Prometheum, which is working to establish a security infrastructure and security blockchain approved by the Securities and Exchange Commission, has raised $ 12 million this week in funding that the company hopes will accelerate the launch of its network at the time. beginning of 2019.
Aaron Kaplan, co-CEO of Prometheum, has said he expects the SEC to approve an offer statement from Regulation A for its smart security tokens, called Ember. The approval would allow any investor to buy and sell tokens and be legally negotiable in the secondary securities market in the United States.
"We have embraced regulation from the start," said Kaplan. "We were the first company to publicly file Reg A in the United States and we expect the former to be approved."
The SEC refused to comment on the status of approval of Prometheum. Prometheum presented the Reg A bid declaration for the first time in November 2017.
The startup's efforts to establish an offer approved by regulators reflect those of financial companies such as Circle Internet Financial and Fidelity Investments, which are working to give greater legitimacy to cryptographic resources as an investment vehicle.
HashKey Digital Asset Group Limited, a holding company investing in the fintech and blockchain industries, provided a combination of money and services to Prometheum as part of the financing round. Prometheum, based in New York, has also announced a strategic partnership with the Chinese Wanxiang Blockchain Labs, one of the first supporters of Ethereum.
Ethan Silver, president of Lowenstein Sandler's broker-dealer firm, said that Prometheum is not the only one looking for Reg A approval for security tokens. He saw other documents, but none was approved.
The challenge for these companies is that the SEC must be comfortable with the protection offered by technology, said Silver.
"Many of them refer to the problem of custody" of the resource, said Silver. "It's a bit clearer when you have a certificate for security, in this context, you're talking about an alphanumeric key and I think the SEC wants to be comfortable when you say you're the security guard. SEC knows you have the physical custody of this security, or possession, and someone has not deceived you? "
The Prometheum approach to regulatory approval is part of why it does not plan to go live until the first quarter of 2019, Kaplan said.
"The SEC has been very meticulous in going through that approval process of any kind of token because historically what you saw in the blockchain space, whether it's ICOs or tokens, are people trying to beat regulation and there have been many scams, "he said.
In fact, the SEC this year has taken the habit of repressing the initial scams that offer tokens, establishing allegations with former executives that amount to millions of dollars.
Last month, the SEC resolved ICO fraud charges with two former AriseBank executives. The former CEO Jared Rice Sr. and the former COO Stanley Ford would have to pay $ 2.7 million combined in hangovers and penalties.
AriseBank was not registered with any banking or securities regulator.
The SEC stated that AriseBank has misrepresented itself as a "decentralized bank for the first time of its kind offering its own cryptocurrency to be used for a wide range of products and services for customers".
AriseBank's marketing efforts have attracted the attention of the sports world because its advertising included retired champion boxer Evander Holyfield.
Kaplan said the bad actors did not derail his efforts with the SEC. It claims that they only improved them.
"The fact that other people have been so blatant in not respecting the law makes our work a little easier because we have taken a completely opposite approach," he said.
"The SEC is not trying to stifle innovation," added Kaplan. "They're just trying to make sure that people act correctly according to US federal securities laws and that's exactly what we're doing."
Prometheus, which was founded by Wall Street lawyers, will work with Wanxiang to "establish our protocol and implement our technology," said Kaplan.
He added that the Prometheum platform will leverage blockchain technology to allow transactions executed to be written into the blockchain and that the agreement will occur on the blockchain. "The blockchain is an excellent medium and an immutable record of value transfer," said Kaplan. "In our case, this transfer of value is a security."