(Bloomberg) -- A crypto startup said it has received the first special purpose broker-dealer license under US Securities and Exchange Commission guidelines that would allow it to custody digital assets securities. But there’s a catch: it can’t support Bitcoin. 

Prometheum Ember Capital, a New York-based firm founded in 2021, said the approval allows it to safekeep digital asset securities on behalf of individual and institutional clients as a qualified custodian. An SEC spokesperson declined to comment. The firm views it as a major step toward building out the corporate structure and licenses to ultimately enable its parent, Prometheum Inc., to provide crypto trading for customers. 

The license approval could be viewed as a sign that registration as a crypto business with US regulators is possible. SEC Chair Gary Gensler has long said most digital assets are securities and that firms offering them to US customers need to come in and register. Many crypto firms, however, have pushed back on that narrative, saying the existing rules aren’t workable and that Congress should act to pass new legislation. 

“The whole thesis of the company is that digital assets are securities, and the best way to regulate them is under the federal securities laws,” Aaron Kaplan, co-chief executive officer of Prometheum Inc., said in an interview. 

The SEC released a policy statement in 2020 under former Chair Jay Clayton outlining a pathway for companies engaging in crypto to register as a special purpose broker dealer. The Financial Industry Regulatory Authority, or FINRA, reviews and approves such applications. To obtain the license, firms must meet certain requirements and can only hold digital-asset securities — not traditional securities or crypto assets that aren’t securities, such as Bitcoin. 

Prometheum declined to share the list of tokens it will support, saying that it will be based on its internal determination on whether an asset is digital asset security. 

“Chairman Gensler has said that the overwhelming majority of digital assets, basically everything except for Bitcoin, is a security, and we take the same view and hope to be able to support many of those assets,” said Kaplan.

Limited pathway 

However, the firm is still limited in the products it can offer. The company hasn’t yet gained approval for clearing and settling under that broker-dealer license, meaning it can’t effectively pair it with a separate alternative trading systems license to allow customers to trade digital assets. 

Prometheum Ember anticipates receiving additional approval to clear and settle transactions in the near future, a company spokesperson said. It also has an entity with a license for alternative trading system. The eventual goal is that Prometheum’s subsidiaries will be able to provide crypto trading for customers. 

Some legal experts say that the first approval of this license marks an important milestone, despite the limitations of what a company can do with it for now. 

“It now opens the door for a SEC registered entity to have custody over some digital assets securities in this space, so that’s a very important statement,” said Gary DeWaal, senior counsel at Katten and a former US Commodity Futures Trading Commission enforcement lawyer. “It shows that there’s a path.”

For existing crypto exchanges, however, gaining the special broker license could be complicated. 

“The conditions in the December 2020 release are quite complex and rigid and create a very complex web of policies and procedures that need to be put into place in order to meet the requirements,” said Russell Sacks, partner at King & Spalding. “The barriers to establishing special purpose broker dealers that are designed to deal with digital assets securities are still very much present.” 

Ultimately, the most critical issue in resolving regulatory clarity is still a determination of what’s a digital asset security versus what’s not, said DeWaal. The first approval of the license is “not the be-all, end-all solution,” he said. 

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