A digital asset company called Prometheum Ember Capital LLC has recently garnered attention for being named the first Special Purpose Broker-Dealer (SPBD) for digital assets. Republican members of the House Financial Services Committee have expressed reservations about this decision, which is what led them to do so to ask the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) for clarification.
The House Financial Services Committee, headed by Chairman Patrick McHenry and supported by 22 other members, Delivered letters to both FINRA and the SEC on August 9, 2023. These letters call into question the “timing and circumstances” of Prometheum’s approval, especially given the concurrent legislative discussions over regulation for the digital asset market.
In response to the concerns raised, Prometheum highlighted the alignment of their technology with federal securities laws. They emphasized their commitment to creating a digital asset market infrastructure that meets these regulations.
Founded in 2017, Prometheum remained relatively under the radar in the crypto domain until co-founder and co-CEO Aaron Kaplan testified before the House committee in June. The company’s SPBD license, granted in May, has since raised eyebrows regarding its products, services and approval process.
A major bone of contention raised by the committee revolves around Prometheum’s previous partnership with Shanghai Wanxiang Blockchain Inc., a Chinese entity. Although their joint effort to develop blockchain trading software was eventually terminated, concerns remain over Wanxiang’s ties to the Chinese Communist Party (CCP).
Notable figures in the crypto industry, including Coinbase CEO Brian Armstrong, have expressed concern about Prometheum’s connections and the approval process. Armstrong underlined the great importance of equal treatment under the law, while BitBoy Crypto alluded to to possible secret collaborations between the crypto startup and the SEC.
In an effort for transparency, members of the House committee have urged both the SEC and FINRA to provide documents and communications records related to Prometheum’s SPBD license by August 22, 2023. It is also pertinent to note that the SEC had previously completed its investigation into Prometheum’s ties. with Wanxiang and its affiliates, with the Committee on Foreign Investment in the United States (CFIUS) refraining from launching a formal investigation into these associations, to report “Simple. Gary came up with the idea and then stamped it.”
The approval of Prometheum as an SPBD has sparked discussions about the regulatory framework of digital assets in the US. As lawmakers push for clarity on the approval mechanism, the crypto community remains vigilant, stressing the need for transparency and fair treatment.
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