CFTC Contradicts SEC Over Prometheum’s Custody Of ETH As Security

The head of the commodities regulator has expressed contradiction with the Securities and Exchange Commission (SEC) over Prometheum’s Ethereum (ETH) claims. He warned that allowing one of its registered firms to custody Ethereum could create conflict within U.S. financial market regulations. According to Commodity Futures Trading Commission (CFTC) chairman Rostin Behnam, both Bitcoin and Ethereum are commodities.

CFTC & SEC Clash On Prometheum’s Ethereum Custody Plans

CFTC Chairman Behnam testified before the House Committee on Agriculture on Wednesday, March 6. Moreover, he addressed the recent decision by SEC special purpose broker-dealer (SPBD) licensed Prometheum to offer ETH custody services. Countering the entity’s claims, he declared, “Both Bitcoin and Ether are commodities.”

While the CFTC and the SEC aren’t on the similar page, Behnam indicated that he doesn’t believe Prometheum’s decision aligns with the SEC’s view of Ethereum. He emphasized the critical nature of the SEC’s response to Prometheum’s decision. In the latest testimony, the CFTC Chairman noted, “The issue is if we do have any action by the SEC to essentially validate [Prometheum’s] decision, i.e. constituting Ether as a security, 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.”

Regarding the regulatory ambiguity surrounding Ether, Behnam noted that SEC-registered SPBDs are only permitted to custody securities. However, SEC Chair Gary Gensler has not explicitly clarified whether Ethereum should be considered a security or a commodity.

Also Read: SEC Commissioners Criticize ShapeShift Settlement for Lack of Clarity

Behnam Urges Congress To Intervene

Additionally, Behnam stressed the importance of preserving “market integrity.” Moreover, he highlighted that considering Ethereum as a commodity has proven effective for market functionality over the years, hence, the request by Prometheum shouldn’t be accepted. In his prepared remarks, Behnam underscored the challenges posed by market evolution and technology, stressing the need for legislative action from Congress.

In addition, he pointed out that the increased participation in the crypto market has pushed the limits of the existing regulatory framework, particularly in addressing the regulatory gap over digital commodity asset spot markets. Behnam reiterated his belief that Congress must intervene to address these regulatory challenges effectively.

Also Read: Ripple CLO Weighs In On Flagged SEC’s “Loosey-Goosey” Rules

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