Is Prometheum Crypto the Most Divisive Company

Within the cryptocurrency business, the concept of "digital asset securities" is a very delicate subject.

Prometheum, a cryptocurrency trading and custody company at the center of this contentious issue, has angered cryptocurrency enthusiasts by designating a number of cryptocurrencies, including Ethereum (ETH), as "digital asset securities."

What makes Prometheum one of the most contentious cryptocurrency startups, and who is it? Let's investigate.

Who is Prometheum?

• The Financial Industry Regulatory Authority (FINRA) has granted Prometheum the first and only Special Purpose Broker-Dealer (SPBD) license in the United States to hold digital asset securities.

• In May 2023, the business was granted this "first-of-its-kind" license.

• Prometheum added clearing and settlement of deals in digital asset securities to its list of services in 2024. The business revealed ambitions to open up trading and clearing services to institutional and retail customers.

• When the digital asset securities broker revealed plans to introduce an institutional custody service for ETH in February 2024, it caused a stir.

• Uniswap (UNI) and Arbitrum (ARB), two "digital asset securities," were added to Prometheum's custodial platform in August 2024.

• The business trades, settles, and maintains digital asset securities on a blockchain-powered platform.

• Prometheum has not yet made its custodial services available to institutional clients as of late August 2024. The launch date was rescheduled by the company from the first quarter of 2024 to the third quarter.

Blockchain Association Requests Prometheum's Special License Be Investigated

• The Blockchain Association requested an inquiry into how Prometheum obtained a "first-of-its-kind license" to function as an SPBD in a letter to Securities and Exchange Commission (SEC) Inspector General Deborah Jeffrey in July 2023.

• The nonprofit Blockchain Association, which advocates for pro-innovation policies, was worried that the SEC would have exerted pressure on FINRA to give Prometheum the SPBD license.

• The group expressed skepticism about SEC head Gary Gensler's plan to propagate "the false narrative that the law is already clear with regard to digital asset securities" through Prometheum and the SPBD licensing procedure.

• The Commodity Futures Trading Commission (CFTC) and the SEC have attempted to increase their authority over the bitcoin industry in recent years.

• Rostin Behnam, the chair of the CFTC, has stated that she is willing to talk about the new crypto-specific rule. However, in its case against cryptocurrency exchanges Binance, Coinbase, and Kraken, the SEC, led by Chair Gensler, has frequently invoked antiquated legal frameworks like the Howey Test to classify a number of cryptocurrencies as "unregistered securities."

• The Blockchain Association said in the letter that Prometheum received a "sweetheart" arrangement from the SEC in return for endorsing the SEC's cryptocurrency regulations.

• "As other businesses in the digital asset space have applied for SPBD licenses based on valid business models, those license applications have either been rejected or have been continuously delayed," the Blockchain Association stated, in reference to Prometheum's licensure.

• The facts underlying the licensure are troubling, even though the licensure itself might not be ethically problematic. Prometheum doesn't have a functional product. It doesn't disclose any assets, and it's unclear if it has any plans to do so in the future," the Blockchain Association continued.

Read Also: Meaning And Definition Of Cryptocurrency

Members of Congress Ask Gensler to Explain

• In a letter (PDF) sent to SEC Chair Gensler in March 2024, 48 members of the House Committees on Agriculture and Financial Services asked for an explanation of Prometheum's custody services for ETH.

• Members of Congress used the approval of CFTC-regulated ETH commodity futures products as evidence that the SEC and the CFTC have "long-recognized" ETH as a digital commodity.

• As seen by the Prometheum announcement, "your refusal to clarify the treatment of ETH only exacerbates the confusion and uncertainty regarding ETH's classification," the letter stated.

• In order to remain in compliance with the SEC's SPBD regime, the letter further stated that Prometheum should ascertain that ETH is a digital asset security before providing custodial services for the second-most valued cryptocurrency in the world.

China-Ties Are Under Examine

• Prometheum's close ties to Chinese firms like Shanghai Wanxiang Blockchain and HashKey Digital have also drawn criticism.

• Prometheum's blockchain technology and smart contract system were developed with assistance from both businesses.

• Additionally, according to SEC documents, HashKey purchased more than 68.8 million Prometheum shares in 2018.

The Final Word

Fortunately for the cryptocurrency sector, it will soon be clear whether a cryptocurrency is classified as a security or a commodity.

In May 2024, the U.S. House of Representatives enacted the FIT21 bill, a significant cryptocurrency measure that aims to identify and delineate cryptocurrencies.