Prometheum Soft-Launches Controversial Ether Custody Service, Braces for SEC and CFTC Clash
Summary:
Prometheum, a digital asset trading and custody firm, has soft-launched its Ether (ETH) custody service, which treats digital assets as securities. Initially rolled out to select companies, a full-scale release is expected in June. Despite garnering criticism from the crypto community, Prometheum aims to expand services to retail clients by 2024. The launch could cause a potential conflict between the SEC and the U.S. commodities regulator over differing classifications of Ether.
Prometheum, a digital asset trading and custody company known for its unconventional views, has initiated a soft launch of its contentious Ether (ETH) custody service that regards digital assets as securities. Information from Fortune on May 20 indicates that this service was introduced discreetly to a handful of firms on May 17, and a full-scale launch seems imminent for June.
Aimed at banks, hedge funds, asset management companies, and registered investment advisors, Prometheum plans to extend its services to retail customers by 2024. Co-CEO and co-founder Aaron Kaplan's testimony before a US House Committee in June last year garnered attention, as he appeared to advocate for crypto regulation under current securities laws - a stance that the Securities and Exchange Commission also endorses.
In February, Prometheum hinted at classifying Ether as a security upon the launch of its custodial services later this year, attracting criticism from the cryptocurrency community. "Classifying things under existing laws puts to rest a lot of contention," asserted Kaplan. He highlighted that for the first time, an investment contract digital asset security will be stored and treated under securities laws. The SEC’s approval of Prometheum’s approach initially sparked concerns about Ether ETF’s future.
Nevertheless, subsequent reports suggest the SEC is urging applicants to expedite their 19b-4 filings, giving hope a boost. In response, Bloomberg ETF analysts, Eric Balchunas and James Seyffart, recalibrated their estimation of receiving approval for an Ether ETF from 25% to 75%.
The Kaplan brothers, Aaron and Benjamin, established Prometheum in 2017. The company kept a low profile until June 2023 when it obtained a broker-dealer license from the SEC and the Financial Industry Regulatory Authority. However, the launch of Prometheum's Ethereum custody service may trigger a dispute between the SEC and the U.S. commodities regulator.
The Commodity Futures Trading Commission (CFTC), recurrently labeling Ether as a commodity, cautioned that such a product would contravene U.S. financial market regulations. CFTC Chair Rostin Behnam warned, "Should this occur, our registrants, our exchanges listing Ether as a futures contract would violate SEC standards instead of complying with CFTC regulations.
Published At
5/21/2024 4:22:15 AM
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