Press Releases

Following Prometheum’s announcement that its subsidiary, Prometheum Capital, will provide custody services for the digital asset, Ether (ETH), Republicans on the House Committee on Agriculture and House Financial Services Committee, led by Chairmen Glenn "GT" Thompson (PA-15) and Patrick McHenry (NC-10) and Reps. French Hill (AR-02), Dusty Johnson (R-SD), Tom Emmer (MN-06), and Warren Davidson (OH-08), sent a letter to Securities and Exchange Commission (SEC) Chair Gary Gensler. The lawmakers are demanding that his agency clarify the SEC’s position with respect to a Special Purpose Broker Dealer’s (SPBD) ability to custody non-security digital assets, the SEC’s willingness to address SPBD non-compliance, the regulatory classification of ETH, and the SEC’s position regarding Prometheum’s announcement.

The SEC and the CFTC have an extensive record of identifying ETH as a non-security digital asset. In the letter, lawmakers highlight that the SEC’s current regime, grounded in this precedent, does not permit SPBD custody of non-security digital assets and warn that allowing Prometheum to proceed could have irreparable consequences for the digital asset markets. -security digital asset. In the letter, lawmakers highlight that the SEC’s current regime, grounded in this precedent, does not permit SPBD custody of non-security digital assets and warn that allowing Prometheum to proceed could have irreparable consequences for the digital asset markets.

Read the lawmakers’ full letter to Chair Gensler here and key excerpts below:

“We write to express our concerns regarding Prometheum, Inc.’s (Prometheum) recent announcement that its subsidiary, Prometheum Ember Capital LLC (Prometheum Capital), a Financial Industry Regulatory Authority (FINRA) approved Special Purpose Broker-Dealer (SPBD), will provide custody services for Ethereum’s token, Ether (ETH), later this month to institutional clients. In particular, we are concerned by the lack of transparency in the Securities and Exchange Commission’s (SEC) SPBD regime and the SEC’s failure to address Prometheum’s intent to custody an asset that the SEC and the Commodity Futures Trading Commission (CFTC) have recognized as a non-security digital asset. We urge you to clarify the SEC’s position with respect to a SPBD’s ability to custody non-securities, willingness to address SPBD non-compliance, regulatory classification of ETH, and position regarding Prometheum’s announcement.

“As you are aware, the agencies have an extensive public record identifying ETH as a non-security digital asset. There are multiple regulatory actions grounded in that position. Yet now, we are faced with an alarming scenario in which a SPBD has announced that it intends to offer custodial services for ETH under a regime that does not permit such activity. This action, if allowed to proceed, could have irreparable consequences for the digital asset markets.

…

“Despite your insistence that most digital assets are ‘digital asset securities,’ that term continues to be undefined. Other regulators, intermediaries, and market participants disagree with your assertions, and have struggled to identify which digital assets are digital asset securities. Moreover, the SEC’s failure to propose a rule or provide comprehensive guidance that provides clear rules for the digital asset marketplace regarding asset classification has only exacerbated the uncertainty in the digital asset ecosystem. Compounding the uncertainty, the SEC has engaged in multiple enforcement actions, accusing certain digital asset trading platforms of failing to register as brokers, clearing agencies, and national securities exchanges (NSE) because they are transacting in digital asset securities. 

…

“Despite this history recognizing ETH as a non-security digital asset, you have consistently refused to acknowledge that ETH is not a security. In your March 2023 testimony before the House Committee on Financial Services you declined to answer multiple questions about whether ETH should be considered a commodity. Your unwillingness to clarify the treatment of ETH only exacerbates the confusion and uncertainty regarding ETH’s classification as demonstrated by the Prometheum announcement.

…

“Your unwillingness to identify which digital assets are so-called digital asset securities has sown confusion even for SEC regulated entities. The SEC established temporary frameworks for broker-dealers to engage with digital asset securities both to facilitate trading as an alternative trading system (ATS) and to provide custodial services which were in place well before your arrival. In September 2020, the SEC’s Division of Trading and Markets issued a no-action letter (NAL) to FINRA establishing a framework for a registered broker-dealer to operate an ATS that trades digital asset securities, under certain conditions.

###