Financial technology firm tZERO Group Inc. has received approval from U.S. regulators to act as a special purpose broker-dealer for digital asset securities custody, becoming the second firm to obtain such a license.
The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) approved tZERO’s application to custody digital assets, the company announced on Tuesday.
“We are at the forefront of regulatory innovation in the U.S. as one of only two broker-dealers authorized by regulators to custody digital asset securities,” said Alan Konevsky, executive vice president and chief legal & corporate affairs officer of tZERO. Konevsky added that the firm plans to use this opportunity to show how regulatory clarity can foster innovation and commercialization across various asset types.
tZERO’s approval follows that of digital asset firm Prometheum, which was granted a similar license by the SEC last year and later by FINRA to offer clearing and settlement services for digital asset securities.
The crypto industry and the SEC have been in conflict over regulatory requirements for digital assets. The SEC has maintained that crypto exchanges must register with the agency and has taken enforcement action against firms like Coinbase, Binance, and Kraken for allegedly operating without proper registration. Crypto firms, however, argue that compliance with the current regulatory framework is unfeasible.
Prometheum, the first firm to receive the special purpose broker-dealer license, has faced scrutiny from the Blockchain Association and Republican lawmakers, who accused it of receiving a “sweetheart deal” with the SEC. Both FINRA and the SEC declined to comment on the matter.
tZERO has been quickly shoring up its offerings with more altcoins. While 2020 marked the launch of its platform and a gradual embrace of crypto products, the latest expansions have been fueled by consistent demand for more diverse options.
tZERO’s broker-dealer subsidiary, tZERO Markets, offers crypto sales, trading, electronic execution, and portfolio execution for buy- and sell-side clients. tZero’s retail brokerage service, which is also registered with the Securities and Exchange Commission (SEC), allows the firm to grab the capacity to serve individual traders instead of only accredited investors. Additionally, it provides token issuers with investment banking and placement agent services in connection with capital raising activities.
