The U.S. Securities and Exchange Commission (SEC) has received a letter from House Republicans requesting clarification on Prometheum and whether Ethereum is regarded as a security.

Prometheum, a U.S. crypto securities platform, had intended to start holding Ethereum (ETH), but these plans are currently on hold due to rumors that the SEC intends to label ETH—the native coin of the Ethereum network—as a security.

Lack of Transparency in SEC SPBD Regime

“In particular, we are concerned by the lack of transparency in the Securities and Exchange Commission’s (SEC) SPBD [special purpose broker-dealer] regime and the SEC’s failure to address Prometheum’s intent to custody an asset that the SEC and the Commodity Futures Trading Commission (CFTC) have recognized as a non-security digital asset. We urge you to clarify the SEC’s position with respect to a SPBD’s ability to custody non-securities, willingness to address SPBD non-compliance, regulatory classification of ETH, and position regarding Prometheum’s announcement.” House Republicans letter to the SEC.

Numerous American-based businesses have reportedly been served with subpoenas that aim to classify ether as a security. The way the SEC categorizes ETH might render the cryptocurrency unlawful, which would place regulated businesses in a difficult situation.

Very Unlikely for the SEC to Designate Ethereum as a Security

Many in the cryptocurrency community contend that since the SEC approved ETH futures trading on authorised exchanges in 2023, it is doubtful that the regulator will classify ETH as a security.

In a recent interview with Cryptonews, Kenzi Wang, general partner and co-founder of Symbolic Capital, stated that it is extremely improbable that Ethereum will be categorised as a security by the SEC. According to Wang, the SEC's decision to designate ETH as a security would not only be in direct opposition to decades of tradition but also to the Commodity Futures Trading Commission (CFTC), its partner regulatory agency.

"The CFTC has made it abundantly evident that they see ETH as a commodity—most notably in 2022 filings surrounding the FTX/Alameda investigation—while the SEC continues to levy vague statements about the potential security status of ETH," Wang remarked.

Ethereum is not considered a security, but rather a decentralised cryptocurrency. Regulators such as the SEC are still keeping an eye on the cryptocurrency market and may offer more guidance and sudden change or new rulings in the future. It’s essential to stay updated on regulatory developments.