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McHenry, Hill, Huizenga Probe SEC for More Information on Prometheum’s Plans to Custody ETH
Lawmakers are demanding the SEC clarify permitted activities for SPBDs given regulatory uncertainty surrounding Ether’s classification

Washington, May 22, 2024 -

Today, House Financial Services Committee Chairman Patrick McHenry (NC-10), Digital Assets, Financial Technology and Inclusion Subcommittee Chairman French Hill (AR-02), and Oversight and Investigations Subcommittee Chairman Bill Huizenga (MI-04) sent a letter to Securities and Exchange Commission (SEC) Chair Gary Gensler demanding the SEC clarify its position with regard to Prometheum’s recent announcement that it will offer custody services for Ethereum’s token, Ether (ETH). 

This follows the SEC’s insufficient response to Republicans’ March 26 letter which failed to answer demands to clarify that the SEC’s current regime does not permit SPBD custody of non-security digital assets, despite warnings that allowing Prometheum to proceed could have irreparable consequences for the digital asset markets. 

Today, both Chairman Patrick McHenry and House Committee on Agriculture Chairman Glenn “GT” Thompson (PA-15) resubmitted the questions included in Republicans' March letter.

Read the lawmakers’ letter to Chair Gensler here.

Read key excerpts from the lawmakers’ letter below:

“On March 26, 2024, Members of the House Committee on Financial Services and the House Committee on Agriculture sent you a letter requesting, among other things, clarification on how Prometheum, Inc. (Prometheum) will comply with its requirements as a Special Purpose Broker Dealer (SPBD) if it offers institutional custodial services for Ethereum’s token, Ether (ETH). The Securities and Exchange Commission’s (SEC) April 9, 2024 response failed to sufficiently describe how Prometheum will comply with its SPBD obligations with respect to ETH.

“Prometheum’s announcement that it will offer custody services for ETH, raise a number of questions regarding what are, and what are not, permitted activities for SPBDs. These questions largely stem from the regulatory uncertainty surrounding ETH, as outlined in our March 26, 2024 letter. Without answers, which the SEC has refused to provide, our concerns about the precedent being set by the SEC, Financial Industry Regulatory Authority (FINRA), and Prometheum are growing.

“The likelihood that, throughout the course of Prometheum’s SPBD application process and eventual approval, the SEC and FINRA likely discussed permitted activities for a SPBD is strong. As such, the Committee on Financial Services is seeking additional information including communications to provide additional clarity regarding the SPBD framework.”


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