Gensler's Regulatory Poster Child Makes First Trade After 10 Years...Market Reaction 'Chilly'

▲ Gary Gensler, Bitcoin (BTC)/AI Generated Image

Prometheum, which virtually justified the hardline regulatory stance of former U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler, executed its first cryptocurrency trade approximately 10 years after its establishment. The company, which had raised nearly $100 million yet was ridiculed for its lack of trading performance, finally launched its services, but the cryptocurrency market's reaction was chilly.

According to Decrypt on May 19 (local time), Prometheum began offering cryptocurrency trading access services last week. Currently, trading is limited to Ethereum (ETH), and co-founder and co-CEO Aaron Kaplan announced plans to introduce additional digital assets in the near future.

In an interview with Decrypt, Kaplan said, “We kept our heads down and kept moving forward.” He added, “Our goal is to be able to support broker-dealer and registered investment advisor channels, and major asset issuers, and I think there’s a significant sense of relief.” He explained that Prometheum aims to counter criticism by combining traditional investments and digital assets under a single regulatory framework.

Prometheum faced strong criticism from the cryptocurrency industry after its testimony before the U.S. Congress in 2023. Kaplan testified at the time that the SEC had clearly laid out a path for regulatory compliance, which was seen as supporting former Chairman Gensler's enforcement-centric regulatory approach. While major players like Coinbase were engaged in legal battles with regulators, Prometheum pushed forward with a business model that treated digital assets like Ethereum as securities.

However, the industry ridiculed Prometheum's lack of trading volume. Some market participants likened the company's gradual approach to a “bicycle without wheels” or a “vending machine without snacks.” Decrypt reported that Prometheum's long-awaited milestone received virtually no attention in a market where investor interest has shifted to products like Bitcoin (BTC) spot ETFs.

Kaplan sees the tokenization trend in the U.S. capital markets as an opportunity. He claimed that the launch of their clearing system allows broker-dealers to offer clients direct access to cryptocurrencies alongside traditional assets. This, he explained, bypasses the management fees and layers of abstraction associated with ETFs. Kaplan stated, “This is good for crypto,” adding, “hundreds of millions of accounts will suddenly be able to invest in crypto.”

However, the regulatory environment at the time Prometheum successfully completed its first trade had significantly changed from when the company was preparing. After former Chairman Gensler left the SEC, the SEC's lawsuit against Coinbase was officially withdrawn/dismissed, and most other crypto-related lawsuits and investigations were also concluded. Prometheum had spent years building its custody infrastructure and regulatory approvals before its first trade, receiving its first license to operate as a special purpose broker-dealer from the SEC and FINRA in 2023.

There are also evaluations that the competitiveness of the regulatory barriers Prometheum had long prepared for has weakened. Decrypt reported that, following amended SEC guidance last year, a specialized regulatory framework became optional. According to an analysis by global law firm Winston & Strawn, traditional broker-dealers can also custody digital asset securities under standard client protection rules, meaning Prometheum's special license is not strictly necessary.

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