Prime Trust, a longtime bulwark in the securities crowdfunding sector that has moved decisively into the digital asset industry, is exiting its Fund America business – an operation that started during the early days of crowdfunding in the US.
The decision has been made due to the rapid growth of Prime Trust’s digital asset operations – which grew by over 50% last year, focusing its energy on the segment of the firm that is showing the most promise. Going forward, Prime Trust will no longer be supporting new equity raise activities on its Capital Raise Platform. FundAmerica will support existing or past customers to transition their crowdfunding and escrow services to DealMaker.
In a release, it was announced that DealMaker, a growing online capital raising platform that recently reported it had enabled 8 out of 10 top investment crowdfunding deals, has emerged as the “exclusive referral partner.” Dealmaker will help existing Fund America customers migrate over by December 31, 2022, as both sides aim for a smooth transfer. Prime Trust stated that it considered several different crowdfunding platforms, ultimately selecting to work with DealMaker.
Prime Trust / FundAmerica, was founded by Scott Purcell (now pursuing a Web3 – NFT solution) in the early days of investment crowdfunding. In the beginning, FundAmerica was the go-to provider for the emerging equity and debt crowdfunding industry. Fund America provided escrow, payment processing, and compliance technology for broker-dealers, investment advisers, portals, and others – following the enactment of the JOBS Act – the legislation that legalized online capital formation.
Over time, Prime Trust saw an opportunity in the digital asset, or crypto, sector – capitalizing on the new business by leveraging its expertise within the exempt securities world. A move that has proven to be good for Prime Trust’s prospects.
Erin Holloway, President of Prime Trust, explained that DealMaker was selected due to its proven technology and its team which “can handle all raise types – they are best suited to address our customers’ needs now and for the long-term.”
Since 2018, DealMaker has enabled many capital raises while processing over 689,000 investments, totaling over $1.6 billion globally. The DealMaker platform services the full stack of securities exemptions and incorporates payment processing capabilities for clients.
Rebecca Kacaba, CEO and co-founder of DealMaker, called the arrangement a “great opportunity” for the users of FundAmerica adding that her company will work to ensure a smooth transition:
“Since we offer end-to-end additional services that include Transfer Agent as well as API connectivity, we are poised to help those customers exceed their goals.”
Prime Trust will continue to build upon its core offerings which include compliance services, digital wallets, fiat rails, and other API products which are expected to grow over time.
CI had a chance to connect with Holloway, who previously spent 20 years at JP Morgan and then SAP in the capital markets sector. She told us that Prime Trust evaluated its various businesses and product lines and made the decision to “focus on what’s more profitable.”
“The growth in the trust and custody side has been exponential,” said Holloway, adding that on the digital asset side has experienced double growth each year for four years running. While it is an “end of an era” exiting FundAmerica, companies need to grow and change.
“We can currently custody over 100 digital assets,” explained Holloway. Competitors typically can handle only a few.
Holloway emphasized that they have always pursued a compliance-first approach and they are succeeding because of this very thoughtful and careful approach. She is very bullish on digital assets in general as Prime Trust sees a future where everyone has access to crypto and it becomes a standard portfolio option.
Recently, Prime Trust launched an IRA product that will enable digital asset access to a trillion-dollar market. Launched in Beta, the IRA offering is expected to grow rapidly with new partners launching soon.
Holloway said they see IRAs and other retirement products as great entry points for engaging and adopting crypto.
“A new generation of investors are pouring into the market who are very intuitive about crypto and looking for new ways to diversify their portfolio. As the markets have shown signs of downturn globally, investors of all stripes are looking for alternative asset classes to diversify their portfolios. Interest in digital assets rose dramatically in 2021 with more people understanding that cryptocurrency isn’t just a fad. It is here to stay. Prime Trust will help enable their ability to invest in crypto for the long term.”
One of the biggest challenges to crypto engagement may be the opaque regulatory environment. The current administration has not clearly defined when a digital asset is a security, when it is a commodity, and when it is a utility – or perhaps a combination of qualities. While the Executive branch and Congress are working towards greater clarity, this will take a bit of time. Holloway noted that markets thrive on regulatory clarity and it is hard to invest when the rules are ambiguous or unclear.
“As government agencies begin to work collaboratively and discover ways to identify which assets fall under whose authority, there’s a likelihood that more people will become comfortable participating in the cryptocurrency economy. Guidance helps everyone in the ecosystem; the industry, retail and institutional investors, and the developers behind the platforms,” Holloway said.
As government agencies begin to work collaboratively and discover ways to identify which assets fall under whose authority, there’s a likelihood that more people will become comfortable participating in the cryptocurrency economy @PrimeTrustCo
And what about the Lummis-Gillibrand legislation? A bipartisan bill that is expected to be reintroduced in the Senate this January.
Holloway said the first iteration of the Lummis-Gillibrand bill was, in essence, a litmus test. The bill examined what a thorough cryptocurrency regulatory framework could look like and what the response would be from industry thought leaders and lawmakers. She said this feedback will prove invaluable to those who update the current version of S.4356 and to legislators who are working to create supporting bills in tandem.
“Overall, Lummis-Gillibrand is a groundbreaking achievement for an industry searching for regulatory efficiency.”
So what comes after IRAs and retirement accounts? Holloway would not share but she said they are keeping a close eye on the market and they will find ways to expand their product offerings and better serve their growing client base.