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Prometheum Soft-Launches Controversial Ethereum Custody Service

Prometheum

Prometheum, a digital asset trading and custody firm, soft-launched on May 17 their controversial Ether (ETH) custody service with a full-scale launch planned for next month. The service, treating digital assets as securities, was first introduced to a few companies, as reported by Fortune on May 20. The complete launch is expected to take place in June.

Targeting Institutional Clients First

Prometheum’s new offering targets asset management firms, hedge funds, banks, and registered investment advisors, with plans to extend to retail clients in the second half of 2024. The company was brought to public attention last June when co-founder and co-CEO Aaron Kaplan testified before a U.S. House Committee in favor of the regulation of cryptocurrencies like securities.

In February, Prometheum expressed its plans to consider Ether as a security when it was about to introduce its custodial services, which led to heavy criticism from the crypto community. This step was supported by Aaron Kaplan, who said, “It does away with a lot of the arguments that stuff can’t be done under existing law. It is the first time that an investment contract digital asset security is being custodied and treated under the securities laws. ”

Potential Market Impact and Regulatory Conflicts

At first, some saw the SEC’s approval of Prometheum’s treatment of Ether as harmful to the likelihood of spot Ether ETFs. Yet, recent reports indicate that the SEC urges 19b-4 filers to hurry up, which has sparked hopes. Bloomberg ETF analysts Eric Balchunas and James Seyffart have subsequently tripled their predicted chances of an approved spot Ether ETF from 25% to 75%.

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Although Prometheum was established by the brothers Aaron and Benjamin Kaplan in 2017, it remained obscure until June 2023 when it acquired a broker-dealer license from both the SEC and the Financial Industry Regulatory Authority. At present, the launch of the company’s Ethereum custody service could cause a schism between the SEC and the Commodity Futures Trading Commission (CFTC). The CFTC which has classified Ether as a commodity in March, alerted that such product might result in the U.S. financial market rules conflicting.

According to CFTC Chair Rostin Behnam, so it will then put our registrants, our exchanges who list Ether as a futures contract kind of in non-compliance of SEC rules as opposed to CFTC rules.

Looking Ahead

While Prometheum is ready to go full-scale with the Ether custody service, the financial and regulatory situations are still in flux, and it is impossible to say what the company is up against. The result could have major input on the future of U.S digital asset trading and regulation.

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