In a joint effort, Republican lawmakers led by Home Monetary Providers Committee Chair Patrick McHenry and Home Agriculture Committee Chair Glenn Thompson have referred to as upon Securities and Alternate Fee (SEC) Chair Gary Gensler to supply additional clarification on the company’s stance relating to the custody of Ethereum (ETH) by Prometheum.

The lawmakers, together with Representatives French Hill, Dusty Johnson, Tom Emmer, and Warren Davidson, expressed issues over the shortage of transparency within the SEC’s Particular Objective Dealer-Vendor (SPBD) regime and the potential ramifications of permitting Prometheum to proceed with its custody services for ETH.

Recognition Of Ethereum As Non-Safety

Of their letter despatched on Tuesday, the lawmakers emphasised the SEC and Commodity Futures Buying and selling Fee’s (CFTC) earlier recognition of Ethereum as a non-security digital asset.

Based mostly on this precedent, they identified that the SEC’s present regulatory framework doesn’t allow SPBD custody of non-security digital belongings. The lawmakers additionally warned that permitting Prometheum to proceed below these circumstances may have “irreparable consequences” for the digital asset markets.

The Republican lawmakers urged Chair Gensler to make clear the SEC’s place on a number of key features, together with the flexibility of SPBDs to custody non-securities, the SEC’s method to addressing SPBD non-compliance, Ethereum’s regulatory classification, and the SEC’s particular stance relating to Prometheum’s latest announcement.

The letter additional raised issues concerning the lack of a transparent definition for “digital asset securities” and the SEC’s failure to supply complete steering or suggest guidelines for asset classification throughout the digital asset market.

The lawmakers additionally expressed their disappointment with Chair Gensler’s refusal to acknowledge Ethereum as a non-security digital asset, stating that his “unwillingness” to make clear the remedy of ETH has contributed to the confusion and uncertainty surrounding its classification.

Lawmakers Urge Decision

The lawmakers criticized the SEC for creating “uncertainty” amongst regulated entities by failing to determine which digital belongings ought to be thought of “digital asset securities.”

They referenced short-term frameworks established to facilitate buying and selling and custodial companies for digital asset securities. The SEC’s Division of Buying and selling and Markets issued a no-action letter to FINRA in September 2020 outlining circumstances for registered broker-dealers to function an Various Buying and selling System (ATS) buying and selling digital asset securities. The letter additional reads:

Regardless of this historical past of recognizing Ethereum as a non-security digital asset, you’ve got persistently refused to acknowledge that ETH shouldn’t be a safety. In your March 2023 testimony earlier than the Home Committee on Monetary Providers you declined to reply a number of questions on whether or not ETH ought to be thought of a commodity. Your unwillingness to make clear the remedy of ETH solely exacerbates the confusion and uncertainty relating to ETH’s classification as demonstrated by the Prometheum announcement.

Finally, the letter careworn the necessity for regulatory readability and a complete method to digital asset classification to attenuate uncertainty and foster development throughout the digital asset ecosystem.

They referred to as on Chair Gensler to handle their issues promptly, contemplating the potential implications for market individuals and the broader digital asset markets.

Chair Gensler and the SEC have but to answer the letter formally, however the business awaits additional developments because the regulatory panorama for digital belongings continues to evolve.