A crypto-compliant U.S. infrastructure is forming at the fringes of the industry, as a watchdog supported by the Securities and Exchange Commission issues approvals to companies that are trying to adhere to securities rules.

The Financial Industry Regulatory Authority, an industry-funded SEC oversight body, announced last week that it had approved Prometheum Ember Capital LLC as its first broker-dealer to have custody rights over digital assets securities. Earlier this month, FINRA gave OTC Markets Group a thumbs up to become one of the few firms that are legally allowed to provide trading in crypto securities.

Prometheum Capital was granted broker-dealer status, a potentially important milestone, on the basis that most tokens in the United States are considered securities. Aaron Kaplan is a securities attorney and the co-CEO at Prometheum Inc. He said that the firm would show industry concerns about the lack of a U.S. compliant path are wrong.

Kaplan stated in an interview that “there is a clear way forward for crypto” in the United States. He said those who complained about the lack of clarity in regulation were “trying to fit a square peg into circle hole”.

Many in the crypto industry have accused the SEC for making impossible demands, such as requiring companies to comply with long-standing securities laws when registering exchanges or brokerages, and even the assets themselves. Gary Gensler, SEC chair, is now calling on crypto firms “to come in and register”, or else face enforcement action for securities violations.

, for example, has been warned of an enforcement action coming. The company has also pressed the agency to provide specific crypto-specific guidance or rules.

Crypto lobbyists have asked Congress to pass a bill that would create a custom-made structure for the digital asset markets in the United States. The lawmakers have not been able to pass any of the bills they have introduced. This uncertainty will continue this year.

Prometheum Capital is not only approved as a’special purpose broker-dealer’ that can take custody customer’s crypto-assets – with effect from May 17 but also as a alternative trading system (ATS), for digital asset securities. Kaplan stated that the company’s platform would go live during the third quarter.

OTC Markets has now surpassed its status as being one of the first ATSs – a type exchange that is less heavily regulated than a “national securities exchange”.

OTC Markets is a well-known name in penny stock trading and other securities outside the major exchanges. It counts itself as one of the firms that “actually try to do things within what the SEC’s put out there thus far, rather than pushing back, saying that we don’t fit under this rule,” Cass Sanford said in an interview.

Sanford stated that it would be a while before the crypto industry as a whole is able to enter this world. “There are some things that need to be worked out.”

What is in a security

Questions remain as to what assets will be available for trading, even though legal trading platforms are emerging. Gensler argues that the majority of cryptoassets are unregistered security and therefore in violation of securities law. Gensler acknowledges that bitcoin is the only crypto asset that is not a security. Its position outside securities law means it can’t be listed on a stock exchange.

Sanford stated, “We are just trying to prepare in case we get clear on what securities are and which aren’t.”

Kaplan, although he would not say which securities will be traded on the exchange of his firm, believes that his platform can handle all digital assets, including those that have requested exemptions from securities regulations. Unlike a fully-fledged stock exchange, an ATS does not work with a firm to “list” a particular security. Instead, it only connects buyers and sellers who are willing to trade assets which Prometheum Capital’s compliance department has determined to be securities.

He said this means that investors can trade a token, even if it’s created by a project that denies it to be a security.

Sanford, on the other hand, has a completely different view. He says that token backers must make public disclosures in order for them to be accepted by OTC Markets’ new ATS, which currently handles 20 crypto-linked securities publicly traded. These are currently traded through trust structures rather than directly. She has argued that tokens could qualify as Over-the-Counter Equity Securities.

Kaplan said that legacy crypto platforms will “quickly become obsolete” when they are forced to comply with U.S. securities laws.

The broker-dealer of his company will also keep custody of the customer’s assets. This could be an important point, as SEC is considering a proposal which could require investment advisers that the agency supervises to only store customers’ crypto-assets with “qualified custodians”, a term typically used for SEC-registered brokers-dealers. Prometheum could be the only broker-dealer that is regulated to provide crypto custody.

Kaplan explained that investors are seeking platforms with the right protections. They will also be attracted by the “hyper-competitive” prices his firm is offering for its services.