US regulators at the Financial Industry Regulatory Authority have expanded a licence previously granted to Prometheum Ember Capital, an exchange that has rattled crypto watchers by siding with industry foe Gary Gensler.
That means it can legally operate the clearing and settlement of digital asset securities. With a special purpose broker dealer, or SPBD, licence issued in May, Prometheum expects to launch its custodial platform in the first quarter.
The trading platform will go live in the second quarter.
Prometheum’s platform was previously expected to go live in 2023, CoinDesk reported in May.
The expanded licence in the US “will empower Prometheum to offer the first blockchain-enabled ecosystem capable of servicing the lifecycle of digital asset trading under the federal securities laws,” Aaron Kaplan, co-CEO of parent company Prometheum Inc., told DL News.
The SPBD licence “includes crypto but extends to any tokenised securities in the future,” he said. Kaplan expects investment firms, hedge funds, asset managers, and banks as clientele for the custodial platform.
FINRA is a private regulatory made up of finance firms overseen by the Securities and Exchange Commission, chaired by Gensler.
Prometheum’s regulatory win comes at a time when leading crypto exchanges including Coinbase, Binance and Kraken are embroiled in battles with securities regulators.
‘The efforts by many in the industry to discredit Prometheum only reaffirm that we are on the right path’
Aaron Kaplan, Prometheum
The SEC has alleged they are unlawfully handling unregistered securities, which industry leaders like Coinbase CEO Brian Armstrong has long contested. Many in the industry worry that the regulation by enforcement approach is hindering innovation and plead for new tailor-made rules.
Reverse-engineering
Kaplan said the “unregulated exchanges” have struggled this year and he expects that to continue into 2024.
“The exchanges that launched their businesses prior to entering into compliance with federal securities laws will likely have a challenging time reverse-engineering their structures to meet SEC guidelines,” he said.
Crypto watchers raised their eyebrows after Kaplan, sat alongside Circle and Ava Labs CEOs, said that “new legislation is not in the best interest of the investing public or the blockchain industry,” in a June hearing in the House Financial Services Committee.
“Legislative efforts will take years to implement while the American public will continue to operate on reckless unlawful platforms,” Kaplan said in June, adding that the SEC was the “most capable financial market regulatory agency in the world.”
The crypto industry was shocked that Prometheum sided with Gensler, a longtime crypto critic, when Kaplan countered commonly-accepted industry views that the SEC’s approach is harming the development of digital assets in the US.
A top crypto lobby group, the Blockchain Association, called for an investigation of the firm in July.
“Prometheum’s licensure comes at a time when other companies in the digital asset space have sought SPBD licences based on legitimate business models, yet those licence applications have either been denied or perpetually delayed,” the association wrote in a letter to the SEC.
This was especially suspicious when Prometheum had no working product, according to the lobby group representing more than 100 companies in the sector.
The association raised concerns that Prometheum may have been acting in concert with the SEC or abusing personal connections to gain advantage.
“We are concerned that Chair Gensler is using Prometheum and the SPBD licensure process as a means to thwart congressional efforts toward legislation by continuing to spread the false narrative that the law is already clear with regard to digital asset securities,” the letter read.
Kaplan told DL News that Prometheum’s interests are to prioritise investor protection and abiding by federal securities laws.
“The efforts by many in the industry to discredit Prometheum only reaffirm that we are on the right path,” he said.
Inbar Preiss is a Brussels-based correspondent who covers crypto regulatory policy. Have a tip? Contact the author at inbar@dlnews.com.
