Patrick McHenry, the Chairman of the House Financial Services Committee, and other Republican lawmakers demanded transparency from the heads of the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) over the approval process for Prometheum.
#NEW: Chairman @PatrickMcHenry led Republicans on the Financial Services Committee in letters to @FINRA and @SECGov regarding the shady approval of Prometheum as the only Special Purpose Broker-Dealer for digital assets.
— Financial Services GOP (@FinancialCmte) August 15, 2023
The lawmakers sent two letters on the issue, one to the FINRA President and CEO Robert Cook, and the other addressed to SEC Chairman Gary Gensler.
In particular, the lawmakers questioned how Prometheum was the sole entity granted a license under the SEC’s special purpose broker-dealers (SPBD) framework, which was introduced in December 2020.
“For the first two years that the regime was effective, FINRA did not approve any SPBDs… Several other firms have sought approval under the SPBD framework but have not been granted approval by FINRA,” the letter stated.
According to the lawmakers, the “timing and circumstances” of this approval raise serious questions, including whether it was aimed at demonstrating that legislation in this regard was not needed because an existing workable regulatory framework for digital assets is already in place.
Prometheum was a relatively unknown crypto firm, until the firm’s CEO made headlines for his controversial viewpoints on crypto regulation, including the fact that the SEC has already provided a compliant path forward for digital asset firms, and that some of these firms wilfully skirt the laws because it suits them better to do so.
In an episode of Unchained, Prometheum CEO Aaron Kaplan even argued that Ethereum is a security, along with the overwhelming majority of cryptocurrencies except for Bitcoin.
“While Prometheum claims it is the silver bullet for regulated digital asset offerings, it has not yet served a single customer. It has also refused to make public the digital asset securities that Prometheum ATS would support on its platform,” wrote the lawmakers in the letter.