The United States House Financial Services Committee and the House Agriculture Committee have written to the Securities and Exchange Commission (SEC) to clarify its position on Prometheum’s plans to offer custody services for the cryptocurrency Ether (ETH).
The letter, addressed to SEC Chair Gary Gensler, emphasizes the immediate need for the SEC to clarify where it stands because of potential regulatory disparities between the SEC and the Commodity Futures Trading Commission (CFTC) with respect to Ether’s classification.
Prometheum’s Custody Plans Spark Debate
The core of the debate stems from Prometheum’s announcement to provide institutional custody services for Ether, which has raised questions about the asset’s regulatory classification. Consequently, the letter from the legislators points out the confusion that this proposal will increase the CFTC’s treatment of ETH as a commodity despite indications that the SEC may consider it a security.
#NEW: Republicans on the House Financial Services Committee and @HouseAgGOP sent a letter to @SECGov Chair Gensler urging his agency to clarify its position with respect to SPBD Prometheum’s custody of #ETH.
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https://t.co/MGGB9NAvWi pic.twitter.com/1U8lqMw8Ao
— Financial Services GOP (@FinancialCmte) March 26, 2024
The nature of the dilemma has, therefore, led to fears of what could happen in the digital asset markets should this regulatory ambiguity continue.
SEC and CFTC’s Stance on Digital Assets
Nevertheless, the SEC has already given a hint that it considers ETH as a security, so this fact might be critical for approving spot Ether Exchange Traded Funds (ETFs) and other investment products related to ETH, including crypto accounts. In contrast, the CFTC has remained consistent in classifying virtual currencies like Bitcoin and Ether as commodities, claiming its authority over such virtual assets. Such contrast in the outlook of the two regulatory bodies has led to the inexistence of a clear classification regarding Ether.
The lawmakers’ letter to Gensler stresses the significance of the imminent SEC decision on this matter, claiming that the absence of clear guidelines from the regulators could be “irreparably harmful” to the digital asset markets. The letter queries the SEC to specify the stance on whether special purpose broker-dealers (SPBDs) such as Prometheum can hold non-security digital assets and the regulatory outcomes of such actions.
The request for clarity from the SEC does not only concern Prometheum as a specific example, but also about the general necessity of consistent and transparent regulatory frameworks for digital assets. The indecision of the classification of digital assets like Ether demonstrates the necessity of a consistent policy that conforms to the structure of the digital asset environment.
Call for Regulatory Clarity and Consistency
As such, the letter from the House Committees mirrors a growing view among market players and regulators for practical, implementable instructions that can foster further development and innovation in the digital asset market.
Consequently, the letter from the House Committees reflects a growing sentiment among market participants and regulators for clear, actionable guidance that can support the continued growth and innovation within the digital asset space.
Read Also: CFTC Classifies Ethereum and Litecoin as Commodities in KuCoin Case
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