Prometheum's Ethereum Custody Sparks SEC Security Concerns
Prometheum, a cryptocurrency firm that recently launched custody services for Ethereum, has come under fire from the Cedar Innovation Foundation. The crypto advocacy group accuses Prometheum of aligning too closely with the U.S. Securities and Exchange Commission (SEC) in its classification of Ethereum as a security.
In doing so, Prometheum is said to be supporting an SEC agenda that many industry insiders believe is driving cryptocurrency businesses away from the United States. The Cedar Innovation Foundation stated: "This announcement is simply the latest attempt orchestrated by the SEC to drive the crypto market out of the United States."
The controversy lies in how different regulators perceive Ethereum. While some financial regulators like Commodity Futures Trading Commission (CFTC) view it as a commodity, Prometheum's business model could disrupt this understanding by treating it as a security.
However, it should be noted that while Prometheum offers custody services for Ethereum classifying it as a security; they have yet to launch trading operations on this basis.
The distinction between cryptocurrencies being treated as commodities or securities is crucial because securities are subject to more stringent regulations than commodities.
Furthermore, if widely accepted that Ethereum constitutes security would mean exchanges dealing with ETH would need licenses – something most do not currently possess due to cost and regulatory complexity involved.
Prometheum’s stance has also drawn criticism since other firms argue they have been unable to meet regulatory requirements due to lack of clarity in rules around digital assets.
Adding fuel to the fire was last month's lawsuit filed by Consensys against SEC seeking judicial clarification whether or not Ethereum constitutes security - further highlighting ongoing debate within industry regarding its categorization.