Regulation
Gensler Must Answer for Prometheum, ‘Regulatory Uncertainty’ Over Ethereum, Lawmakers Say
Republican lawmakers have once again raised eyebrows over controversial cryptocurrency firm Prometheum, demanding clarity from the U.S. Securities and Exchange Commission (SEC) on Wednesday on how the company will comply with a new framework from the agency.
The SEC introduced a framework for so-called special purpose broker-dealers (SPBDs) in 2020, and the designation allows firms to facilitate trading in digital asset securities. While it has not yet fully realized this vision, Prometheum is one of the only companies to receive such registration.
In a letter signed by House Financial Services Committee Chairman Patrick McHenry (R-SC), Representative Bill Huizenga (R-MI), and Representative French Hill (R-AR), a request was made to the SEC to turn over documents and communications relating to Prometheum and the regulatory status of Ethereum.
Prometheum, as a marketplace ecosystem for digital asset securities, said Monday that it had done so launched custodial services for Ethereum as a security, increasing nervousness about the asset’s regulatory status among cryptocurrency market participants and upsetting lawmakers.
“Prometheum’s announcement that it will offer custody services for ETH [raises] a series of questions about what are and what are not permitted activities for SPBDs,” the lawmakers wrote. “Without answers, […] Our concerns about the precedent set by the SEC, Financial Industry Regulatory Authority (FINRA), and Prometheum are growing.”
Last year, the House Financial Services Committee described Prometheum’s crypto move as “shaded,” arguing that the little-known cryptocurrency company was being used by the SEC as a wedge to demonstrate that existing securities laws are sufficient for cryptocurrency companies to remain compliant.
As the agency faces pressure on how it regulates cryptocurrencies, Prometheum co-CEO Aaron Kaplan’s testimony before Congress last year aligns with the SEC’s position that there is a path to compliance for companies cryptographic companies, as many other companies have argued that compliance is not feasible.
Republican lawmakers argued Wednesday that the SEC has refused to provide them with any answers related to Prometheum. An SEC response last month failed to sufficiently describe how the firm will comply with its special purpose broker-dealer license, they argued.
In a lawsuit filed by Ethereum software giant Consensys in April, the company presumed the SEC has internally considered Ethereum as a security for over a year. And in a letter last month, McHenry accused SEC Chairman Gensler lied about the matter after evading questions during congressional testimony last year.