48 members of Congress in the United States signed a letter! Ask the SEC Chairman to clarify whether ETH is a security

The U.S. Congress once again pressured the U.S. Securities and Exchange Commission (SEC) to clarify whether Ethereum (ETH) is a "security."

Two authoritative and influential Republican congressmen, namely House Financial Services Committee Chairman Patrick McHenry and Agriculture Committee Chairman Glenn "GT" Thompson, issued a joint letter today. They asked SEC Chairman Gary Gensler to clarify how Prometheum, the first special purpose broker-dealer (SPBD) for digital asset securities, would legally provide ETH custody services to customers before Ethereum (ETH) was defined as a "security." This move has triggered ongoing concerns among markets and regulators about the regulation of digital assets, especially when it comes to how digital assets that are securities in nature are treated.

Prometheum is a digital asset company registered with the SEC and the U.S. Financial Industry Regulatory Authority (FINRA). Its subsidiary Prometheum Ember Capital, LLC received a special purpose broker-dealer (SPBD) license for digital asset securities from the SEC and FINRA in May, which qualified the company to custody digital asset securities on behalf of retail and institutional clients.

Is it illegal for Prometheum to provide ETH custody?

Prometheum announced in February plans to launch ETH custody services in the first half of this year, a move that triggered an escalating dispute within the SEC over whether Ethereum is a "security." The SEC noted under regulations for special purpose broker-dealers (SPBD) of digital asset securities that Prometheum’s custody services are limited to digital asset “securities” and may not custody traditional securities or non-security digital assets on behalf of clients. The stance further fuels the debate over Ethereum’s legal status and regulatory scope.

As a result, some friendly cryptocurrency supporters are urging the SEC to clarify whether Ethereum is considered a digital asset security and whether it is legal for Prometheum to provide Ethereum custody services as an SPBD. A joint letter signed by 48 members of Congress stated that in the face of worrying circumstances, SPBD (i.e. Prometheum) plans to provide custody services for Ethereum under a framework that does not allow such activities. If this behavior continues to be allowed, it may have an irreparable impact on the digital asset market.

Lawmakers call on SEC to clarify whether Ethereum is a "security"

Lawmakers criticized Gensler for being unwilling to make it clear whether Ethereum is a security, noting that SEC staff said in 2018 that Ethereum is a security. A stock is not a security. In the same year, Gensler also publicly stated that tokens such as Bitcoin and Ethereum are not securities when teaching.

And the SEC approved the Ethereum futures ETF to trade on a platform regulated by the U.S. Commodity Futures Trading Commission (CFTC) last year. The chairman of the CFTC has publicly announced many times that ETH, like Bitcoin, is a commodity and should be regulated by the agency.

The letter also points out the possible serious consequences of classifying ETH as a "security", which may prevent CFTC-registered derivatives exchanges from providing ETH futures-related products, endanger the Ethereum futures ETF, and even This resulted in serious price chaos in the entire ETH market. The legislators emphasized in the letter: "It is unacceptable to allow one market participant and law enforcement regulation to determine the future of digital asset regulation."

Coindesk pointed out that an SEC spokesperson declined to comment on this joint letter. , said Gensler would "respond directly to lawmakers," while a Prometheum spokesman said company officials were still reviewing the letter.

SEC investigates the Ethereum Foundation

However, it is worth noting that there have been some recent signs that the SEC seems to be taking active actions to classify Ethereum as a security. Fortune broke the news last week that the SEC is investigating the Ethereum Foundation and has issued subpoenas to at least three companies, requiring these companies to provide more documents and financial records related to their dealings with the Ethereum Foundation.

Informed sources said that this investigation began shortly after Ethereum merged in September 2022 and switched from PoW to PoS "Proof of Stake" network. After Ethereum transitioned to PoS in September 2022, Gensler warned that all PoS cryptocurrencies may be regulated by securities laws.

As the possibility of the SEC classifying Ethereum as a security heats up, Bloomberg ETF senior analyst Eric Balchunas last week slashed the chances of an Ethereum spot ETF being approved in May from 70% at the beginning of the year. to 25%. It is said that it has almost been confirmed that ETH is recognized as a security in Gensler’s mind.

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