After Prometheum announced its plan to offer custody services for the digital asset Ether (ETH) through its subsidiary, Prometheum Capital, a group of Republican members from the House Committee on Agriculture and the House Financial Services Committee, including Chairmen Glenn “GT” Thompson and Patrick.
McHenry and Representatives French Hill, Dusty Johnson, Tom Emmer, and Warren Davidson took action. They addressed a letter to the Securities and Exchange Commission (SEC) Chairman Gary Gensler, urging the SEC to provide clear guidelines regarding the custody of non-security digital assets by Special Purpose Broker-Dealers (SPBD), the regulatory status of ETH, and the implications of Prometheum’s recent move.
The lawmakers emphasized that the SEC and the Commodity Futures Trading Commission (CFTC) have previously identified ETH as a non-security digital asset.
U.S. Rep. Glenn ‘GT’ Thompson (Credits: Pennsylvania Capital Star)
However, they raised concerns over the SEC’s current policies, which seemingly do not support SPBD custody of such assets. The letter pointed out the potential risks of allowing Prometheum’s plan to go forward without clear regulatory guidance, warning of possible negative impacts on the digital asset markets.
In their communication to Chairman Gensler, the legislators expressed their worries about the SEC’s lack of transparency in its SPBD framework and its hesitance to address the situation surrounding Prometheum’s intention to custody ETH, which has been recognized as a non-security asset.
They called on the SEC to clarify its stance on several fronts, including the ability of SPBDs to custody non-securities, the SEC’s approach to non-compliance, the classification of ETH, and the SEC’s position on Prometheum’s announcement.
The letter highlighted the confusion and uncertainty within the digital asset community, partly due to the SEC’s ambiguity about which digital assets fall under the “digital asset securities.”
This uncertainty is further compounded by the SEC’s history of enforcement actions against digital asset trading platforms, which the lawmakers argue have not been required to register due to their dealings in digital asset securities.
Chairman Gensler (Credits: CoinDesk)
Despite ETH’s longstanding recognition as a non-security digital asset, the legislators pointed out Chairman Gensler’s reluctance to confirm ETH’s status as a security or commodity during his March 2023 testimony before the House Committee on Financial Services.
According to the letter, this reluctance only adds to the confusion and uncertainty surrounding ETH’s classification, as demonstrated by Prometheum’s recent announcement. The letter concluded by voicing concerns over the SEC’s approach to digital asset securities, which has left regulated entities confused.
The legislators highlighted to the SEC the presence of previously established temporary frameworks for broker-dealers to participate in transactions involving digital asset securities. This underscores the need for comprehensive guidance to adeptly manage the evolving digital asset environment.
