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Republicans on the House Financial Services Committee (HFSC) are calling out the U.S. Securities and Exchange Commission (SEC) for its “shady approval” of the mysterious crypto broker Prometheum.
Led by Committee chair Patrick McHenry (R-NC), the politicians say that the “timing” of the approval “raises serious questions”—especially given the state of crypto regulation in the United States at large.
“The timing of the approval raises concerns that it was aimed at demonstrating that legislation is not needed because there is a workable regulatory framework for the custody of digital asset securities,” wrote the HFSC in a letter to the SEC last week, which was released on Tuesday.
On May 17, the Financial Industry Regulatory Authority (FINRA) approved Prometheum as the first-ever Special Purpose Broker-Dealer (SPBD) for digital assets. This came over two years after the regulatory regime was first established in December 2020, during which no other crypto exchange could manage to secure approval under the framework.
It also occurred in the same month that the HFSC held hearings related to digital asset legislation aimed at drawing clear lines around which crypto assets the SEC would have jurisdiction over.
SEC chairman Gary Gensler has often claimed that securities laws are clear in their current form and that non-compliant crypto firms are intentionally choosing not to follow the law.
In fact, as the HFSC points out, Gensler has touted Prometheum’s approval as evidence that there is a clear pathway for existing firms to come into compliance. Prometheum co-founder and co-CEO Aaron Kaplan did the same during testimony before Congress in June.
“While Prometheum claims it is the silver bullet for regulated digital asset offerings, it has not yet served a single customer,” argued the HFSC. “It has also refused to make public the digital asset securities that Prometheum ATS would support on its platform.”
The letter noted that it was “unclear” why FINRA—which is supervised by the SEC—would approve a firm “with no operating history” before all other applicants. It also said that the approval raised national security concerns, given that Prometheum is 20% owned by international conglomerate Wanxiang, which “has deep ties to the Chinese Communist Party (CCP).”
"Prometheum’s former relationships with Wanxiang and its affiliates have been reviewed by the SEC, which closed its investigation, and CFIUS, which never opened up a formal investigation," a spokesperson for Prometheum told Decrypt.
The Committee requested that the SEC and FINRA provide all documents and communications related to Prometheum’s approval by August 22 at 5 pm – one week from today.