Just In: SEC Faces Probe Over Prometheum’s Plans to Custody ETH

Members of the House Financial Services Committee are questioning the SEC about the regulatory uncertainty of Prometheum’s recent move to provide custody solutions for Ethereum’s native token, Ether (ETH).

The Chairman of the Committee, Patrick McHenry, along with the Chairmen of the Subcommittees French Hill and Bill Huizenga, has raised questions over the responses provided by the SEC regarding the nature of activities that are permissible for entities like Prometheum which falls under the category of Special Purpose Broker-Dealer (SPBD).

This inquiry comes after the digital assets platform Prometheum soft launched an Ethereum custody service, which it has classified as a security under current federal laws. This classification is consistent with the Prometheum position even though there is controversy within the industry on the possibility of such a classification.

Clarification on Prometheum’s Plans to Custody ETH

In response to this announcement by Prometheum, the House Financial Services Committee has once again demanded that the SEC to give more explanations. This is evident from the committee’s recent letter to SEC Chair Gary Gensler, where they sought to know whether SPBDs are permitted to custody digital assets such as ETH since they remain unregulated.

The lawmakers’ concerns were further compounded by the SEC’s inability to adequately respond to a prior request made on March 26. 

They have now reposted their questions, inquiring on the rules that permitted Prometheum to go ahead with its strategies despite threats to the digital asset markets.

Promethium’s Custody Service

Prometheum, co-founded by Aaron Kaplan, has chosen to become a pioneer by adopting Ethereum as one of the registered securities in the custody. This is a part of a larger plan to target asset managers, crypto hedge funds, and banks. Prometheum’s approach has received support from FINRA and the SEC, making it a precedent in the digital currency market.

The launch of this service comes at a time given that the SEC is currently considering spot Ethereum ETF proposals. The result of this review could also affect the classification of Ethereum and related services in the future regulation.

Furthermore, with the probability of the approval of a Spot Ether ETF increasing to 75% and the SEC requesting firms to amend their 19b-4 submissions, this clarification would be important.

Meanwhile, the Ethereum (ETH) price has been bullish, buoyed by the hopes of a potential approval on Thursday. At press time, ETH was trading at $3,735, a 0.50% surge from the intra-day low.

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