Prometheum, an alternative trading platform for crypto securities, recently launched custodial services for Ethereum (ETH). This move has significant implications for the legal status of ETH, the second-largest cryptocurrency by market capitalization.
Prometheum’s strategy is to compel regulators, particularly the Securities and Exchange Commission (SEC), to recognize Ethereum as a security. The company received regulatory approval in 2021 to operate as an alternative trading platform for securities. It gained further attention when it obtained a special-purpose broker-dealer license from the Financial Industry Regulatory Authority (FINRA).
The SEC has refrained from definitively classifying Ethereum as a security, despite declaring several other cryptocurrencies as such. Prometheum aligns with the SEC’s assessment that most cryptocurrencies are securities and argues that Ethereum can be listed as a security under an exemption called Rule 144, typically used for trading restricted stocks.
Prometheum’s Custodial Services and ETH’s Legal Status
Prometheum’s custodial services for Ethereum could potentially force the SEC to determine Ethereum’s legal status. The company’s registered status with FINRA and the SEC adds weight to its claim. Legal experts and academics speculate that the SEC may be forced to rule on Ethereum’s classification due to Prometheum’s custodial launch.
Prometheum’s approach has drawn criticism from the crypto industry and Republican lawmakers who accuse SEC Chair Gary Gensler of supporting the firm to advance his regulatory agenda.
Prometheum’s introduction of Ethereum custodial services has thrust the debate over Ethereum’s legal classification into the spotlight. This move could compel the SEC to decide whether Ethereum should be classified as a security, challenging the crypto industry’s argument for new laws. The success of Prometheum’s approach is still uncertain, and it remains to be seen how subsequent SEC administrations will respond.