House Republicans Urge The SEC To Clarify Position On Prometheum's Plan To Provide Custody For ETH

House Republicans Urge The SEC To Clarify Position On Prometheum’s Plan To Provide Custody For ETH

Updated: 27 March 2024

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House Republicans are urging the US Securities and Exchange Commission (SEC) to clarify its stance on Prometheum’s plan to provide custody services for Ethereum’s ETH token (ETH) to institutional clients.

That leaves ”an alarming situation” in which Prometheum intends to offer custodial services for ETH ”under a regime that does not permit such activity,” the Republican chairmen of the House Financial Services and Agriculture committees wrote in a Mar. 26 letter to SEC chair Gary Gensler.

SEC Has Not Yet Said Whether Ethereum Is A Security

The SEC has not yet clarified whether ETH is a security or a commodity. However, Prometheum’s launch of an ETH custody service would conclude that the altcoin leader is a security.

Rep. Glenn Thompson (R-Penn.), together with Rep. Patrick McHenry (R-N.C.), argued in the letter that ETH is not a security. As such, it will be illegal for the securities firm Prometheum to handle the asset.

The SEC seemed to have initially agreed that ETH fits within the CFTC’s commodities jurisdiction, similar to Bitcoin. Agency officials later suggested that the decision around ETH is not yet clear, especially after the Ethereum network transitioned from a Proof of Work consensus to a Proof of Stake mechanism.

“Your unwillingness to clarify the treatment of ETH only exacerbates the confusion and uncertainty regarding ETH’s classification,” the letter said.

Adding to the confusion is the fact that ETH futures products have already started trading on CFTC-regulated platforms, while the SEC also approved ETH futures ETFs (exchange-traded funds) to begin trading in 2023.

Prometheum proceeding with their ETH custody services “could have irreparable consequences for the digital asset markets,” the Congressmen said in the letter.

A Turning Point In The Treatment Of Crypto Companies In The US

The launch of the ETH custody service could also represent a potential turning point in how the US treats crypto companies. On several occasions, Gensler has referred to Prometheum as the perfect example of a company that is willing to jump through the necessary regulatory hurdles to legally handle crypto in the US.

Exciting times are ahead! Our institutional custody service for ETH is just around the corner. Institutions are invited to sign up in anticipation of our upcoming launch at https://t.co/c6VNTsmfoL. Keep an eye out for more details!

— Prometheum (@PrometheumInc) February 23, 2024

If the SEC gives Prometheum the green light, it might also undermine the crypto sector’s argument that it is nearly impossible for crypto companies to operate under current SEC rules.