House Members Push SEC for Information on Prometheum’s Ability to Custody Ether

House Financial Services Committee Chairman Patrick McHenry, along with Digital Assets, Financial Technology and Inclusion Subcommittee Chairman French Hill, and Oversight and Investigations Subcommittee Chairman Bill Huizenga, have joined to ask the Securities and Exchange Commission to provide information on Prometheum’s move to provide custody for Ether.

Prometheum has been granted status as a Special Purpose Broker Dealer (SPBD) and is also approved to operate an ATS. Prometheum aims to become a digital trading venue for digital assets, which are securities. The SEC has previously declared Ethereum/Ether not a security as it was sufficiently decentralized. The transition from proof of work to proof of stake may have emboldened the current leadership at the SEC to reverse this determination.

The members have asked SEC Chairman Gary Gensler to clarify the Commission’s position regarding Prometheum’s recent revelation that it will offer custody services for Ethereum’s token, Ether. Prometheum CEO Aaron Kaplan recently disclosed to Fortune its intent to provide custody for Ether.

This past March, Republican members of the Committee asked Chairman Gensler for additional information on Prometheum but the response was deemed insufficient. The members are asking the questions, once again.

The letter states:

“Prometheum’s announcement that it will offer custody services for ETH, raise a number of questions regarding what are, and what are not, permitted activities for SPBDs. These questions largely stem from the regulatory uncertainty surrounding ETH, as outlined in our March 26, 2024 letter. Without answers, which the SEC has refused to provide, our concerns about the precedent being set by the SEC, Financial Industry Regulatory Authority (FINRA), and Prometheum are growing.”

“The likelihood that, throughout the course of Prometheum’s SPBD application process and eventual approval, the SEC and FINRA likely discussed permitted activities for a SPBD is strong. As such, the Committee on Financial Services is seeking additional information including communications to provide additional clarity regarding the SPBD framework.”

Many digital asset advocates believe some digital assets are securities, some are commodities and others could be utilities or perhaps all of the above. Current rules have been deemed unable to adapt to the changing environment of digital assets.

FIT21 is pending legislation that aims to clarify the regulation of digital assets but it is being opposed by the SEC Chairman as well as many Democrat officials.

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