Navigating the complex world of digital assets and the emerging regulatory landscape, a U.S. House Committee hearing on June 14 had Representative Mike Flood of Nebraska hold a riveting discourse with crypto marketplace Prometheum’s CEO, Aaron Kaplan.
The crux of the dialogue circled around defining the landscape of digital asset securities and their regulatory frameworks.
The pendulum of clarity
At the center of the dialogue was the exchange between Flood and Kaplan regarding the evolving clarity over the definition of digital asset securities.
The correspondence between Prometheum and the Securities and Exchange Commission (SEC), back in December 2020, revealed Prometheum’s concerns over the lack of regulatory clarity.
The company worried that the ambiguity could potentially disrupt the registration process for broker-dealers who need to distinguish between digital assets and digital asset securities.
Fast forward to the committee hearing, Flood cited a letter from Prometheum to the SEC, and then directed a question towards Kaplan. The CEO had previously stated that he believed no new legislative measures were required to clarify the digital asset space.
Flood inquired, “What has changed between the date of this letter in 2021 and when your firm called for clarity and now what has changed?”
Kaplan responded that the difference lay in the two years since Prometheum’s original letter. He stated that recent enforcement actions and statements from the SEC had provided enough clarification regarding the designation of a digital asset as a security.
An impasse over asset trading
Despite Kaplan’s assurance of a clearer landscape, Flood pushed further, questioning why Prometheum’s Alternate Trading System (ATS) did not support the trading of Ether and Bitcoin, two dominant assets making up over 60% of the digital asset market.
Kaplan replied that while not currently supported, he envisioned Prometheum adding more assets and capabilities over time, taking a gradual “crawl, walk, run” approach.
However, Flood found Kaplan’s response insufficient, noting that the inability of Prometheum’s customers to trade some of the most popular digital assets indicated a more profound systemic issue.
He further added that Prometheum’s broker-dealer license did not address the central issue – the lack of a consistent definition for a digital asset security in existing legislation.
Flood pointed out that even Chair Gensler could not definitively categorize Ether as a digital asset security during a previous hearing.
The call for legislation
The Nebraska Representative concluded his questioning by highlighting the need for more comprehensive legislation to resolve these issues.
He voiced his concern that Prometheum’s belief in their existing charter’s sufficiency—despite only supporting trading for a small range of assets—did not make sense.
He left the hearing with a renewed call for action, stating that current challenges indicated a broader problem that legislative intervention could help solve.
Flood’s final statement left an imprint on the proceeding, reinforcing his belief that new legislation is needed for the continually evolving digital asset space.
This debate sheds light on the need for further scrutiny and legislative actions to ensure a stable and secure future for digital assets and the industry at large.
With the popularity of digital assets increasing, and their market share growing, these conversations and debates are more important than ever before.
