A group of Republican lawmakers, including the chairs of the House Financial Services Committee and the House Agriculture Committee, have formally asked SEC Chairman Gary Gensler to provide clear guidance on the regulatory stance regarding escrow. of non-security digital assets by special purpose brokers. Distributors (SPBD).
He letter of March 26 specifically demands clarity on the status of ethereum (eth) and further requests the regulator to establish clear definitions for various terms related to cryptocurrencies, digital assets, securities and investment contracts.
The letter was signed by 48 members of Congress, including House Financial Services Committee Chairman Patrick McHenry and House Agriculture Committee Chairman Glenn Thompson. Lawmakers asked for a response to their questions by April 9.
The state of ethereum
According to the letter, the SEC did not propose a rule or provide comprehensive guidance for asset classification, and the term “digital asset securities” remains undefined.
The lawmakers said that despite a public filing from both the SEC and CFTC identifying eth as a worthless digital asset, there are concerns about the lack of transparency in the SEC's SPBD regime and the potential regulatory implications of allowing such custody services.
The letter raises the question:
“Is eth a digital asset security?”
The query is followed by several other questions depending on the answer.
The letter comes in the wake of Prometheum Inc.'s announcement that its subsidiary, Prometheum Ember Capital, a FINRA-approved SPBD, plans to offer ethereum custody services to institutional clients.
They emphasized the “alarming scenario” posed by Prometheum's announcement, arguing that it could have “irreparable consequences for digital asset markets” if allowed to proceed under the current regulatory framework, which does not explicitly allow SPBD custody of digital assets. that are not security. .
Exacerbating the problem
Highlighting the discrepancy between the SEC's enforcement actions and the historical recognition of eth as a worthless digital asset, the letter criticized the SEC for failing to provide comprehensive guidance or rules for the digital asset market regarding asset classification. .
Lawmakers said this lack of clarity has “exacerbated” uncertainty within the digital asset ecosystem, complicating the ability of regulated entities to comply with SEC regulations.
The letter also highlights the broader implications of the SEC potentially classifying eth as a digital asset security, including the impact on commodity derivatives exchanges registered with the CFTC and the availability of eth futures for trading.
Such a decision could have significant repercussions for market participants, potentially eliminating access to essential risk management tools and causing significant price dislocation across the eth market.
The letter concludes by warning of the “chilling effect” on US digital asset markets if regulatory uncertainty persists, emphasizing the importance of clear and consistent regulatory guidance to ensure continued growth and innovation within the cryptocurrency space. digital assets.
