roberts / Reuters

Nasdaq chief executive  Adena Friedman said the exchange operator is keeping its distance from initial coin offerings.

“There is no standard for disclosure,” Friedman said at the annual Financial Markets Quality Conference at Georgetown University in Washington Tuesday. “There are no protections for investors. There’s no ownership.”

ICOs are a way to fundraise for new digital currencies, following in the footsteps of pioneers bitcoin and ether. Compared to highly regulated initial public offerings, where companies debut their shares on a registered stock exchange, the frontier for ICOs lacks the same stringent standards and investor protections, Friedman said.

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“I would call that a bleeding edge type of construct. Nasdaq doesn’t tend to get engaged in the bleeding edge,” she said, adding that the exchange instead prefers to stay in the realm of better vetted constructs in finance.

Startups have used ICOs to raise more than $2 billion this year, according to analysts at Autonomous Research. But regulators are urging investors to treat them with caution. The arena could be riddled with fraudsters, according to the US Securities and Exchange Commission.

“It would shock me if you don’t see pump-and-dump schemes in the initial coin offering space,” SEC Chairman Jay Clayton said last month.

While New York-based Nasdaq chooses not to experiment with the emergent form of fundraising, it is exploring uses for blockchain, the distributed ledger system underlying cryptocurrencies like bitcoin. The exchange operator uses blockchain on its Nasdaq Private Market business, and on an ad exchange that licenses its technology, called NYIAX.