- Republicans on the House Financial Services Committee have criticized the SEC’s approval of Prometheum, questioning its timing and legitimacy amidst complex crypto regulations
- Prometheum gained a pioneering SPBD license in May with CEO Kaplan testifying before the HFSC shortly afterwards
- The HFSC’s letter probes into undisclosed assets, national security concerns, and why Prometheum received approval without a track record
Republican members of the House Financial Services Committee (HFSC) have voiced their opprobrium regarding the US Securities and Exchange Commission’s (SEC) approval of crypto platform Prometheum. Following the appearance of Prometheum’s CEO at an HFSC hearing in June, which led to an outcry among crypto natives, Committee Chair Patrick McHenry and his colleagues have raised pointed questions about the timing and legitimacy of Prometheum’s approval, particularly given the complex landscape of cryptocurrency regulation in the United States.
Prometheum Was Awarded SPBD license
Prometheum was awarded a Special Purpose Broker-Dealer (SPBD) license in the US in May, the first of its kind for digital asset securities. This followed an avowed crackdown on unregistered broker-dealers by the SEC and allowed Prometheum to label itself a “securities-regulated marketplace.” CEO Aaron Kaplan was then wheeled out in front of the HFSC just weeks later to talk up the SEC’s approach to regulation that had allowed it to reach this exalted status.
SEC Chairman Gary Gensler has consistently asserted that the current securities laws are unambiguous and that non-compliant cryptocurrency companies are deliberately choosing to circumvent them. Gensler held up Prometheum’s approval as evidence of the route that existing crypto companies can take to achieve compliance.
Almost everyone has smelt a rat, however, and the HFSC’s concerns were formalized in a letter addressed to the SEC this week. The letter pointedly questions the timing of the approval, suggesting that it might have been orchestrated to demonstrate the efficacy of the existing regulatory framework for digital asset securities, thereby undermining the need for further legislation.
Platform Has Yet to Go Live
Members of the committee highlighted that despite Prometheum’s assertions of being a solution for regulated digital asset offerings, the company is yet to serve any customers. Furthermore, they pointed out that Prometheum has refrained from disclosing the specific digital asset securities that its platform, Prometheum ATS, would support, right at a time when cryptocurrencies are going through an SEC-inspired identity crisis with regard to securities.
The HFSC’s letter also questions why FINRA, a regulatory entity supervised by the SEC, would bestow approval upon a company that lacks an operational history, especially ahead of other applicants. The letter additionally raises concerns about national security due to Prometheum’s 20% ownership by international conglomerate Wanxiang, an entity with known ties to the Chinese Communist Party (CCP).
