Republican members of the House Financial Services Committee are demanding that SEC Chair Gary Gensler explain how Prometheum got approval from the SEC.
The lawmakers have petitioned both financial regulators for more information regarding the company’s registration status.
Republicans Demand Answers
The Republican lawmakers on the Financial Services Committee, led by Chairman Patrick McHenry, have questioned how the previously unknown entity was able to beat other, more established entities to obtain approval from the United States Securities and Exchange Commission (SEC) as a broker-dealer for crypto. The members have directed their inquiries to the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) in a letter signed by 23 House Financial Services Lawmakers.
Several questions have been raised regarding the context of Prometheum’s approval, especially since the approval came shortly after a joint hearing held by the House Financial Committee and the House Agriculture Committee on digital assets. The letter stated,
“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.”’
A Play By Gensler?
The letter has also flagged serious concerns about whether the Securities and Exchange Commission put Prometheum up as a poster firm to shore up SEC Chair Cary Gensler’s argument that no new laws were required to regulate the crypto space in the United States. The approval comes just before McHenry’s committee is about to send the digital assets legislation to the house floor.
However, Prometheum executives have insisted there is nothing to be surprised about regarding the approval. They added that they followed the registration process step-by-step, just like other firms looking for approval. Prometheum’s co-CEO, Aaron Kaplan, has also insisted that the firm would go about demonstrating the right way to build a crypto platform that is also fully compliant with current laws and regulations. In response to the letter, the company released a statement, responding,
“Prometheum purpose-built its technology with the goal to develop a market infrastructure for digital asset securities that is compliant with the federal securities laws. This technology will serve as a building block for a compliant and orderly digital asset securities marketplace that protects investors and serves their best interests.”
Lawmakers Wary Of Prometheum
The Republican lawmakers are the latest to call for more information and an investigation into the sudden approval of Prometheum, a company that has not done any trading as yet. Several other Republican members of the Senate have called for greater scrutiny of the prevailing situation. Republican lawmaker Thomas Tuberville has alleged that the company may have provided false testimony to Congress or violated several US Securities Laws. Meanwhile, Democrat lawmaker Ritchie Torres has requested an investigation of the Securities and Exchange Commission.
Prometheum’s China Connection
Prometheum has previously collaborated with the Shanghai Wanxiang Blockchain Inc. to develop a blockchain trading software, a point that has been noted by lawmakers. While the collaboration has been concluded, reports have highlighted the involvement of a Chinese firm during Prometheum’s early days. According to several reports, a Chinese entity owns a portion of the company and even has a representative, Feng Ziao, as a director at Prometheum. Lawmakers have also pointed to the connection between Wanxiang and the Chinese Communist Party (CCP), which has led to significant concerns about national security and data privacy.
Furthermore, Kaplan’s posts on social media have also garnered considerable attention. Kaplan’s views closely align with that of the Securities and Exchange Commission and differ from those taken by crypto-space members. Kaplan has insisted that existing Federal Securities Laws are sufficient to regulate crypto. Kaplan and other top executives at Prometheum’s connections with the Securities and Exchange Commission and FINRA have also been discussed.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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