Prometheum Crypto Approval: Lawmakers Open Investigation!

McHenry and several lawmakers sent letters to Robert Cook, CEO of FINRA, and Gary Gensler, CEO of the SEC. In those letters, lawmakers raised their concerns related to Prometheum’s approval as a Special Purpose Broker-Depository (SPBD).

Prometheum Approved by FINRA

On May 17, the Financial Industry Regulatory Authority (FINRA) gave approval to Prometheum Ember Capital LLC as a Special Purpose Broker-Depository (SPBD) for cryptos.

Several lawmakers, led by Patrick McHenry, chairman of the House Financial Services Committee, have taken steps to investigate the approval. On August 9, they sent letters to Robert Cook of FINRA, and Gary Gensler of the SEC.

These letters reflect concerns about the adequacy of Prometheum’s approval, according to a yesterday’s press release. Indeed, the regulatory framework of the crypto market is still only at a stage of development.

Approval Concerns

There are many concerns about Prometheum’s endorsement. First, the SEC only introduced the new class of special purpose broker-dealers, or SPBDs, in December 2020. Then, FINRA had not approved any SPBDs for the first two years. Yet Prometheum was (suddenly) approved as the first and only SPBD on May 17, 2023.

Additionally, the approval coincides with legislative discussions on cryptocurrency regulation. This raises doubts about its compliance with the regulatory framework. Prometheum, although presented as a regulated platform, has not yet had a single customer. Also, it has yet to disclose which cryptocurrencies it will support.

Uncertainty also persists about eligible assets, as the SEC has not clearly defined their nature. Prometheum’s inability to offer clearing and settlement services raises questions about why it was approved by FINRA. These services are indeed essential in an alternative trading system.

Finally, past ties to a Chinese entity and national security implications heighten concerns around this approval.