In a joint effort, Republican lawmakers led by Home Monetary Companies Committee Chair Patrick McHenry and Home Agriculture Committee Chair Glenn Thompson have referred to as upon Securities and Trade Fee (SEC) Chair Gary Gensler to offer additional clarification on the company’s stance concerning the custody of Ethereum (ETH) by Prometheum.
The lawmakers, together with Representatives French Hill, Dusty Johnson, Tom Emmer, and Warren Davidson, expressed considerations over the dearth of transparency within the SEC’s Particular Objective Dealer-Supplier (SPBD) regime and the potential ramifications of permitting Prometheum to proceed with its custody services for ETH.
Recognition Of Ethereum As Non-Safety
Of their letter despatched on Tuesday, the lawmakers emphasised the SEC and Commodity Futures Buying and selling Fee’s (CFTC) earlier recognition of Ethereum as a non-security digital asset.
Primarily based on this precedent, they identified that the SEC’s present regulatory framework doesn’t allow SPBD custody of non-security digital property. The lawmakers additionally warned that permitting Prometheum to proceed below these circumstances may have “irreparable penalties” for the digital asset markets.
The Republican lawmakers urged Chair Gensler to make clear the SEC’s place on a number of key elements, together with the flexibility of SPBDs to custody non-securities, the SEC’s strategy to addressing SPBD non-compliance, Ethereum’s regulatory classification, and the SEC’s particular stance concerning Prometheum’s latest announcement.
The letter additional raised considerations concerning the lack of a transparent definition for “digital asset securities” and the SEC’s failure to offer complete steerage or suggest guidelines for asset classification inside the digital asset market.
The lawmakers additionally expressed their disappointment with Chair Gensler’s refusal to acknowledge Ethereum as a non-security digital asset, stating that his “unwillingness” to make clear the remedy of ETH has contributed to the confusion and uncertainty surrounding its classification.
Lawmakers Urge Decision
The lawmakers criticized the SEC for creating “uncertainty” amongst regulated entities by failing to establish which digital property needs to be thought-about “digital asset securities.”
They referenced short-term frameworks established to facilitate buying and selling and custodial providers for digital asset securities. The SEC’s Division of Buying and selling and Markets issued a no-action letter to FINRA in September 2020 outlining situations for registered broker-dealers to function an Different Buying and selling System (ATS) buying and selling digital asset securities. The letter additional reads:
Regardless of this historical past of recognizing Ethereum as a non-security digital asset, you’ve got constantly refused to acknowledge that ETH is just not a safety. In your March 2023 testimony earlier than the Home Committee on Monetary Companies you declined to reply a number of questions on whether or not ETH needs to be thought-about a commodity. Your unwillingness to make clear the remedy of ETH solely exacerbates the confusion and uncertainty concerning ETH’s classification as demonstrated by the Prometheum announcement.
In the end, the letter confused the necessity for regulatory readability and a complete strategy to digital asset classification to reduce uncertainty and foster progress inside the digital asset ecosystem.
They referred to as on Chair Gensler to handle their considerations promptly, contemplating the potential implications for market contributors and the broader digital asset markets.
Chair Gensler and the SEC have but to reply to the letter formally, however the business awaits additional developments because the regulatory panorama for digital property continues to evolve.
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