A growing wave of concern is sweeping through the Capitol over crypto regulation. Republican lawmakers are demanding answers from the U.S. Securities and Exchange Commission (SEC) about its unclear stance on Ethereum’s (ETH) classification.
Prometheum, a crypto custody provider, has sparked controversy by labeling Ethereum security while launching its custody services. Republican lawmakers have accused the SEC of being inconsistent and confusing crypto businesses.
Confusion Over The Status of Ethereum
Earlier this year, the SEC publicly acknowledged that Ethereum is not classified as a security. This came as the agency approved a spot Ethereum Exchange Traded Fund (ETF). During a legal battle with Binance, the SEC clarified that crypto asset securities refer to how digital assets are sold. This does not apply to the assets themselves, such as Ethereum.
Despite this, Prometheum has contradicted this by declaring that Ethereum is, in fact, a security. This created a gray area for Prometheum’s custodial services and the regulators overseeing them.
Representative John Rose criticized the SEC’s silence in a letter to SEC Chair Gary Gensler and FINRA President Robert Cook. Lawmakers expressed frustration over the lack of clarity on Prometheum’s Ethereum custody services and its regulatory classification. They sought clarity on how Prometheum can operate while Ethereum’s regulatory status remains unclear.
Republican Lawmakers Seeks Regulatory Clarity
The lawmakers point to testimony from SEC Chair Gary Gensler himself. Some time ago, he noted that Special Purpose Broker-Dealers (SPBDs) cannot custody non-securities.
Yet Prometheus appears to be operating in this very space, raising questions about how the SEC interprets its rules. In the letter, Representative Rose expressed frustration, stating that the digital asset sector deserves certainty from its regulators. She pointed out that this certainty has remained elusive under Gensler’s leadership.
A Ripple of Uncertainty in Crypto Leadership
Meanwhile, Gensler has repeatedly called for stricter regulation to protect investors in the crypto space. However, his tenure has been marked by confusion and inconsistency, and the resignation calls for Gensler have been growing.
This is mainly true as speculation swirls around whether President Donald Trump might appoint a more crypto-friendly SEC chair. The question of who will replace SEC Chair Gary Gensler is a key issue. Reports suggest that his replacement might be more supportive of the crypto industry.
Fox Business reporter Eleanor Terret tweeted that the Trump administration may move crypto regulation from the SEC to the CFTC. This shift could result in a new approach to regulating digital assets in the U.S. If this happens, it would significantly change how the crypto industry is overseen.
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