Prometheum's License Approval: Republican Lawmakers Challenge SEC and FINRA Decisions
A digital asset company called Prometheum Ember Capital LLC has recently gained attention for being named the first Special Purpose Broker-Dealer (SPBD) for digital assets. Republican members of the House Financial Services Committee have expressed reservations about this decision, leading them to ask the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) for explanation.
The House Financial Services Committee, spearheaded by Chair Patrick McHenry and supported by 22 other members, dispatched letters to both FINRA and the SEC on August 9, 2023. These letters question the "timing and circumstances" of Prometheum's approval, especially given the concurrent legislative discussions on digital asset market regulations.
In response to the concerns raised, Prometheum emphasized their technology's alignment with federal securities laws. They highlighted their commitment to crafting a market infrastructure for digital asset securities that adheres to these regulations.
Founded in 2017, Prometheum had remained relatively under the radar in the crypto domain until its co-founder and co-CEO, Aaron Kaplan, testified before the House committee in June. The firm's SPBD license, granted in May, has since raised eyebrows regarding its products, services, and the approval process.
A significant point of contention raised by the committee revolves around Prometheum's previous association with Shanghai Wanxiang Blockchain Inc., a Chinese entity. Although their collaborative effort to develop blockchain trading software was eventually terminated, lingering concerns persist due to Wanxiang's affiliations with the Chinese Communist Party (CCP).
Noteworthy figures in the crypto industry, including Coinbase CEO Brian Armstrong, have expressed their apprehensions regarding Prometheum's connections and the approval process. Armstrong underscored the paramount importance of equal treatment under the law, while BitBoy Crypto alluded to potential undisclosed collaborations between the crypto startup and the SEC.
In a bid for transparency, the House committee members have urged both the SEC and FINRA to furnish documents and communication records related to Prometheum's SPBD license by August 22, 2023. It's also pertinent to mention that the SEC had previously concluded its investigation into Prometheum's ties with Wanxiang and its affiliates, with the Committee on Foreign Investment in the United States (CFIUS) refraining from initiating a formal probe into these associations, stating "Simple. Gary came up with the idea and then stamped it."
The endorsement of Prometheum as an SPBD has ignited discussions on the regulatory framework of digital assets in the U.S. As lawmakers strive for clarity on the approval mechanism, the crypto community remains vigilant, emphasizing the imperative of transparency and equitable treatment.
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