On May 23, 2023, Business Wire reported that Prometheum Ember Capital LLC became the first business to be approved by FINRA to operate as a special purpose broker-dealer (SPBD) for digital asset securities, which permits it to custody digital asset securities on behalf of clients. Business Wire reports that this is the first time that digital asset securities will be custodied in a FINRA member firm and SEC registered broker-dealer.
State-chartered banks and trust companies continue to worry about their qualified custodian status, particularly following the SEC’s Proposed Safeguarding Rule. Now, Prometheum can serve as a qualified custodian and will be subject to the Securities and Exchange Act 15c3-3 Customer Protection Rule.
SPBD services are still limited to securities. Wilson Sonsini reports that “SPBDs cannot custody or transact in crypto asset non-securities (such as bitcoin), or in crypto assets that are not registered or exempt from registration under the federal securities laws… prevent[ing] SPBDs from custodying or transacting in the vast majority of crypto assets.” This also reflects the SEC’s current view that most crypto assets should be treated and registered as securities.
Now that one custodian has received approval to operate as an SPBD, it will be interesting to see…
- Will other custodians soon follow suit?
- What will be the scope of digital asset securities that custodians are willing to provide custody services for?
- Will any attempt to provide other non-custodial services for digital assets that are not securities?
Link to Business Wire article. Additional reporting by Yueqi Yang and Allyson Versprille on Bloomberg and Wilson Sonsini Goodrich & Rosati on JD Supra.