Prometheum’s Ethereum Custodial Launch Puts SEC’s ETH Classification In The Spotlight
09 Februar 2024 - 1:00AM
NEWSBTC
Prometheum, an “alternative” trading platform for crypto
“securities” assets, has recently announced the launch of its
custodial services for Ethereum (ETH). This move has significant
implications for the legal status of the second-largest
cryptocurrency by market capitalization. Fortune Magazine
reported that the company’s strategy is to compel regulators,
particularly the Securities and Exchange Commission (SEC), to
recognize Ethereum as a security. SEC Pressured To Settle
Ethereum Legal Status Per the report, Prometheum, based in New
York, has positioned itself as a compliant player in the crypto
industry by claiming to have discovered a path to operate within
existing laws. The company received regulatory approval in
2021 to operate as an alternative trading platform for securities.
It gained further attention when it obtained a special-purpose
broker-dealer license from the Financial Industry Regulatory
Authority (FINRA). The license allows them to operate as a
broker-dealer in “digital asset securities,” a designation no other
firm has achieved. This has prompted crypto companies and even
members of the US Congress to call for investigations into the
firm’s activities. Related Reading: Analyst Reveals Potential
Trigger For A 32% Cardano (ADA) Rally Previously, the SEC refrained
from definitively classifying Ethereum as a security despite
declaring several other cryptocurrencies as such. Prometheum
aligns with the SEC’s assessment that most cryptocurrencies are
securities and argues that Ethereum can be listed as a security
under an exemption called Rule 144, typically used for trading
restricted stocks. The embattled company claims it can use
blockchain data to determine whether the assets have been
circulating for over a year, a crucial factor in claiming the
exemption. What’s interesting is that Prometheum’s custodial
services for Ethereum could potentially force the SEC to determine
Ethereum’s legal status. The company’s registered status with FINRA
and the SEC, prominently displayed on its website, adds weight to
its claim. Legal experts and academics speculated that the
SEC may be forced to rule on Ethereum’s classification due to
Prometheum’s custodial launch. This decision could have
far-reaching consequences for the crypto industry, challenging the
industry’s argument that cryptocurrencies cannot operate under
existing securities laws. Backlash Mounts As Prometheum Shakes Up
Crypto Regulations SEC Chair Gary Gensler, who has intensified
enforcement efforts following the collapse of FTX, has emphasized
the sufficiency of existing rules while filing lawsuits against
exchanges for failing to register with the agency.
Prometheum’s approach contrasts with other crypto exchanges like
Coinbase, which argue that the existing rules are outdated.
Prometheum’s strategy has drawn criticism from the crypto industry
and Republican lawmakers who accuse Gensler of supporting the firm
to advance his regulatory agenda. Related Reading: Crypto Analyst
Predicts Bitcoin To $100,000 But Says Cardano Is Dead, Here’s Why
Overall, Prometheum’s introduction of Ethereum custodial services
has thrust the debate over Ethereum’s legal classification into the
spotlight. This move could compel the SEC to decide whether
Ethereum should be classified as a security, challenging the crypto
industry’s argument for new laws. While the success of
Prometheum’s approach is still uncertain, it remains to be seen how
subsequent SEC administrations will respond and whether
institutional investors will be attracted to Prometheum’s compliant
approach. Currently, ETH is trading at $2,428, reflecting a
marginal 0.5% price increase in the last 24 hours. Featured image
from Shutterstock, chart from TradingView.com
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