Prometheum Inc. is now in a position to test if a crypto platform that can be operated within the SEC regulations will work, according to a FINRA report outlining expanded licensing. The letter signed by co-CEO Benjamin Kaplan on Wednesday must be resubmitted in order to finalize this new status.

Prometheum is the only licensed crypto broker-dealer that has a special purpose. Now it has been approved to clear and settle securities transactions involving digital assets. Aaron Kaplan, the co-CEO of the company, said that the company will start taking custody of the assets of its institutional clients within the next three months.

Kaplan, in an interview with the SEC, said that the amount of interest shown in the possibility of the SEC approving a bitcoin exchange-traded funds spot has been a good indicator of the pent-up institutional demand.

Kaplan explained that the regulatory issues plaguing U.S. Crypto have kept some institutions away. An approved firm who speaks the same language of compliance as they “will allow these institutions to feel at ease and allow that pent-up demand to be met.”

A spokesperson for FINRA said that the self-regulatory body had no comments.

Path to compliance

Prometheum’s approval by the Financial Industry Regulatory Authority (FIRA), a standards and licensing body for the securities industry that reports to SEC, is likely to rekindle the tense debate about the company’s status. Kaplan has been a strong advocate for his company’s compliance approach, even though the crypto industry spent years explaining that it is impossible to run digital-assets platforms under current rules.

In April , U.S. exchange Coinbase claimed that the “existing SEC disclosure and registration requirements are incompatible” with digital assets.

The crypto sector faces a problem if Prometheum is successful. It will undermine everyone else’s main complaint about operating in America.

Prometheum plans to launch its digital asset custodial services for asset managers and hedge funds in the first quarter 2024. The company will make trading and clearing services available to its clients by the second quarter – initially for institutional clients, and then retail investors. Kaplan sees the platform as a possible platform for tokenizing traditional securities.

Kaplan, the CEO of Prometheum, waged a verbal war against crypto competitors as Prometheum gained prominence in this year’s compliance debate. This led to Kaplan being asked to testify before Congress . Some industry experts have predicted that Prometheum’s business model would never be realized, despite its unusual and unprecedented licensing.

Token listings

Gary Gensler, the SEC’s chairperson, has not made trading digital assets particularly clear. He insists that the same securities laws which have always been applied to investment contracts must also apply to all cryptocurrencies. judges aren’t completely in agreement with this view.

The commission is only willing to acknowledge bitcoin as a crypto-name that falls outside of its securities jurisdiction. regularly names other tokens, including bitcoins, as securities in enforcement actions. However thousands of tokens remain in regulatory limbo. Gensler, as well as his predecessor Jay Clayton, has publicly stated that they believe most cryptocurrencies to be securities.

Unregistered crypto platforms made their own choices about which tokens would not trigger the SEC securities alarm. Their decisions have often led to enforcement actions by the regulator.

Prometheum acknowledged in the past that when it received approval to be one of 70 SEC-regulated Alternative Trading Systems (ATSs), the company provided examples of securities it would support. A few of these have been also marked as such as by the agency. It said it would offer Flow (FLOW), Protocol Labs Filecoins (FIL), The Graphs (GRT), the Compounds (COMP), and CELO from the Celo platform.

Kaplan stated that “the public discussion about how almost all digital assets besides bitcoin are likely securities gives us a substantial amount of potential asset which we can support in terms of custody and trading.” Kaplan said that he would not be able to answer specifics regarding the assets.

Kaplan stated that Prometheum would make more announcements in the coming year. He declined to comment on whether or not the SEC gave the company specific advice as it approached this latest approval.

Kaplan stated that “there’s been a standard communication with our regulatory bodies.”

Unregistered Securities

Lobbyists and industry executives claim that Prometheum will only be able trade securities registered at the SEC. Since the majority of crypto assets are still outside, the company won’t have anything to trade. Prometheum, however, argues that SEC requirements such as regular disclosures are the primary responsibility of the person or company backing the asset, and not a trading platform.

Kaplan stated that while the SEC is responsible for enforcement, Prometheum is not.

Kaplan explained that an ATS has more flexibility than a national exchange with more strict regulations. He said that a registered exchange must work with the issuers in order to list their assets. However, an ATS is given a “different consideration.”

He said that an alternative trading system will support an asset depending on the needs of its customers.

Kaplan stated that Prometheum, along with its affiliates, employs about 50 people. Public records indicate eight brokers are registered and ready to trade. Kaplan explained that now the company has been licensed for custody and trading, clearing, and settling it can “service all the lifecycles of digital assets” in one place.

The company will face its true test in the months to come, as the doors are set to open very soon. Prometheum will continue to be surrounded by doubts until it can operate as a custodian platform and trading platform without the SEC telling the company to stop.

The SEC can also boost Prometheum’s relevance if it completes its recent proposal that requires registered investment advisers to only store their clients’ crypto-assets with “qualified custodians”, a term Gensler said does not include today’s cryptocurrency exchanges. The SEC is targeting the rule for April’s list of its latest rulemaking agenda. Prometheum, a crypto-native company licensed to hold digital assets could be at the top of a short list.

Gensler, the SEC chair, also gave Prometheum a shout out on Friday – but not by name. He rejected Coinbase’s request for the agency’s to create regulations that are tailored to the sector. Gensler stated that the current method is working well, and he cited the fact that a broker has already been registered as an example .

Read more: Prometheum, the crypto industry’s new favorite punching bag, asks for a chance

Nikhilesh De.