tl;dr
Prometheum has faced delays in opening its crypto custody business, citing the need to finalize technology related to its wallet system before launching. The company has received special-purpose broker dealer approval under SEC regulations and plans to provide custody for crypto securities, includin...
Prometheum, the first to secure special broker-dealer approval under SEC, faces delays in launching custodial services for institutional clients due to smart contract auditing process. The delay has sparked apprehension in the crypto sector, with the company emphasizing the importance of meeting regulatory standards. Prometheum aims to offer a one-stop shop for trading digital tokens and dealing in tokenized assets, targeting institutional and retail investors. The delay in custody operations may impact the timeline for its trading operation, originally set for the second quarter of 2024.
Prometheum has fallen several weeks behind the date it said the business would open for crypto custody, and its CEO said the company is trying to finish technology related to its wallet system before launching. The firm has said it'll begin holding crypto securities for clients before starting its trading operations. Much of the crypto sector has been apprehensive about the ribbon cutting on Prometheum's custody and trading operations, which the firm said will fully comply with U.S. Securities and Exchange Commission (SEC) demands.
Prometheum is a crypto-native startup that's the first to get a special-purpose broker dealer approval under SEC regulations and is now licensed to hold, trade and clear transactions in crypto securities. Its executives had originally said they'd have a custody operation rolling in the first quarter of this year – a date now more than five weeks past. But Kaplan said the firm is "excited to be nearing the public launch of its custodial services for institutional clients."
"Building proprietary technology subject to federal securities laws requires us to meet the high standards set by our regulators and expected by our clients," he said. "We have been finalizing a rigorous smart contract auditing process conducted by a leading auditing firm."
Every week that Prometheum delays is another week that existing businesses wait to find out whether a crypto custodian and broker dealer can hold and trade tokens by treating them – including the marquee asset of Ethereum's ether (ETH) – as securities. So far, the SEC hasn't blocked the company's progress through its chain of registrations, and SEC Chair Gary Gensler has even referred to its efforts as a sign of progress.
Prometheum, the first firm to get the special broker-dealer license, represents the contrarian view that Gensler and his agency are right, and many industry insiders and their allies among Republican lawmakers have chastised the company's executives and accused Prometheum of being an SEC pet project.
If Prometheum is correct, it could become a live demonstration of Gensler's view on cryptocurrencies as securities, which he argues belong under the jurisdiction of existing U.S. securities law and SEC oversight. Issuers of securities must be registered with the agency and submit to an array of disclosures and examinations, and the securities themselves must also be registered – requirements that many industry proponents say crypto companies and decentralized organizations would find impossible to meet.
Prometheum's leaders say they intend it to be a one-stop shop where investors – institutional and retail – will one day be able to keep their digital tokens, trade them on its alternative trading system (ATS) and deal in the future of tokenized assets. It's not yet clear who the company's first customers will be.
The company had said its trading operation – the more high-profile test of its business model – was supposed to get started as soon as this second quarter of 2024, though it's unclear whether the custody delay will push off that timeline, too.
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