A recent development has unveiled a renewed vigour among Republican lawmakers within the U.S. congressional committee responsible for overseeing the Securities and Exchange Commission (SEC). With their sights set on the agency’s crypto approval process, a cohort of 23 House Financial Services Committee lawmakers, led by Chair Patrick McHenry, has dispatched a pointed letter to SEC Chair Gary Gensler. The missive demands a comprehensive elucidation of the rationale behind the approval of Prometheum as a crypto broker-dealer.
At the heart of their inquiry lies Prometheum’s intriguing designation as a special purpose broker-dealer (SPBD) for “crypto securities.” Pioneered by the SEC in December 2020, the SPBD framework was crafted to facilitate custody and digital asset securities transactions. Notably, this framework mandates Financial Industry Regulatory Authority (FINRA) approval for operational commencement, a prerequisite that remained unfulfilled until May 17, 2023, when Prometheum Ember Capital, a subsidiary of Prometheum, secured this coveted approval.
The unprecedented approval of Prometheum Ember Capital as the solitary SPBD within this new framework has roused the suspicions of Republican lawmakers. Their concerns are further exacerbated by the timing of the approval, coinciding with a joint hearing conducted by the House Financial Services Committee and the House Agriculture Committee, focusing on the regulatory oversight of crypto asset markets.
Notably, these lawmakers harbour suspicions that this strategic approval was orchestrated to potentially undermine the impetus for legislative action by portraying an operational, regulatory framework for digital asset securities custody. However, the House Financial Services Committee has revealed that despite Prometheum’s claims of providing a comprehensive solution for regulated crypto asset offerings, the firm has yet to engage a single customer.
The opacity surrounding the specific digital asset securities supported by Prometheum’s platform has elicited concerns about the firm’s eligibility criteria. Ambiguity arises due to the SEC’s lack of explicit guidance regarding classifying digital assets as securities, rendering the scope of Prometheum’s operations challenging to discern.
The lawmakers’ letter raises further apprehensions surrounding Prometheum’s limited operational capacities, particularly its inability to execute clearing or settlement services, an essential component for operating as an alternative trading system. This precipitates questions regarding why FINRA sanctioned a firm without a customer track record or operational history over other applicants.
Deeper concerns reverberate concerning national security and data privacy. The partnership between Prometheum and Shanghai Wanxiang Blockchain Inc., a Chinese entity embroiled in blockchain software development in 2018, has cast shadows. Although the partnership was subsequently dissolved, lingering inquiries persist about the possible involvement of a Chinese entity in Prometheum’s foundational technology development. The presence of Feng Ziao, a representative of the Chinese entity, on Prometheum’s board, only amplifies these apprehensions.
As Republican lawmakers continue to press for answers from Chair Gary Gensler, the spotlight is firmly trained on the SEC’s approval process and the intricate factors culminating in Prometheum’s unique SPBD status. The outcome of this inquiry bears the potential for substantial ripple effects, cascading into the regulatory sphere for digital assets and resonating throughout the broader cryptocurrency industry.
Disclaimer: The information provided is not trading advice, Bitcoinworld.co.in holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.