Prometheums

Prometheum, an “alternative” trading platform for crypto “securities” assets, has recently announced the launch of its custodial services for Ethereum (ETH). This move has significant implications for the legal status of the second-largest cryptocurrency by market capitalization.

Fortune Magazine reported that the company’s strategy is to compel regulators, particularly the Securities and Exchange Commission (SEC), to recognize Ethereum as a security.

SEC Pressured To Settle Ethereum Legal Status

Per the report, Prometheum, based in New York, has positioned itself as a compliant player in the crypto industry by claiming to have discovered a path to operate within existing laws.

The company received regulatory approval in 2021 to operate as an alternative trading platform for securities. It gained further attention when it obtained a special-purpose broker-dealer license from the Financial Industry Regulatory Authority (FINRA).

The license allows them to operate as a broker-dealer in “digital asset securities,” a designation no other firm has achieved. This has prompted crypto companies and even members of the US Congress to call for investigations into the firm’s activities.

Previously, the SEC refrained from definitively classifying Ethereum as a security despite declaring several other cryptocurrencies as such.

Prometheum aligns with the SEC’s assessment that most cryptocurrencies are securities and argues that Ethereum can be listed as a security under an exemption called Rule 144, typically used for trading restricted stocks.

The embattled company claims it can use blockchain data to determine whether the assets have been circulating for over a year, a crucial factor in claiming the exemption.

What’s interesting is that Prometheum’s custodial services for Ethereum could potentially force the SEC to determine Ethereum’s legal status. The company’s registered status with FINRA and the SEC, prominently displayed on its website, adds weight to its claim.

Legal experts and academics speculated that the SEC may be forced to rule on Ethereum’s classification due to Prometheum’s custodial launch. This decision could have far-reaching consequences for the crypto industry, challenging the industry’s argument that cryptocurrencies cannot operate under existing securities laws.

Backlash Mounts As Prometheum Shakes Up Crypto Regulations

SEC Chair Gary Gensler, who has intensified enforcement efforts following the collapse of FTX, has emphasized the sufficiency of existing rules while filing lawsuits against exchanges for failing to register with the agency.

Prometheum’s approach contrasts with other crypto exchanges like Coinbase, which argue that the existing rules are outdated. Prometheum’s strategy has drawn criticism from the crypto industry and Republican lawmakers who accuse Gensler of supporting the firm to advance his regulatory agenda.

Overall, Prometheum’s introduction of Ethereum custodial services has thrust the debate over Ethereum’s legal classification into the spotlight.

This move could compel the SEC to decide whether Ethereum should be classified as a security, challenging the crypto industry’s argument for new laws.

While the success of Prometheum’s approach is still uncertain, it remains to be seen how subsequent SEC administrations will respond and whether institutional investors will be attracted to Prometheum’s compliant approach.

Currently, ETH is trading at $2,428, reflecting a marginal 0.5% price increase in the last 24 hours.

Featured image from Shutterstock, chart from TradingView.com

Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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US Congressman Ritchie Torres (D-N.Y.) has called for two independent investigations into the US Securities and Exchange Commission’s (SEC) actions, citing concerns over its handling of digital assets. In letters shared on Twitter on June 13, Rep. Torres expressed dissatisfaction with the SEC’s “haphazard and heavy-handed approach” to regulating the crypto industry.

The two letters were addressed to the SEC’s Inspector General Deborah Jeffrey and the Comptroller General Gene Dodaro of the Government Accountability Office, respectively, seeking an objective assessment of the SEC’s enforcement actions and processes to ensure greater transparency and accountability within the federal regulatory body.

The first investigation requested by the congressman was focused on the SEC’s decision to grant a special purpose broker-dealer (SPBD) license to Prometheum, a crypto brokerage company that, according to Torres, does not engage in any trading of digital assets.

In March, the company announced that it had received federal approval from the Financial Industry Regulatory Authority (FINRA) to legally offer digital asset services to residents of the United States. However, the license, or “sweetheart deal” as it was referred to, has stirred controversy within the crypto industry, with some arguing that it undermines the need for additional regulations. In contrast, others like Torres question the platform’s actual business activities.

Prometheum’s License Approval Could be Politically Motivated

Earlier this week, US senator Thomas Tuberville (R-Ala.) and five other congressional Republicans called for investigations into Prometheum’s ties to Chinese entities, alleging connections with the Chinese Communist Party. Similarly, the Blockchain Association, an industry trade group based in the US, also called for an investigation into the company.

Joining these groups, Torres has questioned the circumstances surrounding the issuance of the Prometheum’s license, suggesting that it may have been a politically motivated move by SEC Chair Gary Gensler rather than a genuine effort to incorporate digital assets into the existing regulatory framework.

The US congressman criticized Prometheum as a “deceptive digital asset platform” and compared it to Potemkin villages, which were elaborate facades created to deceive observers. He suggested that the company’s licensing reflects a trend of politicizing the registration process within the SEC, an approach rarely seen before.

Overzealous Traffic Agent

In his second letter, Rep. Torres requested an investigation into the financial regulator regarding its failure to establish a robust and practical registration process for companies offering crypto services.

He argued that the SEC’s current approach leads to uncertainty and inconsistency, likening the agency to an “overzealous traffic agent” who issues arbitrary speeding tickets without clearly defining the speed limit. Torres emphasized that regulation through enforcement is not an effective or reliable way to regulate the digital assets industry.

According to Torres, the financial watchdog has failed to provide clear guidelines regarding implementing securities laws in relation to digital assets.

“The SEC refuses to bring even the barest amount of clarity to applying securities law to digital assets. Its preferred means of communication is neither rule nor guidance but enforcement,” said the congressman.

The call for investigations comes during intense debate and legislative efforts to clarify the regulatory landscape for digital assets in Congress. The congressman has previously commended the SEC after it sued crypto exchanges Binance and Coinbase within 24 hours for violations of US laws. According to him, the Commission finally took action after sitting on the sidelines.

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Chimamanda is a crypto enthusiast and experienced writer focusing on the dynamic world of cryptocurrencies. She joined the industry in 2019 and has since developed an interest in the emerging economy. She combines her passion for blockchain technology with her love for travel and food, bringing a fresh and engaging perspective to her work.

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Prometheum’s Ethereum Custodial Launch Puts SEC’s ETH Classification In The Spotlight

SEC Pressured To Settle Ethereum Legal Status

Backlash Mounts As Prometheum Shakes Up Crypto Regulations

Congressman Torres Urges Investigation into SEC’s Cryptocurrency Oversight & Prometheum’s License

Prometheum’s License Approval Could be Politically Motivated

Overzealous Traffic Agent