Prometheum Capital Launches Controversial Ether Custody – CM

Prometheum Capital has launched its ether custody services in a soft manner, treating ether as a security under the supervision of the US SEC.

Originally planned for a full launch in the first quarter of 2024, the service started Friday at a limited group of companies. However, co-CEO Aaron Kaplan said Prometheum aims to fully launch the service in June this year, with trading services expected to launch within a quarter, Fortune said on Monday and confirmed by Cryptomode.

It eliminates a lot of the arguments that things can’t be done under existing laws. This is the first time that…a digital asset security of an investment contract has been held and handled under the securities laws.”

Aaron Kaplan to Fortune

Prometheum receives regulatory approval despite industry criticism

Prometheum received approval from the Financial Industry Regulatory Authority (FINRA) in December to offer crypto clearing and settlement services through a special broker-dealer license. The SEC granted Prometheum this license in May 2023.

Despite these approvals, Prometheum has faced criticism from the blockchain industry, which largely opposes the classification of cryptocurrencies as securities. The company believes that operating custody and trading services under separate entities with SEC and FINRA approval demonstrates that existing laws enable crypto operations.

The move comes as the SEC has consistently warned crypto exchanges against registering with the agency. Last year, the SEC charged major exchanges such as Coinbase, Binance and Kraken for allegedly operating as unregistered exchanges, brokers, dealers and clearinghouses. The launch of Prometheum could prompt the SEC to clarify its position on ether, especially since SEC Chairman Gary Gensler has suggested that ether could be considered a security. At the same time, Rostin Behnam, chairman of the Commodity Futures Trading Commission, has indicated that it could be a commodity.

Prometheum focuses on institutional customers

Prometheum’s target groups include institutional clients such as asset managers, hedge funds, banks and registered investment advisors. The company also plans to expand its services to retail customers in 2024. This expansion reflects Prometheum’s strategy to serve a broad market with its regulated crypto custody and trading services.

In March, Republican leaders of the House Financial Services Committee and House Agriculture Committee said the SEC must decide whether ether is a security before Prometheum can take it into custody. Last week, a new filing suggested that the SEC could consider ether security in upcoming decisions on spot Ethereum ETFs. Additionally, the SEC issued a Wells Notice against Ethereum ecosystem developer Consensys in April, demonstrating ongoing scrutiny.