Prometheum, a crypto-native startup that has received a special-purpose broker dealer approval from the US Securities and Exchange Commission (SEC), is facing delays in launching its custody and trading operations, despite assurances from the company’s co-CEO Benjamin Kaplan that it is close to launching its custodial services for institutional clients. Originally scheduled for the first quarter of 2024, the company is currently finalising a rigorous smart contract auditing process, which is reportedly the only major hurdle left before its public launch.
Prometheum is unique in the crypto industry as the first firm to receive this type of approval from the SEC, allowing it to hold, trade and clear transactions in crypto securities. However, the company has faced criticism from some industry insiders and Republican lawmakers, who accuse it of being too closely aligned with the SEC and its chair, Gary Gensler. Gensler has previously suggested that cryptocurrencies should be subject to existing securities laws, a stance that some in the crypto community dispute.
Prometheum has stated that it plans to provide custody services for ether (ETH), the second-largest cryptocurrency by market capitalisation, though it has not yet confirmed which other tokens it will support. The company’s co-founders, brothers Benjamin and Aaron Kaplan, have both taken up executive roles within the company, with Aaron scheduled to speak at the upcoming Consensus 2024 conference.
The wider crypto industry has been grappling with legal conflicts with the SEC, with numerous exchanges and other companies challenging the regulator’s position that most tokens are securities. Prometheum’s decision to treat these tokens as securities has attracted criticism from some quarters, who argue that many decentralised organisations and crypto companies would find it difficult to meet the regulatory requirements imposed by the SEC.
It remains unclear which institutions will use Prometheum’s services, although the company has stated that it expects to be used by a range of institutions, including institutional investors and traders, asset management firms, family offices, hedge funds, registered investment advisors (RIAs), banks, and financial institutions. It is unclear if the delay in launching the custody service will impact the planned launch of its trading operation, which was initially scheduled for this second quarter of 2024.
Prometheum’s decision to focus on compliance with existing securities laws could present an opportunity for the SEC to demonstrate its view that cryptocurrencies should be subject to such regulation. This would involve issuers registering with the SEC, submitting to disclosure requirements, and registering the securities themselves. Some in the crypto industry argue that such requirements would be impractical or impossible for many crypto companies and decentralised organisations to meet.
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