Prometheum, which provides the infrastructure for trading, clearing, settlement and custody of digital asset securities, plans to make a bigger push into the wealth management space and recently hired Marc Nicholsa former director of product at Arbor Digital, to help with this effort.
Nichols, a frequent speaker on digital assets and blockchain, last month left Arbor Digital, a subsidiary of Arbor Capital, an Anchorage, Alaska-based RIA firm. He will serve as Prometheum's director of RIA business development, leading the company's focus on the RIA market, where he sees great opportunity moving forward.
Prometheum co-CEO Aaron Kaplan says the firm doesn't see itself as a “crypto company,” but rather as “a marketplace infrastructure company for on-chain securities.” He argues that Prometheum has taken a different approach to creating and deploying its technology, one that they hope will remove many of the difficulties RIAs have had participating in the space historically.
Unlike many companies in the crypto space, Prometheum was not born out of Silicon Valley or venture capital; it was created in 2017 by a group of Wall Street securities lawyers. Compliance with securities laws has been its mainstay.
“The whole point was to integrate the benefits of blockchain technology, which would be the record keeping, the issuance, trading and settlement of an asset, the movement of that asset on the chain, etc., into the market infrastructure,” Kaplan said.
The company operates out of two subsidiaries: Prometheum ATS, its marketplace that allows public trading; and Prometheum Capital, which last year became the first special purpose broker/dealer approved by the SEC and FINRA allowed to store digital asset securities. Kaplan said the firm has already launched custody services for Ether (ETH), with plans to fully roll it out by the end of June.
“Prometheum Capital's custody services, starting with ETH, are tailored to meet the strict regulatory and compliance standards promulgated by federal securities laws,” Kaplan said in a statement. “Our unwavering commitment to compliance and investor protection drives this milestone, signifying substantial progress toward creating a new paradigm for blockchain-enabled market infrastructure.”
But storing crypto assets is only part of what the company hopes to do; his focus is broadly on Act '33 securities on the blockchain, which includes equities, debt, structured products, treasuries, money markets and ETFs.
The special purpose broker/dealer also licensed Prometheum to perform post-trade processing, which includes clearing and settlement, custody, financing and books and records. In April, the company Selected Broadridge Financial Solutions for back-office capabilities, including its Shadow Post Trade processing and Business Process Outsourcing.
Prometheum hopes to eventually integrate into the adviser's desktop, and Kaplan said its system speaks the same compliance language as those regulated in the securities industry.
“From a compliance perspective, it makes it much easier for entities licensed under the securities laws to communicate and feel comfortable integrating with other entities that are also licensed under the securities laws that must meet the same standards,” Kaplan said.
“We provide the infrastructure that will allow financial advisors to give their clients exposure to securities of various digital assets, whether that's what some people would call virtual currencies that we call securities worth of digital assets of the investment contract, or if it is merely a form of ' 33 Security Act issued on the chain.”