Congress Questions SEC and FINRA on Prometheum's Special Broker-Dealer Status
Summary:
U.S. Congress members are pressing SEC Chair Gary Gensler for clarification on the Special Purpose Broker-Dealer (SPBD) requirements established in discussions between the SEC and the Financial Industry Regulatory Authority (FINRA). They are questioning the possible precedent set by the crypto custody provider Prometheum and are seeking information about the company’s SPBD application process and the regulatory classification of Ether. This call for transparency comes amidst suspicions of a controversial move by Prometheum to get approval from FINRA as an SPBD.
US Congress members are seeking answers about discussions between the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) regarding the Special Purpose Broker-Dealer (SPBD) stipulations. There are suspicions that these institutions and digital asset security firm Prometheum may be establishing a questionable precedent. Patrick McHenry, who chairs the House Financial Services Committee, along with subcommittee leaders Bill Huizenga and French Hill, expressed their dissatisfaction with the SEC’s responses to an earlier inquiry about the classification of Ether and Prometheum's plans to custody it in a letter to SEC Chief, Gary Gensler.
Gensler had previously deflecting their questions by stating he wasn't aware of Prometheum's prospective business strategies. The Congressmen stated their concern over what precedent this might set and asked Gensler for complete details of all exchanges between the SEC and FINRA regarding Prometheum’s SPBD application. They also questioned the approved activities and digital assets eligible for custody by an SPBD, as well as the regulatory classification of Ether, setting a June 5 deadline for responses.
It’s pretty commonplace for the SEC and FINRA to collaborate on regulatory decision-making. Despite ongoing disputes over its classification, on May 17, Prometheum commenced with a custody service for Ether as a security.
Amid the latest discussions, McHenry in conjunction with the chair of the House Agriculture Committee, Glenn Thompson, have forwarded their previously submitted queries to Gensler once more, following the implementation of Prometheum’s plans.
Ever since FINRA approved the SPBD for Prometheum back in May 2023 the decision has been regarded as contentious. CEO Aaron Kaplan’s apparent support for existing security laws to regulate crypto currencies at a Congressional hearing was seen to be controversial by several representatives of the cryptocurrency industry.
Recently, the crypto backing group Blockchain Association submitted a request under the Freedom of Information Act for SEC papers relating to the Prometheum scandal. The move is viewed as suspicious in the current aggressive enforcement environment by the SEC, according to a tweet by Blockchain Association counsel Marisa Tashman Coppel.
Published At
5/23/2024 12:07:33 AM
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