While the U.S. crypto industry has complained loudly about the lack of regulatory clarity, one company takes a different view. Digital asset platform Promethium has taken the paradoxical view that clear legal avenues already exist for trading cryptocurrencies, a position that has angered industry insiders.
On Friday, the New York-based company put the theory to the test by launching its long-planned Ethereum custody service. This move is notable because Promethium is doing so in a way that classifies its tokens as securities under the oversight of the Securities and Exchange Commission. The introduction of this custody system appears to vindicate the position of the agency's head, Gary Gensler, who has argued that the existing regulatory regime is appropriate and effective, contradicting the position of the cryptocurrency industry as a whole.
“This eliminates a lot of arguments that you can't do things under existing law,” said Aaron Kaplan, co-CEO of Promethium, the parent company of the group launching EtherCustody. said. “This is the first time that digital asset securities in investment contracts are stored and treated under securities law.”
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Promethium, founded by brothers Aaron and Benjamin Kaplan, will burst onto the crypto scene in mid-2023 after announcing it has received its first broker-dealer license that will allow companies to store digital data. Until then, he remained relatively unknown. Asset securities.
While many in the blockchain industry argue that most cryptocurrencies should not be treated as securities under the jurisdiction of the SEC, Promethium has made a new argument. The company argued that the special purpose broker-dealer distinction and the licensing of a separate entity to operate an alternative trading platform would allow it to offer cryptocurrency trading under existing SEC regulations.
Promethium's bet is coupled with Aaron Kaplan's controversial appearance at a House Financial Services Committee hearing on digital assets, where the industry claims Promethium's approach doesn't work and won't allow it to launch or search for products. This sparked harsh criticism from leaders. client.
For months, Promethium did not reveal which crypto assets it would treat as securities and offer on its platform, until announcing in February that it would soon make Ethereum available for storage. While this launch does not constitute a complete trading service, custody is a necessary first step to facilitating trading, as customers need a place to hold the assets they buy and sell. With approval from the SEC and the Financial Industry Regulatory Authority (FINRA), an independent industry watchdog, Promethium will operate both its custodian and trading system under separate entities, making it more competitive with competitors like Coinbase. claimed to have found a path to compliance that failed.
Again, the announcement was greeted with vitriol, with cryptocurrency advocates worried that it would lead to the SEC considering Ether a security. The SEC has not yet issued such a position, but it has repeatedly telegraphed it, and it will have far-reaching implications for the SEC. sector. These concerns were further exacerbated in late April when the SEC issued a wells notice to Ethereum developer ConsenSys that seemed to confirm industry concerns.
However, the launch of Promethium's ether storage service has been delayed until Friday, beyond the March target. Mr. Kaplan said: luck Promethium, a subsidiary of Promethium, which holds a broker-dealer license, said it plans to soft launch the product with a small group of companies and fully launch its custody services by the first week of June. He said the full transaction would occur within a quarter. He declined to provide further details about the companies included in the pilot.
Promethium's start of custody marks the first test of the company's strategy after months of fears overturning the cryptocurrency industry's long-held beliefs about the possibility of trading Ether under SEC guidance.
“It took a little longer than expected,” Kaplan said. “But we didn't really have a choice to do it any other way.”
