The Blockchain Securities Lifecycle

How Traditional Investments are Going Digital

What are blockchain securities?The evolution of digital marketsBlockchain securities lifecycle

The Digital Evolution of Securities

Capital markets are entering a new era. Through blockchain technology, traditional securities—stocks, bonds, funds, structured products, and more—can now be issued, traded, custodied, cleared, and settled entirely on a blockchain.

Securities issued and transferred on a blockchain—digital asset securities—provides the benefits of speed, efficiency, and transparency offered by blockchain technology within a regulated framework. But realizing their full potential requires a purpose-built market infrastructure that is subject to U.S. federal securities laws and supports the entire lifecycle of these digital assets.

On-Chain Issuance: Token Creation
The lifecycle of a blockchain security begins with issuing a security directly on the blockchain, or through the process of tokenizing an existing security offering. Unlike traditional securities that rely on layers of manual recordkeeping, on-chain issuance embeds ownership and transfer rights into the asset itself through smart contracts.

Issuers can raise capital and launch securities natively on-chain through capital formation platforms like ProFinancial, Prometheum’s SEC-registered and FINRA member broker-dealer.

Key to this process is the role of a digital transfer agent. While ownership records are updated in real-time through a blockchain, Prometheum Coinery also maintains an SEC-registered, off-chain transfer agent to mitigate risk through maintaining on- and off-chain records.

Whether issuing structured products, ETFs, on-chain funds, or equities, this model confirms securities are natively digital and ready for secondary market activity.
Capital Formation: Securities Issuance and Distribution in the Digital Age
Once a blockchain security is created, capital formation and distribution occurs—investors purchase securities or shares directly from the issuer.

ProFinancial empowers issuers through Prometheum’s vertically-integrated ecosystem.
  • Direct sales to accredited investors
  • Integrated KYC/AML onboarding
  • On- and off-chain shareholder record keeping
Custody: Safeguarding Blockchain Securities
Custody is essential to maintaining investor protections and preserving confidence in markets. Blockchain securities require a federally licensed custodian to custody and transact these products subject to federal securities laws. These entities are also "Qualified Custodians,"*  subject to federal standards for blockchain securities custody.

Through Prometheum Capital, customer funds and securities are subject to SEA Rule 15c3-3 to provide the required customer protection for investors, meaning we offer:
  • Qualified Custody requirements under Federal Securities Laws
  • Segregated account management
  • Additional multi-layer security features
Secondary Market Trading: Access to Blockchain Securities through Public Markets
Blockchain securities can be traded on a secondary market similar to the NYSE, NASDAQ, or through traditional brokerages.

Prometheum ATS is a public, SEC-registered alternative trading system where blockchain securities trade under the same rules as traditional equities.
  • Fair access and transparent pricing
  • Cross-asset class marketplaces
  • Near-instantaneous trade settlement
Post-Trade Services: Clearing and Settlement on a Blockchain
Blockchain technology simplifies and accelerates post-trade processes. Clearing and settlement happen in near-real time, reducing risk and cost compared to traditional models.

All Prometheum ATS transactions clear and settle through Prometheum Capital, offering:
  • Near-instantaneous settlement and transfer of securities and funds
  • Removal of traditional intermediaries
  • Reduced counterparty and operational risk

Footnote

* "Qualified custodian" is defined by the SEC in Rule 206(4)-2 under the Investment Advisers Act of 1940 to include "A broker-dealer registered under section 15(b)(1) of the Securities Exchange Act of 1934, holding the client assets in customer accounts."

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Digital asset securities may not be suitable for all investors. Investors should note that investing or trading in digital asset securities could involve substantial risks, including no guarantee of returns, costs associated with selling and purchasing, and no assurance of liquidity, which could impact their price and the investor's ability to sell, and possible loss of principal invested. There is always the potential of losing part or all of your money when you invest in digital asset securities. 
Not SIPC or FDIC insured. For further risk disclosure information see ProATS Digital Asset Securities Risk Disclosure, Prometheum Capital LLC Digital Asset Securities Risk Disclosure, and Regulatory Considerations sections in Disclosures.

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