• Prometheum wants to be a crypto company that is SEC compliant. It will start with a custody business, which intends to hold customers’ ETH.
  • The executives of the company say that the firm will launch its trading operations in the second quarter 2024.

ETH Price Index and Live Chart – CoinDesk”>(ETH).

After only recently clearing, the last regulatory hurdle for opening its custody operation, the company has not yet generated any revenue. Aaron Kaplan and Benjamin Kaplan, co-CEOs, have said that they will take custody of their customers’ ETH at the end of this month.

Aaron Kaplan said in an interview with CoinDesk that “we want to be able service the most liquid token and market cap.” “Ethereum should be the first and many others will follow.”

Prometheum is a test case for crypto in the United States. It is the first company to try to pass all of the Securities and Exchange Commission compliance hurdles in order to become a crypto custodian and special-purpose broker through the Financial Industry Regulatory Authority. Next quarter, Prometheum executives plan to launch their alternative trading system. This is a U.S. trading platform that’s similar to an exchange but has fewer compliance requirements.

The company must either prove the critics that it is impossible to meet SEC expectations, or disprove the executives who claim that crypto cannot be handled in a manner that pleases the securities regulator. Prometheum, the crypto industry and the SEC are all at risk. The government has been claiming for years that there is a way for crypto companies to “come into the U.S. and register”. Prometheum registered and it’s unclear what will happen next. While it is testing these murky waters it could also be a way to determine if the SEC will view ETH as a financial instrument.

Prometheum’s decision to use ETH as an opening asset may have its own complications. BTC Price Index and Live Chart – CoinDesk”>(BTC), which the SEC has openly declared isn’t a security and is therefore none of the agency’s business, the commission has been more coy about whether ETH is among the digital tokens that should be considered securities that fall under its jurisdiction. The Commodity Futures Trading Commission has not been shy in declaring that ETH is a commodity.

Prometheum has a license to hold crypto assets and is not in the commodities industry. Ben Kaplan stated that the firm would follow whatever the SEC says about ETH.

He said, “The CFTC does not regulate us.” When the SEC tells us that ‘it’s not a securities,’ we will be concerned.

Aaron Kaplan, the founder of the startup, has stated that it employs about 50 people. The company is experiencing “immense” interest in its services as a “qualified custodian,” but has not yet confirmed which institutions may be interested. It plans to serve asset managers, hedge fund, investment advisors, banks, and other financial institutions.

He said that “a lot of people were burned in 2022”, referring to the chaos involving the U.S. under-regulated industry.

If the SEC implements a proposed rule that requires registered investment advisers to only park their clients’ crypto assets at qualified custodians, Prometheum could get a huge boost. This list usually includes banks and registered brokers, but SEC chair Gary Gensler said it likely does not include the major crypto exchanges today. The rule will be on the agency’s agenda, which is expected to be completed by April. However, such agendas are often overly ambitious.

Aaron Kaplan argued that whether the SEC completes the rule or doesn’t, traditional financial firms would want to work with a company that is properly registered and that “speaks the same compliance language.”

He said that the company would also benefit from asset tokenization because this practice requires a firm to be able to trade, clear, and settle all at once.

Prometheum is not the only firm facing uncertainty. The SEC’s silence or intervention in the business plan of Prometheum and the outcome of the plan are also uncertain. The future of Prometheum could be determined by court cases which will provide answers to how crypto securities are defined.

If the courts agree with Coinbase’s recent arguments that cryptocurrencies traded in a secondary market do not carry explicit contracts, and isn’t a security then this could have an impact on the universe of securities Prometheum’s platform can host.

Read more: Prometheum Receives Final Regulatory Approval to Test Hand at Fully Compliant Crypto

Nick Baker is the editor.