Doors Open at Prometheum as Much-Disputed Firm Tests Crypto Tokens as Securities

As a seasoned crypto investor with years of navigating the turbulent waters of the digital asset market, I find the recent move by Prometheum Inc. to open its custody function for institutional clients an intriguing development. The company’s ambition to become the “PayPal of crypto” is not just bold, but it also reflects a maturing industry that’s ready to cater to larger players.

In contrast to the wider cryptocurrency sector engaging in disputes with the U.S. Securities and Exchange Commission over their classification of many tokens as securities, Prometheum is now welcoming participants for a much-anticipated trial of its approach, which assumes that the SEC’s stance is accurate.

Prometheum’s unique advantage: It was the initial crypto-focused special-purpose broker-dealer to be fully registered under SEC regulations, and it is licensed for clearing and settlement. This makes it a potential one-stop shop once its operations are fully up and running. However, until this week, it held this singular status. But tZero Group Inc. announced that they too have received the same broker-dealer license and plan to introduce products next year.

Nevertheless, many other parts of the crypto industry and notable Republican politicians argue that operating a crypto business under current securities regulations is unfeasible. As of now, Prometheum has not revealed any clients or income to counteract these criticisms.

Kaplan said there’s been “an immense amount of interest” from potential users and issuers.

In a recent interview, Aaron Kaplan, who co-leads the company with his brother, stated, “We aim to emulate PayPal within the digital asset sector.” Currently, there’s no established infrastructure that ensures compliance throughout the entire lifecycle of securities products created on blockchain networks. This is crucial as more attention is being paid to tokenizing assets, given the growing interest in this area.

At the same time as its official launch, Prometheum Capital revealed that it would incorporate tokens derived from Optimism, a layer-two Ethereum blockchain, and The Graph, a blockchain data indexing and querying protocol.

Benjamin Kaplan expressed that this is merely the start, as they plan to fill their vending machine quite generously with five eligible tokens.

The company does not yet have a public timeline for launching trading and settlement services.

As a researcher, I was curious about the specifics of any discussions between the company and regulatory bodies regarding the viability of their approach. However, when inquired by me, Kaplan chose not to disclose the details of these interactions, only confirming that Prometheum maintains regular communication with the SEC as part of routine business operations.

A representative from the Securities and Exchange Commission chose not to provide a statement regarding their perspective on Prometheum’s custodial operations.

For the company to thrive, it serves as one of several significant indicators within its industry, alongside the resolution of various court cases at the federal level. In the context of Prometheum, if the SEC approves their business model, it would demonstrate that operating a cryptocurrency platform can be done within existing regulations, as suggested by SEC Chair Gary Gensler. However, should the SEC intervene, it contradicts the long-standing position from the agency that digital asset businesses must adhere to existing laws to meet regulatory requirements.

Benjamin Kaplan stated, “We don’t intend to engage in a conflict with regulatory bodies. Instead, we choose to operate within the guidelines of federal securities laws, as we believe this provides the most effective means for safeguarding our customers.