Why a 'Decentralized' Crypto Exchange Is Seeking a Securities License

Everbloom, one of numerous so-called decentralized exchanges for cryptocurrencies that have cropped up lately, is seeking to become a licensed broker-dealer in a bid to attract institutional investors.

Revealed exclusively to CoinDesk, the startup recently registered with the U.S. Securities and Exchange Commission and submitted an application for a license from the Financial Industry Regulatory Authority, the self-regulatory organization for securities dealers.

If approved, Everbloom would be allowed to profit from services related to trading securities.

That's a must in the company's view, given the uncertain regulatory environment for tokens issued through initial coin offerings, and more specifically the possibility that many of the ERC-20 standard ethereum tokens traded on Everbloom could be deemed securities under U.S. law.

"Obtaining a broker-dealer license is a long, tedious and expensive endeavor but we believe a necessary one that will ultimately add long-term value to the company and position ourselves well against our competitors," said Everbloom chief operating officer Scott Pirrello.

Unlike traditional crypto exchanges, Everbloom doesn't deal with custody or approve trades.

After raising $2 million from investors such as Mashable co-founder Frederick Townes, Indicator Ventures, and First Star venture firm's Drew Volpe, an early ethereum investor, Everbloom quietly opened its platform for institutional traders in late July.

In the meantime, the Everbloom platform is mostly a slick interface where anyone can search multiple DEXs' order books simultaneously and trade directly using cryptocurrency wallets such as MetaMask.

Newblock Capital managing partner AJ Nary, a fund that invests in both tokens and equity, told CoinDesk that although he sees the irony in creating intermediaries for decentralized platforms, it's important to have "a comfortable trading platform" for his institutional clients.

Everbloom will need more than a license and help hotline to distinguish itself.