The transition from traditional electronic markets to digital asset securities has been a gradual but transformative process, according to Aaron Kaplan, Founder and Co-CEO of Prometheum.
With increased institutional understanding of blockchain technology and the development of regulatory frameworks, digital asset securities are no longer just a proof-of-concept—they are becoming a reality, he told Traders Magazine.
Prior to the recent change in administration, many institutions were hesitant to embrace blockchain technology. There was skepticism about its viability and a lack of regulatory clarity. However, this mindset has shifted. “What we’ve seen is that market participants now understand that blockchain technology has had time to mature,” he said. “They’re no longer just noticing it—they’re actively working to operationalize it,” he added.
Speaking on the sidelines of FIA Boca last week, Kaplan said that previously, institutions viewed blockchain through the lens of speculative cryptocurrencies rather than as an infrastructure upgrade for securities markets. Now, they recognize the potential of digital asset securities, which has led to an increased focus on adoption and implementation.
Digital asset securities offer significant advantages over traditional electronic securities. “There are advantages to almost every stakeholder in the process,” Kaplan said. “For issuers, there’s a lower cost of issuance. For buy-side and sell-side firms, there will be a wider range of tradable products. Investors benefit from improved record-keeping, and capital efficiency is significantly enhanced through instantaneous settlement.”
Some of the most impactful improvements include:
Improved Record-Keeping – Blockchain technology eliminates the need for fragmented and redundant record systems, reducing errors and streamlining operations.
Bespoke Products – The ability to tokenize assets allows for customized financial products that better suit investors’ needs.
Lower Costs – With fewer intermediaries and automated compliance mechanisms, digital asset securities reduce operational expenses.
Today’s electronic securities markets operate on outdated infrastructure, layered over decades of incremental upgrades. This results in inefficiencies, including high costs, delays, and frequent trade reconciliation issues, Kaplan said.
“Right now, market infrastructure is built on top of legacy systems, which makes it nearly impossible to overcome underlying inefficiencies. What we’re doing with digital asset securities is not just adding another layer—it’s an entirely new parallel infrastructure designed for efficiency,” he said.
One of the biggest pain points in traditional markets is trade reconciliation. Kaplan pointed out that the rate of broken trades—trades that fail to settle correctly—is much higher than most people assume.
“I originally thought the percentage of broken trades was negligible, but in reality, it’s around 2%, which in the aggregate makes a big difference. With blockchain-based settlement, you can eliminate the overwhelming majority of broken trades, reducing operational costs and human capital requirements.”
The integration of blockchain technology into securities markets streamlines settlement, custody, and compliance processes.
“Blockchain enables cryptographically enabled assets with real-time, on-chain record-keeping,” said Kaplan.
By using blockchain, regulators and market participants can enhance monitoring capabilities while reducing fraud and compliance burdens. This technological shift fundamentally improves how securities markets operate.
A major challenge in digital asset securities has been regulatory uncertainty. Some argue that entirely new regulations are needed, but Kaplan believes that existing frameworks are sufficient.
“There’s a misconception that digital asset securities require entirely new regulations. But the truth is, the regulatory framework is already in place. The SEC’s Special Purpose Broker-Dealer (SPBD) designation, introduced under the Trump administration, was a game-changer. It clarified the post-trade processes—clearing, settlement, and custody—which paved the way for public trading and liquidity.”
With infrastructure and regulations in place, institutions now have a clear path to adoption, Kaplan said.
“Historically, people were tokenizing assets without considering market liquidity. But now, with firms like Prometheum providing custody and trading solutions, there are public, liquid secondary markets coming online. That’s what will drive large-scale adoption.”
As the digital asset securities market matures, innovations in structured products and investment vehicles will drive growth.
“In the past, new market infrastructure led to innovations like ETFs,” Kaplan said. “Now, with blockchain-based securities, we’ll see even more customizable financial products tailored to investors’ needs.”
One major opportunity is in money market tokens. “Currently, money markets offer interest payouts once a day. With blockchain, you could distribute earnings on a defined interval, such as hourly. That’s a game-changer for liquidity and capital efficiency.”
“If digital asset securities save money, improve liquidity, and provide better products for investors, the transition from electronic to digital markets will be as natural as the shift from paper to electronic markets decades ago,” he concluded.
