Cryptocurrency Startup Seeking SEC-Approval for Tokens Raises $12 Million in Seed Funding
Cryptocurrency project Prometheum raised $12 million in seed funding this week before the company gears up to offer a Securities and Exchange Commission (SEC)-approved security token to investors in early-2019, reported American Banker on December 21, 2018.
Seeking Regulatory Approval
Unlike most ICO projects reeling under the clutches of the SEC’s crackdown on tokens classified as securities, Prometheum’s Chief Executive Officer Aaron Kaplan expects the watchdog to approve a Regulation A offering for the company’s Ember currency, described as a “smart security” token.
If the approval is granted, investors can legally invest and trade the tokens in the U.S. securities market.
Kaplan claims Prometheum is the first crypto-venture to have filed for the Regulation A in the U.S. and anticipates an approval prior to launch. He added the firm has “embraced regulation since inception.” Interestingly, regulatory legality for the Ember tokens was first sought in November 2017, with no comments from the SEC on both the form’s status and stage of progress.
The funding round was led by Hong Kong-based Hashkey Digital Asset Group, a holding company that exclusively invests in blockchain and fintech companies and provided consulting services and capital to Prometheum as part of the investment round. The latter’s connection to China is two-fold, with Beijing-based Wanxiang Blockchain Labs listed as a strategic partner.
Kaplan, a former securities attorney on Wall Street, noted Wanxiang would work towards “establishing [Prometheum’s] protocol and implement our tech.” He added:
“The SEC is not trying to stifle innovation. They’re just trying to make sure that people act properly under the federal securities laws of the United States and that’s exactly what we’re doing.”
Crackdown Necessary to Ward off Bad Actors
Prometheum’s efforts mirror similar action taken by crypto-finance firms Circle and Fidelity Investments, which are working towards legitimizing the crypto asset class as an alternative investment apart from seeking approval for their respective stablecoin and custodial products.
The SEC has been particularly effective in its cryptocurrency crackdown in 2018, with several company shutdowns, criminal charges, and penalties meted out to individuals found in violation of the law. In December 2018, the watchdog charged Arisebank executives $2.7 million for a multi-layered fraud involving inflated claims and false promises of services.
However, Kaplan believes the crackdown is necessary as the cryptocurrency space is marred with frauds, scams, and “people trying to skirt regulation.” He added that the presence of bad actors has not derailed Prometheum’s efforts to gain approval, but only enhanced them.