As
crypto
regulators
have,
for
years,
hemmed
and
hawed
over
essential
legal
questions
like
“is
ether
a
security?,”
the
industry
has
often
complained
about
a
lack
of
legal
clarity.
It
has
been
impossible,
many
have
said,
to
comply
with
the
law
because
it’s
not
clear
exactly
what
the
law
says,
or
rather
how
regulators
will
interpret
that
law
related
to
something
as
novel
as
an
internet-era
digital
asset.
This
is
an
excerpt
from
The
Node
newsletter,
a
daily
roundup
of
the
most
pivotal
crypto
news
on
CoinDesk
and
beyond.
You
can
subscribe
to
get
the
full
newsletter
here.
We
still
don’t
know,
for
instance,
whether
ether
is
a
security
or
a
commodity,
though
the
SEC
has
breadcrumbed
that
it’s
probably
the
latter
and
that
the
leading
securities
regulator
is
not,
therefore,
responsible
for
regulating
the
second
most
important
crypto
asset
after
bitcoin.
But
is
it?
This
week,
Prometheum,
a
weird
anomaly
in
being
the
“only
U.S.-registered
crypto
securities
platform,”
announced
that
it
would
begin
to
custody
ETH
as
its
first
digital
asset.
The
news
is
important
because
it
tests
two
key
open
questions
in
crypto
—
one,
whether
it’s
possible
to
comply
with
the
SEC
when
transacting
leading
cryptocurrencies,
and
two,
who,
if
anyone,
is
finally
going
to
adjudicate
on
ETH
classification
so
we
can
all
go
about
building
the
next
generation
crypto
industry.
My
colleague,
regulation
deputy
managing
editor
Jesse
Hamilton,
summed
up
the
stakes
in
a
masterful
dissection
of
the
(very
complicated)
matter
yesterday:
“At
that
point,
[Prometheum]
will
either
be
proving
the
claims
of
its
executives
that
crypto
can
be
handled
in
the
U.S.
in
a
way
that
appeases
the
securities
watchdog,
or
proving
the
naysayers
who
argue
that
it’s
impossible
to
meet
the
SEC’s
expectations,”
Hamilton
writes.
See
also:
DeFi
Shouldn’t
Have
to
Worry
About
the
SEC’s
Expanded
Broker
Rule
|
Opinion
“The
stakes
aren’t
just
high
for
Prometheum
and
the
rest
of
the
industry,
but
also
for
the
government
agency
that
has
claimed
for
years
that
there’s
a
proper
way
for
crypto
firms
to
‘come
in
and
register’
to
do
business
in
the
U.S.;
Prometheum
came
in
and
registered
but
what
happens
next
is
unclear.
And
while
it
tests
these
murky
waters,
it
may
also
help
establish
whether
the
SEC
intends
to
view
ETH
as
a
security.”
Prometheum
is
able
to
offer
both
custody
and
trading
in
those
digital
assets
because,
unusually,
it
has
licenses
to
do
both.
That
means
it
can
“legally
sling
Ethereum
as
a
security,”
in
the
words
of
Fortune’s
Jeff
John
Roberts
and
hope
that
“regulators
have
no
choice
but
to
recognize
the
designation.”
In
this
scenario,
Prometheum
would
then
be
the
only
platform
for
legally
trading
ether,
the
security
—
a
pretty
nice
natural
monopoly
if
you
can
get
it.
The
question,
then,
is
whether
the
SEC,
witnessing
this
anomaly,
would
step
in
to
finally
designate
ether
a
security,
or
not.
Mike
Selig,
a
fintech
lawyer
at
Willkie
Farr
&
Gallagher,
says
that’s
unlikely,
given
the
SEC’s
preference
the
last
few
years
for
not
saying
anything
very
definite
when
it
comes
to
crypto.
“The
SEC
is
likely
to
remain
neutral
on
Ethereum,”
he
says.
They
have
done
no
favors
for
ether.
I
wouldn’t
expect
it
makes
one
now.”
Under
the
terms
of
the
SEC’s
special-purpose
broker-dealer,
Prometheum
has
broad
latitude
to
designate
assets
as
securities
to
list
on
its
platform
(for
instance,
by
showing
that
an
asset
meets
the
all-important
Howey
Test).
See
also:
Coinbase
vs.
the
SEC
Debates
the
Difference
Between
Securities
and
Beanie
Babies
|
Opinion
How
this
plays
out
is
anyone’s
guess.
Jeff
John
Roberts
thinks
Prometheum
will
struggle
for
clients
and
that
Coinbase
and
others
will
fight
SEC
chair
on
this
as
it’s
fighting
on
a
host
of
related
issues.
But
the
Prometheum
Test
shows
one
thing
very
clearly
once
again:
the
SEC
has
failed
to
provide
any
legal
certainty
for
the
crypto
industry
and
as
a
result
has
enabled
a
backdoor
actor
to
come
within
spitting
distance
of
a
legal
monopoly.
Nature
abhors
a
vacuum,
and
the
crypto
industry
abhors
Gary
Gensler’s
SEC.
