In a move that has raised eyebrows among U.S. lawmakers, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have come under scrutiny for granting Prometheum a Special-Purpose Broker-Dealer (SPBD) license. Lawmakers from the House Financial Services Committee, particularly the Republicans, are seeking answers from the regulatory bodies about the decision to authorize Prometheum despite the company’s lack of customer service track record.
Prometheum, a player in the emerging field of regulated digital asset offerings, had touted itself as a game-changer. However, as of yet, the company has not provided its services to a single customer, prompting concerns from legislators about its credibility.
The issue came to the forefront on August 15 when Chairman Patrick McHenry of the House Financial Services Committee, along with 22 other representatives, expressed their doubts about the SEC and FINRA’s decision. The letters addressed to both regulatory bodies questioned the logic behind authorizing Prometheum as an SPBD when the company has not demonstrated its ability to serve customers.
Authorization as an SPBD is significant as it grants firms the ability to custody digital securities, enabling them to buy, sell, and store digital asset securities under the purview of FINRA. The lawmakers’ primary concern stems from the fact that only Prometheum has received approval as an SPBD despite its lack of a customer base. Meanwhile, other crypto firms with active customer interactions are still awaiting regulatory approval.
In addition to their doubts about Prometheum’s operational credibility, the lawmakers have also raised national security concerns. They have demanded transparency regarding the approval process for Prometheum and have questioned the potential risks to national security posed by the company’s reported connections to the Chinese Communist Party.
The controversy surrounding Prometheum’s approval as an SPBD has ignited discussions within the industry. The House Financial Services Committee sought clarity on the offerings that Prometheum plans to support on its platform, as the company has been hesitant to disclose details about the digital asset securities it intends to deal with.
A pivotal moment in the narrative occurred on June 13 when Aaron Kaplan, co-founder of Prometheum, testified before a United States House Committee to discuss cryptocurrency regulations. During his appearance, Kaplan expressed support for the SEC’s utilization of traditional securities laws in regulating the crypto landscape.
Amid the backdrop of the SEC’s preparations to take legal action against major players like Binance and Coinbase, industry observers have noted the curious timing of Prometheum’s SPBD approval on May 17. The decision prompted skepticism among stakeholders, especially when Prometheum’s CEO appeared before Congress shortly after, seemingly in coordination with Democratic members, to present a pre-written narrative.
As the inquiry into Prometheum’s SPBD license approval continues, the questions raised by U.S. lawmakers highlight the ongoing challenges that regulators face in navigating the complex and rapidly evolving world of digital assets and cryptocurrencies.