Prometheum a crypto corporation aiming to be SEC-compliant is set to launch its custody business starting with Ether as its first digital asset.
With a custody operation that plans to begin its business by storing customers’ ETH, Prometheum is trying to break new ground as an SEC-compliant crypto corporation.
According to the company’s officials, they plan to commence their trading operations in the second quarter of 2024 after introducing a number of other tokens.
It has been revealed that Prometheum Inc., the sole crypto securities platform registered in the United States, would handle Ethereum’s ether (ETH) as its first digital asset for clients.
Despite just passing the last regulatory obstacle to launch its custody business, the company which has been the subject of criticism and debate within the industry has failed to collect any income as of yet. Aaron and Benjamin Kaplan, co-CEOs, have stated that by the end of next month, they will assume custody of clients’ ETH.
“Our goal is to support the token with the highest market capitalization and the highest liquidity,” Aaron Kaplan stated in an interview with CoinDesk. “Ethereum is first, and there should be many more thereafter.”
The Prometheum case is a high-stakes example of American cryptocurrency. Being the first firm to try to establish itself up as a special-purpose broker-dealer and crypto custodian through the Financial Industry Regulatory Authority, it has to overcome all the compliance barriers set by the U.S. Securities and Exchange Commission.
An alternative trading system, which is equivalent to a full-fledged exchange but has fewer compliance requirements, will be launched by Prometheum in the United States in the next quarter, according to the company’s officials.
By then, the firm will have shown either its executives’ assertions that the SEC can be satisfied with the way crypto is handled in the US or the doubters’ claims that the SEC’s requirements are impossible to satisfy.
Prometheum and the sector as a whole aren’t the only ones with a lot on the line; the government agency that has maintained for years that crypto businesses can “come in and register” to do business in the US is also in a precarious position. As it navigates these uncertain seas, it could potentially shed light on the SEC’s intentions regarding ETH as a security.
There may be additional challenges for Prometheum as a result of using ETH as its first asset. While the SEC has been forthright in its declaration that bitcoin (BTC) is not a security and is thus outside of its purview.
It has been less forthcoming in deciding whether Ethereum (ETH) is one of the digital tokens that ought to be regarded as securities subject to its authority. The Commodity Futures Trading Commission, its sibling body, has been quite forthright in stating that Ethereum is, in fact, a commodity.
Unlike other commodities companies, Prometheum is authorized to hold cryptocurrency assets in custody. The firm will follow the SEC’s instructions on ETH, according to Ben Kaplan.
“The CFTC is not our regulator,” he stated. “When the SEC says to us, ‘It’s not a security,’ then we’ll be troubled.”
The young company, which according to Aaron Kaplan employs around 50 people, is experiencing “immense interest” from potential clients looking for a “qualified custodian,” although it has not yet disclosed which institutions may conduct business with it. Its target market consists of banks, investment advisors, asset managers, and hedge funds.
He made the comment, “A lot of people got burned in 2022,” in reference to the chaos that ensued in the unregulated US business.
The SEC’s proposed rule to limit registered investment advisers to only allowing clients’ crypto assets to be stored with authorized custodians might be a huge boon for Prometheum.
The current leading cryptocurrency exchanges are likely not on that list, according to SEC Chair Gary Gensler, who has contended that it normally contains regulated banks and broker-dealers. Although such objectives frequently turn out to be too ambitious, the regulation is scheduled to be finalized by April on the agency’s public agenda.
Regardless of the SEC’s rule-making status, according to Aaron Kaplan, conventional financial institutions will prefer to work with a registered service that is “speaking the same compliance language.”
Since asset tokenization requires a firm that can trade, clear, and settle all in one place, he suggested that the company might also profit from this trend.
There is more than just the SEC’s silence or intervention in relation to Prometheum’s business plan’s potential consequence that the company must contend with. The sector as a whole may be influenced by current court cases that aim to clarify the definition of crypto assets.
A ruling that supports Coinbase’s claims in its recent SEC case—that secondary market cryptocurrencies do not constitute securities since they do not carry explicit contracts—may impact the kind of securities that Prometheum is able to host.