Prometheum Launches Ether Custody Service; Treating ETH as a Security

Vitalik Buterin Ethereum Eth

Digital asset trading and custody firm Prometheum has started its controversial Ether (ETH) custody service, which treats ETH as a security. The service was soft-launched on May 17 to a few select companies, with a full launch planned for June.

According to a May 20 report from Fortune, the rollout is part of Prometheum’s plan to expand its digital assets platform.

Prometheum Targets Institutional Clients with Ether Custody Service

Prometheum is focusing its services on asset management firms, hedge funds, banks, and registered investment advisors, with plans to expand to retail clients later in 2024.

The company gained attention in June last year when its co-founder and co-CEO Aaron Kaplan testified before a United States House Committee, expressing support for regulating crypto under current securities laws. This perspective aligns with the views of the Securities and Exchange Commission.

In February, Prometheum announced it would treat Ether as a security when launching its custodial services later in the year, drawing criticism from the crypto community.

“It eliminates a lot of the arguments that things can’t be done under existing laws,” explained Aaron Kaplan. “It marks the first time that an investment contract digital asset security is being custodied and treated under the securities laws.”

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SEC’s Actions and Prometheum’s Impact on Ether Market Dynamics

Initially, the SEC’s approval of Prometheum’s treatment of Ether was viewed negatively for spot Ether ETFs. However, recent reports indicate that the SEC is urging applicants to expedite their 19b-4 filings, renewing hopes for Ether ETF approvals.

Source: Tony Edward

As a result, Bloomberg ETF analysts Eric Balchunas and James Seyffart have revised their estimated chances of an approved spot Ether ETF from 25% to 75%.

Prometheum, founded by brothers Aaron and Benjamin Kaplan in 2017, gained prominence in June 2023 when it obtained a broker-dealer license from the SEC and the Financial Industry Regulatory Authority (FINRA).

However, the launch of Prometheum’s Ethereum custody service may potentially strain relations between the SEC and the U.S. commodities regulator.

The Commodity Futures Trading Commission (CFTC), which has historically classified Ether as a commodity, expressed concerns in March about such a product potentially conflicting with U.S. financial market regulations.

“It will then put our registrants, our exchanges who list Ether as a futures contract sort of in non-compliance of SEC rules as opposed to CFTC rules,” explained CFTC Chair Rostin Behnam at the time.

Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.


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