The Financial Industry Regulatory Authority granted Prometheum Ember Capital the ability to offer clearing and settlement services in a move that is likely to rattle the crypto industry.
Prometheum, a lesser-known digital asset firm, announced on Thursday that it received the first-ever approval from FINRA to allow for digital asset securities clearing and settlement services through its special purpose broker dealer license, which it obtained this past year from the Securities and Exchange Commission.
The move will add to its ability to custody and makes Prometheum the “only viable, federally-compliant access point for crypto trading and custody in the U.S.,” the firm said in a statement.
“We really feel that this transition of crypto to federally-regulated ecosystems is a major step forward for the industry as we still need a responsible way for the American public to participate in the digital asset space,” said Aaron Kaplan, co-chief executive officer at Prometheum, in an interview with The Block.
Prometheum said it plans to begin offering custodial services to institutional clients, including asset management firms and hedge funds by the first quarter of this coming year. Institutional and retail trading will launch shortly after, Kaplan said.
A tug of war
Prometheum’s steps forward come as the SEC has consistently warned that crypto exchanges need to register with the agency. Over the past year, it’s charged Coinbase, Binance and Kraken for allegedly operating as an unregistered exchange, broker, dealer and clearinghouse. Meanwhile, crypto firms have argued that it’s not possible to register with the agency.
Prometheum itself has faced the ire of the industry, with probes coming from the Blockchain Association and Republican lawmakers. The Blockchain Association alleged that the firm had a “sweetheart deal” with the SEC in July.
“We are concerned that the Commission granted Prometheum a ‘sweetheart’ deal in exchange for support of the Commission’s policy goals, or that Prometheum is leveraging personal connections with the Commission to gain an unfair advantage in the market,” according to a letter requesting the investigation.
House Financial Services Committee Chair Patrick McHenry, R-N.C. also asked the SEC to hand over information while inquiring about documents in August related to a license issued to Prometheum.
Some Republican lawmakers, who have been critical of the SEC, say the timing of it all “raise serious questions” as they work on legislation to regulate crypto.
Keep your head down
When asked on Thursday what message Kaplan has to those who say it’s not possible to register with the SEC, he said working with the law instead of against it helps.
“By keeping your head down and working within the regulation and trying to work within the law as opposed to change the law, one can achieve success when properly registering under the securities law as evidenced by first the approval for the special purpose broker dealer and now the approval to clear and settle.”
