The cryptocurrency world is abuzz with a custody quandary. House Republicans are demanding clarity from the SEC on Prometheum, a US crypto platform, and its plan to offer custody services for Ethereum (ETH).

Prometheum in Limbo: Is Ethereum a Security?

Prometheum's plans have hit a roadblock due to speculation that the SEC might classify ETH as a security. This potential shift could render ETH custody illegal for regulated firms like Prometheum. The situation is further muddied by reports of US companies receiving subpoenas regarding ETH's security status.

House Republicans Demand Transparency

In a letter to the SEC, House Republicans expressed concern about the lack of transparency surrounding the Special Purpose Broker-Dealer (SPBD) regime and the SEC's silence on Prometheum's plans. They highlight that both the SEC and the Commodity Futures Trading Commission (CFTC) have previously recognized ETH as a non-security digital asset.

The letter urges the SEC to clarify its stance on several crucial points:

Can SPBDs hold non-securities like ETH?

How will the SEC address potential non-compliance within the SPBD regime?

What is the official classification of ETH as a security or non-security?

How does the SEC view Prometheum's planned ETH custody services?

Is an SEC About-Face Likely?

Many crypto experts believe the SEC is unlikely to categorize ETH as a security. This skepticism stems from the SEC's prior approval of ETH futures trading on regulated exchanges in 2023.

Kenzi Wang, co-founder at Symbolic Capital, argues that such a move would contradict not only years of precedent but also the CFTC's stance on ETH as a commodity. The CFTC's view was evident in 2022 filings related to the FTX/Alameda investigation.

Ethereum's Regulatory Fog

While Ethereum operates as a decentralized cryptocurrency, regulatory agencies like the SEC continue to scrutinize the crypto landscape. Investors and firms should stay informed about evolving regulations and potential sudden changes or rulings.