The Blockchain Association is calling for an SEC investigation into potential misconduct in Prometheum SPBD license approval.
In an open appeal dated July 12, 2023, the Blockchain Association, a group championing progress within the digital money space, raised serious questions about some goings-on at the U.S. Securities and Exchange Commission (SEC). This group called for a deep dive into whether the SEC played fair when it gave a Special Purpose Broker-Dealer (SPBD) license to Prometheum Ember Capital, commonly known as Prometheum. They also wondered how Prometheum’s co-CEO, Aaron Kaplan, got the chance to speak before the U.S. House Financial Services Committee.
This call to action by the Blockchain Association underlines potential ethical issues that need to be explored by the SEC Office of Inspector General. This group works hard to make sure blockchain technology gets the support it needs and the public and policymakers know how it can change the way we do business.
The SEC’s Perspective on Digital Assets: A Cause for Concern
One of the trickiest parts of working in the digital asset space is figuring out how U.S. laws about securities apply to what they’re doing. After the SEC gave some advice about initial coin offerings in 2019, it went quiet. No new advice. No new rules. But Gary Gensler, the head of the SEC, has been clear about one thing – he thinks almost all digital assets are securities, apart from Bitcoin.
With Gensler in charge, the SEC has been quite tough on the digital assets industry. They’ve taken lots of companies to court, using new ways to interpret the law. They’ve also suggested new rules that would stop whole parts of the industry, like decentralized finance. But they haven’t tackled the main question: when do digital assets count as securities?
How Prometheum Got its SPBD License: A Case for Investigation
The approval of Prometheum as an SPBD by the Financial Industry Regulatory Authority (FINRA) on May 17, 2023, was a first. It’s even more surprising because it happened when the SEC was being tough on the digital assets industry. Other companies, with good business plans, have been trying to get an SPBD license. But their applications were turned down or put on hold.
And then there’s Prometheum. This company doesn’t have a product you can buy. It doesn’t list any assets. There’s no clear plan for the future. In recent cases against other companies, the SEC said that different parts of a business – like the exchange and the broker-dealer functions – should be separate. But Prometheum, which got approved as an SPBD, doesn’t follow this rule.
Shifting Stance and Congress Appearance
Prometheum did a turnaround that raised eyebrows. In 2021, they asked the SEC for advice on how laws apply to digital assets. Fast forward to now, and Prometheum is saying that Chair Gensler is right – there’s a clear way to register digital assets and we don’t need new laws.
Aaron Kaplan, co-CEO of Prometheum, even said as much to Congress on June 13, 2023. This flip-flop makes some people wonder. Did the SEC give Prometheum a special deal in return for their support? Or is Prometheum using its connections at the SEC to get ahead?
A Plea for Transparency and a Fair Playing Field
The Blockchain Association is worried that Chair Gensler might be using Prometheum’s SPBD license approval as a way to stop Congress from making new laws. The Association is also concerned about the SEC possibly pressuring FINRA to approve Prometheum’s SPBD license.
To get to the bottom of things, on June 16, 2023, the Association asked for any documents or emails related to this under the Freedom of Information Act. The digital money industry is waiting to see what will happen next. The Association hopes that an investigation by the SEC Office of Inspector General can either reveal any wrongdoing or show that there’s nothing to worry about.