Republicans wants the SEC to hand over documents on Prometheum license

Quick Take

  • Some Republican lawmakers say the timing of the approval for Prometheum’s license raises “serious questions,” as they work on legislation to regulate crypto. 

House Financial Services Committee Chair Patrick T. McHenry wants Securities and Exchange Commission Chair Gary Gensler to hand over documents related to a license issued to digital asset firm Prometheum.  

The firm first gained approval in May of a special broker dealer license, which allows them to custody digital asset securities, from the Financial Industry Regulatory Authority, which is overseen by the SEC. 

Some Republican lawmakers, who have been critical of the SEC, say the timing of it all “raise serious questions,” as they work on legislation to regulate crypto. 

“The approval comes as the Committee is considering addressing gaps in the regulation of digital assets,” McHenry said on Tuesday in a letter to Gensler. 

A week before the approval of Prometheum’s license, the House Financial Services Committee and House Agriculture Committee held a hearing to discuss their plans to propose a bill to regulate crypto, McHenry said.

“The timing of the approval raises concerns that it was aimed at demonstrating that legislation is not needed because there is a workable regulatory framework for the custody of digital asset securities,” he said. 

Prometheum has been thrown into the spotlight over the past few months. Co-CEO Aaron Kaplan testified before a House committee in June that he wanted to build a crypto trading platform that operated within existing securities laws — a message in line with the SEC’s approach toward regulating crypto. Since then, the crypto industry has raised its ire against Kaplan and the firm, arguing that platforms cannot register with the agency. 

McHenry also raised concerns about Prometheum’s connections to the Chinese Communist Party, which has been brought up in past hearings and letters. 

Letter to FINRA

McHenry also led lawmakers in a letter to FINRA President Robert Cook, asking the self-regulatory organization about the steps it took to “assess the risk posed by Prometheum’s ties to the Chinese Communist Party.” Lawmakers also asked FINRA how many other special purpose broker-dealer applications remain outstanding and how many had been denied.

McHenry asked for a response from both FINRA and the SEC by Aug. 22. 

Republican Reps. Bill Huizenga of Michigan, Blaine Luetkemeyer of Missouri Ann Wagner of Missouri, Andy Barr of Kentucky, Warren Davidson of Ohio, French Hill of Arkansas, Pete Sessions of Texas, Tom Emmer of Minnesota and 14 others signed the letters. 

Prometheum and Kaplan did not immediately respond to a request for comment. FINRA will respond to the committee, a spokesperson said in an emailed statement. An SEC spokesperson said Gensler will respond to lawmakers directly. 

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