Prometheum, HashKey and Velocity Capital today announced a tie up to distribute tokenized US stocks to international investors through HashKey’s licensed exchanges. The tokens will be minted by the DTC, the US central securities depository, whose tokenization service launches in October. Prometheum and Velocity are both US broker dealers. The news is notable for two reasons. It is one of the first international distribution plans for DTC tokenized stocks. And Prometheum has been shrouded in controversy, including over its relationship with HashKey, which the announcement does not mention.
HashKey is listed in Hong Kong (market cap US$820m) and was one of the first two firms licensed to operate a crypto exchange there. It also runs an exchange from Bermuda and holds a Dubai license. Velocity Capital’s parent is 75% owned by South Korea’s Hanwha Life. Turning to Prometheum, while Gary Gensler was SEC chair its subsidiary became the first special purpose broker dealer approved to custody digital asset securities. It went on to offer custody and trading of several mainstream cryptocurrencies, treating them as securities. That supported Gensler’s position that most crypto tokens are securities and made Prometheum deeply unpopular in the crypto industry.
Congress also questioned a Prometheum executive about Chinese affiliations, including with Wanxiang and HashKey. Senator Tommy Tuberville called for action, describing HashKey as an affiliate of Wanxiang, which he said has “deep ties to the Chinese Communist Party.” Prometheum previously had technology and services agreements with Wanxiang. HashKey bought roughly a quarter of Prometheum in 2018 and its chairman Xiao Feng appears as a Prometheum director in a January 2023 regulatory filing but not in later ones. Neither firm has disclosed whether the ownership stake remains.
To date most tokenized stocks circulating offshore are debt instruments backed one for one by the underlying shares. Holders have a claim on the token issuer rather than a stake in the company. Coinbase’s tokens are a little different, representing a beneficial interest in shares which are held at a broker via a special purpose vehicle. The DTC route is cleaner.
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