- tZERO received a special-purpose broker-dealer license from the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) on Tuesday.
- The new digital asset security services from tZERO will be available in early 2025.
- The first firm to obtain such a license, Prometheum, gained mass attention in mid-2023 after approval by FINRA.
On Tuesday, tZERO became the US’s second fully registered crypto broker firm. Prometheum being the first. tZERO is set to launch its Series A equity, TZROP, in early 2025.
tZERO Obtains SPBD License l
tZERO operates as an alternative trading system (ATS) under the SEC and a broker-dealer under the FINRA.
It received a full US broker-dealer license from the SEC and FINRA for digital assets securities custody. The firm will launch an ATS similar to Prometheum’s.
The new license will allow tZERO to offer clearance, settlement, and custody services in a unified platform. tZERO’s approval suggests that the regulated broker-dealer licenses for crypto firms could become more common.
tZERO also plans to roll out services for securitized real estate, private securities, and sports assets.
Now, as a result of this effort and philosophy, we are at the very avant-garde of regulatory innovation in the United States as one of only two broker-dealers entrusted by the regulators to custody digital asset securities.Alan Konevsky, tZERO
Criticism Regarding the SEC’s Designation
Prometheum was founded by Aaron and Benjamin Kaplan in 2017. In 2021, the firm received the SEC’s approval to operate an alternative trading platform for digital assets securities, similar to a stock exchange.
The SEC created the Special Purpose Broker-Dealer (SPBD) license in 2020 and granted FINRA the power to approve it. However, it took over two years for the first crypto firm, Prometheum, to obtain it.
Prometheum became a special purpose broker-dealer status in May 2023 but hasn’t yet launched its full custody services. It has listed $ETH, $ARB, and $UNI as its digital assets securities.
There are doubts about the necessity of the SEC’s SPBD license assessment, as prominent firms like Robinhood haven’t obtained it. In 2023, Senator Cynthia Lummis tweeted that ‘the SEC has failed to provide a path for digital asset exchanges to register.’
While SEC Chairman Gary Gensler called for crypto exchanges to ‘come in and register,’ a former SEC commissioner Dan Gallagher said in his testimony, ‘We went through a 16-month process with the SEC staff trying to register a special purpose broker-dealer. And then we were pretty summarily told in March that that process was over and we would not see any fruits of that effort.’
The Big Picture
tZERO’s approval shows how clear regulations can promote commercialization and innovation in the digital asset industry.
Despite mixed reactions from crypto industry leaders, the developing regulatory frameworks demonstrate policymakers’ positive sentiment toward digital assets.
References
- tZERO Receives Landmark Approval To Custody Digital Securities and Support End-to-End Digital Securities Lifecycle in the United States (PR Newswire)
- The Lesson of Prometheus – A Special Purpose Broker Dealer May Cause Havoc in TradFi by Unilaterally Declaring ETH To Be A Security (katten.com)
- tZERO Digital Security Custody Broker-Dealer Approval (tzero.com)
- Robinhood to Delist Tokens Declared Securities by the SEC (The Street Roundtable)
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
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