House Republicans Demand SEC Clarify Its Position Regarding Prometheum

Ethereum

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Tanzeel Akhtar

Journalist

Tanzeel Akhtar

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Tanzeel Akhtar has been covering the cryptocurrency and blockchain sector since 2015. She has written for the Wall Street Journal, Bloomberg, CoinDesk, Bitcoin Magazine and Bitcoin.com.

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Last updated:

March 27, 2024 00:54 EDT

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House Republicans have written a letter to the U.S. Securities and Exchange Commission (SEC) urging for clarity regarding Prometheum and whether Ethereum is considered a security.

U.S. crypto securities platform Prometheum planned to begin custody of ETH but these plans are now in limbo as speculation arises that the SEC is planning to classify ETH the native cryptocurrency of the Ethereum network, as a security.

It has been widely reported that a number of U.S. based companies have received subpoenas attempting to label ETH as a security. Depending on how the SEC brands ETH it could make the cryptocurrency illegal putting regulated firms in a tricky position.

The House Republicans said in a letter to the SEC:

“We write to express our concerns regarding Prometheum, Inc.’s (Prometheum) recent
announcement that its subsidiary, Prometheum Ember Capital LLC (Prometheum Capital), a
Financial Industry Regulatory Authority (FINRA) approved Special Purpose Broker-Dealer
(SPBD), will provide custody services for Ethereum’s token, Ether (ETH), later this month to
institutional clients.”

Lack of Transparency in SEC SPBD Regime

“In particular, we are concerned by the lack of transparency in the Securities and Exchange Commission’s (SEC) SPBD [special purpose broker-dealer] regime and the SEC’s failure to address Prometheum’s intent to custody an asset that the SEC and the Commodity Futures Trading Commission (CFTC) have recognized as a non-security digital asset. We urge you to clarify the SEC’s position with respect to a SPBD’s ability to custody non-securities, willingness to address SPBD non-compliance, regulatory classification of ETH, and position regarding Prometheum’s announcement.” — House Republicans letter to the SEC.

Highly Unlikely SEC Will Classify ETH as a Security

Many in the crypto space argue that it is unlikely the SEC will brand ETH as a security due to the regulator approving ETH futures trading on regulated exchanges in 2023. Kenzi Wang, the co-founder and general partner at Symbolic Capital, told Cryptonews in a recent interview, it is highly unlikely the SEC will classify Ethereum as a security. Wang explains, the SEC now classifying ETH as a security would not only undo years of precedent, but also be directly contradictory to their partner regulatory body the Commodity Futures Trading Commission (CFTC).“While the SEC continues to levy vague statements about the potential security status of ETH, the CFTC has clearly stated that they view ETH as a commodity — most clearly in 2022 filings around the FTX/Alameda investigation,” said Wang. Ethereum is viewed as a decentralized cryptocurrency, rather than a security. Regulatory agencies like the SEC continue to monitor the cryptocurrency space and may provide further guidance and sudden change or new rulings in the future. It’s essential to stay updated on regulatory developments.