New York-based Prometheum Ember Capital (PMC) secured regulatory approval to become the first crypto-focused company to register with the U.S. SEC and FINRA as a special-purpose broker-dealer.
Prometheum Inc. — PMC’s parent company — announced the development on May 23 and said it allows PMC to operate as a “qualified custodian” for digital assets. However, the firm will not offer services for Bitcoin (BTC) due to the limitations of the license.
Prometheum Inc. co-CEO Aaron Kaplan said:
“We expect that custodying assets in an SEC-registered broker-dealer will provide the regulatory protections needed to re-establish investor confidence, increase institutional adoption, and allow the industry to flourish.”
No Bitcoin, no trading
The approval allows PMC to custody digital assets that can be deemed securities, which currently excludes Bitcoin (BTC) and includes virtually every other cryptocurrency.
PMC did not disclose the list of assets it will support and said it will internally assess which cryptocurrencies can be deemed digital securities.
Additionally, the license also does not allow the firm to process crypto transactions via clearing and settling, so PMC cannot offer trading or exchange services.
However, Prometheum said it is confident it will secure the necessary approvals in the future and intends to pair its subsidiaries to offer a full suite of crypto services, including trading, once that happens, according to a Bloomberg report.
Path to regulatory clarity?
Prometheus’ successful registration with the SEC is an outlier in the sea of disapprovals the regulator has dished out to crypto companies and their various plans in recent years.
Many exchanges and crypto companies in the U.S. operate under state licenses due to the unclear regulatory landscape and federal regulators’ apprehensive stance toward the sector.
The SEC recently said the crypto industry does not need new rules as the current framework is sufficient to deal with them as it considers most to be securities. Meanwhile, the regulator has also admitted that Bitcoin is not a security in the past.
PMC’s license follows that sentiment by excluding Bitcoin but allowing other “digital asset securities.”
Gary DeWaal, senior counsel at Katten and CFTC enforcement lawyer, told Bloomberg News that the approval shows that there is a “path” to future clarity for the space and more approvals for companies that want to engage with digital assets that are securities under similar licensing.
However, he added that ultimate regulatory clarity can only be achieved by properly defining what can and cannot be considered a security.