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House Republicans Demand SEC Clarify Its Position Regarding Prometheum

House Republicans have penned a letter to the U.S. Securities and Exchange Commission (SEC), pressing for clarity on the status of Prometheum and the potential classification of Ethereum as a security.

Prometheum, a U.S.-based crypto securities platform, had outlined plans to initiate custody services for ETH, the native cryptocurrency of the Ethereum network. However, these intentions have been cast into uncertainty amid speculation surrounding the SEC’s stance on categorizing ETH as a security.

Numerous reports suggest that several American companies have received subpoenas aimed at designating ETH as a security. The classification decision by the SEC holds significant implications, potentially rendering the cryptocurrency illegal and placing regulated entities in a precarious position.

In their letter to the SEC, House Republicans expressed their apprehensions, stating:

“We are writing to convey our concerns regarding the recent announcement by Prometheum, Inc.’s subsidiary, Prometheum Ember Capital LLC (Prometheum Capital), an approved Special Purpose Broker-Dealer by the Financial Industry Regulatory Authority (FINRA). They plan to offer custody services for Ethereum’s token, Ether (ETH), to institutional clients later this month.”

Lack of Transparency in SEC SPBD Regime

“We are particularly troubled by the opacity surrounding the Securities and Exchange Commission’s (SEC) Special Purpose Broker-Dealer (SPBD) regime, as well as the SEC’s apparent oversight regarding Prometheum’s proposal to custody an asset acknowledged by both the SEC and the Commodity Futures Trading Commission (CFTC) as a non-security digital asset. We strongly urge you to provide clarity on the SEC’s stance regarding the ability of SPBDs to custody non-securities, commitment to addressing SPBD non-compliance, regulatory classification of ETH, and stance on Prometheum’s recent announcement.” — Excerpt from the letter by House Republicans to the SEC.

Highly Unlikely SEC Will Classify ETH as a Security

Many within the crypto community argue against the likelihood of the SEC categorizing ETH as a security, citing the regulator’s approval of ETH futures trading on regulated exchanges in 2023.

Kenzi Wang, co-founder and general partner at Symbolic Capital, emphasized in a recent interview with Cryptonews that it’s highly improbable for the SEC to designate Ethereum as a security. Wang elaborated that such a classification would not only contradict years of established precedent but also directly oppose the stance of the Commodity Futures Trading Commission (CFTC), a regulatory counterpart.

“While the SEC has issued ambiguous statements regarding the potential security status of ETH, the CFTC has unequivocally asserted its view of ETH as a commodity — notably evident in their 2022 filings related to the FTX/Alameda investigation,” Wang remarked.

Ethereum is widely recognized as a decentralized cryptocurrency rather than a security. Regulatory bodies like the SEC continue to monitor developments in the crypto sphere, leaving room for potential shifts in guidance or rulings in the future. Staying informed about regulatory updates remains crucial for participants in the crypto market.

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I want to save money. Will cryptocurrency work?

Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

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