Prometheum, an “alternative” trading platform for crypto “securities” assets, has recently launched its custodial services for Ethereum (ETH). This move has significant implications for the legal status of the second-largest cryptocurrency by market capitalization.
Fortune Magazine reported that Prometheum’s strategy is to compel regulators, particularly the Securities and Exchange Commission (SEC), to recognize Ethereum as a security. The company claims to have discovered a path to operate within existing laws, positioning itself as a compliant player in the crypto industry.
Prometheum received regulatory approval in 2021 to operate as an alternative trading platform for securities. It gained further attention when it obtained a special-purpose broker-dealer license from the Financial Industry Regulatory Authority (FINRA), allowing them to operate as a broker-dealer in “digital asset securities” – a designation no other firm has achieved.
Prometheum aligns with the SEC’s assessment that most cryptocurrencies are securities and argues that Ethereum can be listed as a security under an exemption called Rule 144, typically used for trading restricted stocks. The company claims it can use blockchain data to determine whether Ethereum assets have been circulating for over a year, a crucial factor in claiming the exemption. Prometheum’s registered status with FINRA and the SEC adds weight to its claim.
Legal experts and academics speculate that the SEC may be forced to rule on Ethereum’s classification due to Prometheum’s custodial launch. This decision could have far-reaching consequences for the crypto industry, challenging the industry’s argument that cryptocurrencies cannot operate under existing securities laws.
Prometheum’s approach contrasts with other crypto exchanges like Coinbase, which argue that the existing rules are outdated. This has drawn criticism from the crypto industry and Republican lawmakers who accuse the SEC Chair Gary Gensler of supporting Prometheum to advance his regulatory agenda.
Prometheum’s introduction of Ethereum custodial services has thrust the debate over Ethereum’s legal classification into the spotlight. This move could compel the SEC to decide whether Ethereum should be classified as a security, challenging the crypto industry’s argument for new laws.
While the success of Prometheum’s approach is still uncertain, it remains to be seen how subsequent SEC administrations will respond and whether institutional investors will be attracted to Prometheum’s compliant approach. The implications of this decision have the potential to shape the future of Ethereum and the broader crypto industry.
Prometheum’s launch of custodial services for Ethereum brings the legal status of the cryptocurrency under scrutiny. By positioning themselves as a compliant player in the industry and utilizing existing securities laws, Prometheum challenges the notion that cryptocurrencies cannot operate within the current regulatory framework. The decision by the SEC on Ethereum’s classification could have significant implications for the future of the crypto industry as a whole. As the debate continues, market participants and investors will closely monitor the outcome and potential impact on the market.