Promethium Ethereum Protection Sparks Debate Over Asset Allocation

Promethium, a digital asset trading and custody firm, is expected to launch its Ethereum (ETH) custody service on Friday, May 17, 2024 at full scale in June.

The move reignites the debate surrounding the classification of cryptocurrencies, as Promethium Services considers Ethereum a security under the US Securities and Exchange Commission (SEC).

TLDR

Prometheum launched Ethereum custody services on Friday, classifying ETH as a security in accordance with SEC regulations. The move has sparked controversy, with some saying Prometheus is working with the SEC to misclassify Ethereum. The SEC has not officially declared Ethereum safe, but it is working internally in its estimation. Speculation arose that the SEC might approve Spot Ethereum ETFs, which would classify ETH as a commodity and not a security. Promethium's securities launch represents an attempt by the company's strategy to offer a compliant crypto business under existing securities laws.

Promethium's launch of an Ethereum escrow service has drawn criticism from the crypto community, with some accusing the firm of colluding with the SEC to misclassify Ethereum.

Cedar Innovation Foundation, a crypto advocacy group;

“This announcement is simply the latest attempt by the SEC to drive the crypto market out of the United States. The SEC and Prometheum stand alone on the question of whether ETH is a security.”

Although the SEC has not publicly announced the security of Ethereum, there are allegations that the agency has been working internally on this assumption.

In the year In April 2024, Ethereum software giant Consensus filed a lawsuit against the SEC, seeking proof that Ethereum is not a security.

Unredacted portions of the lawsuit reveal that the SEC has been considering Ethereum as a security since March 2023.

Classifying Ethereum's security as Promethium conflicts with the opinions of other US financial regulators, such as the Commodity Futures Trading Commission (CFTC), which has certified Ethereum as a commodity.

This difference has raised concerns about possible consequences for US financial market rules.

Let's hope for Spot Ethereum ETFs

Despite the controversy surrounding Promethium's security service, there is speculation that the SEC may soon approve Ethereum exchange-traded funds (ETFs).

Bloomberg ETF analysts Eric Balchunas and James Seifert jumped from 25% to 75%, citing political pressure as a possible motivation for the SEC's change in position. The proposed ETFs classify Ethereum as a commodity, not a digital asset security.

In the year Promethium, founded in 2017 by brothers Aaron and Benjamin Kaplan, takes an opposing view on crypto regulation, arguing that there is already a clear legal way to trade crypto under existing securities laws.

The company received a broker-dealer license from the SEC and the Financial Industry Regulatory Authority (FINRA) in June 2023, allowing it to hold digital asset securities.

Aaron Kaplan, co-CEO of Promethium, believes that the launch of Ethereum's custody service will “eliminate a lot of disputes that cannot be handled under existing rules.” He added, “This…is the first time that an investment contract has been protected by digital asset security and treated under securities laws.”