Four Republicans Pen Letter to SEC and FINRA, Say Regulators ‘Complicit’ in Perpetuating Confusion in Crypto

Four Republican members of the U.S. House Committee on Financial Services are expressing concern over the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority’s (FINRA) stance on Prometheum Capital’s launch of Ethereum (ETH) custody services.

In a letter addressed to SEC Chair Gary Gensler and FINRA President and CEO Robert Cooke, U.S. Representatives John Rose, French Hill, Dusty Johnson and William R. Timmons IV say that the SEC has already acknowledged that Ethereum is not a security and that special purpose broker-dealers (SPBDs) such as Prometheum cannot offer custodial services for non-securities.

Despite this, the officials say that Prometheum has publicly stated that Ethereum is a security and even soft-launched custody services for the crypto asset in May.

“It continues to be unclear to us how, as a SPBD approved by FINRA to custody securities only, Prometheum can custody ETH in compliance with SEC and FINRA rules, and why the SEC and FINRA continue to allow Prometheum to hold ETH out to the public as a security.”

The letter says that Prometheum’s statement and actions are “misleading” and have already caused confusion in the marketplace, with the SEC and FINRA’s silence worsening the situation.

“The SEC and FINRA are complicit in perpetuating confusion and uncertainty in the marketplace, which ultimately harms market participants and consumers.

The SEC’s and FINRA’s silence is irresponsible and continues to raise troubling questions as it relates to the SPBD requirements and process as well as the SEC’s and FINRA’s ability to oversee broker-dealers and ensure the market’s integrity.”