Legislative Scrutiny on Prometheum’s Endorsement
Firstly, U.S. legislative members are scrutinizing the decision the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) made regarding Prometheum’s endorsement. Recognized as the sole special-purpose broker-dealer for digital assets, the company’s lack of clientele and operational background, coupled with its alleged ties to the Chinese administration, have certainly raised eyebrows.
House Financial Services Committee’s Stance
Subsequently, the House Financial Services Committee recently revealed that its chairman, Patrick McHenry, and other Republican members are actively investigating the SEC and FINRA’s decision on Prometheum. They dispatched letters on August 9 to SEC Chair Gary Gensler and FINRA President and CEO Robert Cook. Moreover, a statement from the Financial Services GOP’s Twitter handle highlighted the committee members’ concerns.
Congressman Fitzgerald’s Concerns
Additionally, Congressman Scott Fitzgerald has voiced his concerns about the approval, especially given Prometheum’s alleged ties to the Chinese Communist Party. He emphasized the need for clarity regarding this decision.
Legislative Requests and New Broker-Dealer Category
On another note, the legislative members have asked the SEC to share all relevant documents related to Prometheum’s application by August 22, 2023. In 2020, the SEC introduced a new broker-dealer category, termed special-purpose brokers-dealers (SPBDs), to facilitate digital asset securities’ custody. Interestingly, FINRA approved the first SPBD, Prometheum Ember Capital LLC, in May 2023. However, several other entities are still waiting for their SPBD approval. Consequently, this delay has caused the legislators to voice concerns over Prometheum’s approval timing and context.
Committee’s Observations and Concerns
Furthermore, the committee members pointed out that Prometheum hasn’t served any customers yet and hasn’t been transparent about the digital asset securities it plans to support. Moreover, the company lacks the infrastructure to offer clearing or settlement services, crucial for operating as an alternative trading system. The decision to approve a company with no operational history over other applicants has raised questions. Lastly, concerns have emerged over Prometheum’s alleged ties to the Chinese government, posing potential national security and data privacy risks. Congressman Ritchie Torres has previously called for an investigation into the license the SEC awarded to Prometheum.
