Promethium, which remains isolated as the only US-registered crypto securities platform, has revealed that its first digital asset for customers will be Ethereum’s Ether (ETH).
The company has been the subject of industry criticism and controversy, but it has only made a profit and is not yet profitable. I just finished it recently The final regulatory hurdle to start a storage operation. However, co-CEOs Aaron and Benjamin Kaplan said they would store customers’ ETH by the end of next month.
“We want to be able to offer the largest market cap and most liquid tokens,” Aaron Kaplan said in an interview with CoinDesk. “Ethereum will be the first, and there will be many more after that.”
Promethium represents a high-stakes test case for US cryptocurrencies. The company is the first to overcome all U.S. Securities and Exchange Commission compliance hurdles to establish itself as a special purpose broker-dealer and cryptocurrency custodian through the Financial Industry Regulatory Authority. And next quarter, Promethium executives said they intend to open the door to alternative trading systems. This is a type of US trading venue that resembles a full-fledged exchange but has fewer compliance requirements.
At that point, the company must either prove management’s claims that it can handle cryptocurrencies in the U.S. in a manner that appeases securities regulators, or naysayer They claim it is impossible to meet the SEC’s expectations. The stakes are high not only for Promesium and the rest of the industry, but also for government agencies that have long insisted there is a proper way for crypto companies to “enter and register” to do business in the United States. . Prometheum has come in and registered, but it’s unclear what will happen next. And while it tests these muddy waters, it may also help establish whether the SEC intends to consider ETH a security.
Promethium’s choice of ETH as its starting asset may come with its own complexities. Unlike Bitcoin (BTC), which the SEC has openly declared is not a security and therefore not part of the SEC’s business, the commission included ETH among the digital tokens that should be considered securities under the SEC’s jurisdiction. was more cautious about whether or not .Its sister organization, the Commodity Futures Trading Commission, has confirmed that ETH It’s definitely a product.
Promethium is registered for the purpose of storing crypto assets and is not involved in the commodity business. Ben Kaplan said the company intends to do whatever the SEC says regarding ETH.
“The CFTC is not our regulator,” he said. “If the SEC says, ‘That’s not a security,’ we’re going to be in trouble.”
Aaron Kaplan said the startup, which has about 50 employees, has “significant interest” in serving as a so-called “eligible custodian,” but the names of the institutions that might operate there are unknown. Not confirmed yet. It plans to serve asset managers, hedge funds, investment advisors, banks and other financial institutions.
“A lot of people got burned in 2022,” he said, referring to the turmoil that engulfed the poorly regulated industry in the United States.
Promethium could be hit hard if the SEC implements a rule requiring registered investment advisers to only allow custody of their customers’ crypto assets. with a qualified guardian. The list typically includes registered broker-dealers and banks, but SEC Chairman Gary Gensler has said it could probably be included. Does not include current major cryptocurrency exchanges. The rules are on the agency’s public agenda to be finalized by April, but such agendas are often too ambitious.
Regardless of whether the SEC finalizes this rule, Aaron Kaplan argued that traditional financial companies will want to handle services that are properly registered and “speak the same compliance language.”
He argued that the company could also benefit from the trend, as asset tokenization requires companies that can trade, clear and settle in one place.
The outcome of Promethium’s business plan and whether the SEC remains silent or tries to intervene are not the only uncertainties facing the company. As with other industries, its future may hinge on ongoing court cases that promise answers about how cryptocurrency securities are defined.
If the court upholds Coinbase’s recent argument in its lawsuit with the SEC that there are no explicit contracts for cryptocurrencies traded in the secondary market; Not securitiessuch decisions could impact the world of securities that Promethium is able to host on its platform.