In the latest Ethereum news, it appears that the time is now up for the second-largest cryptocurrency which has so far avoided being named a security by regulators. This follows after a Wednesday announcement hinted that Prometheum is planning to launch custodial services for Ether, the Ethereum blockchain’s native coin.
From the look of things, Prometheum may have orchestrated the move to force the hands of the US Securities and Exchange Commission (SEC). That is as it pertains to declaring a stance on Ethereum’s legal status, having classified over a dozen other cryptocurrencies as securities.
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For what it’s worth, the majority percentage of the crypto industry has been at loggerheads with the SEC for many years. Top crypto firms such as Coinbase and Kraken, for instance, insist that most of the SEC’s rules are outdated. To this end, they have mostly been operating outside the regulatory framework of the agency.
The agency, on the other hand, has constantly maintained that its rules and regulations are sufficient for the crypto industry. At some point, the agency even filed lawsuits against these same crypto companies.
However, the crypto industry was not buying the legal threats as many immediately drew support for Coinbase and others while slandering the SEC’s approach to regulation. They argue that Ether is more like oil or gold — an asset that doesn’t fit the legal definition of a security and so can’t be registered.
Prometheus Backs US SEC
In all of this, however, it appears that Prometheus may have taken quite the unpopular route. The controversial crypto firm, which was founded by two brothers, Aaron and Benjamin Kaplan, argues that the SEC is well within its rights with the claims that most cryptocurrencies are securities.
To further prove their point, the Kaplan brothers hint that Prometheum will be able to list different crypto assets as securities under an exemption called Rule 144. This rule, according to the brothers, is normally used to trade restricted stocks.
However, the Kaplans believe that by using blockchain data to confirm whether an asset has been in circulation for more than a year, the exemption rule can come into play nicely with ETH. This means that Prometheum may be able to bypass issuers and not work directly with them. That is, ultimately, the firm has the opportunity to choose which assets to list.
As expected, Prometheum’s submission and SEC-supportive claims have raised curious eyebrows even beyond the crypto industry. Some lawmakers are questioning the authenticity of the firm, which has next to no history to write home about. As a fact, it is being widely pushed that the SEC Chair Gary Gensler may have created the firm to advance his regulatory agenda.
Further fueling the agenda rumors was a CNBC interview last June. In the interview, Gensler could be seen heaping praise on Prometheum’s exemplary registration. Its registration as a special purpose broker-dealer set a compliance pathway for other firms in the industry to emulate, Gensler noted.
In the same month, Prometheum was also invited to testify at a crypto congressional hearing. This was despite its seeming inexperience in the industry at the time.
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What It Means for The Crypto Industry
Before now, the constant debate over Prometheum’s proposals has been nothing but theoretical. However, Wednesday’s announcement may have caused a major shift in the outlook of crypto regulation. If Prometheum begins to offer Ether custodial services for institutional clients by late March as announced, that may become the only compliant way to offer assets like Ether for trading.
Meanwhile, Benjamin Kaplan has seized the opportunity to clear the air about the real intentions of the fast-rising firm. He recently disclosed that Prometheum is focused on building the crypto industry, rather than sabotaging it.
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