The cryptocurrency industry faces a potential regulatory clash as the head of the Commodity Futures Trading Commission (CFTC), Rostin Behnam, expressed concerns about a conflict with the Securities and Exchange Commission (SEC) over Ethereum (ETH).
Behnam’s warning stems from a recent decision by Prometheum, an SEC-registered broker-dealer, to offer custody services for ETH. This move has ignited a debate about how regulators should classify Ether, the second-largest cryptocurrency by market capitalization.
The CFTC considers both Bitcoin (BTC) and ETH to be commodities similar to gold or oil. The SEC, however, has remained silent on ETH’s classification, although it has taken action against several cryptocurrencies it deems to be securities.
If the SEC allows Prometheum to offer ETH custody, it could be seen as implicitly classifying ETH as a security. This would create conflicting regulations for the cryptocurrency, potentially leading to confusion for market participants and hindering innovation.
Behnam emphasized this point during a congressional hearing, highlighting the importance of clear and consistent regulatory frameworks for cryptocurrencies. He argued that classifying ETH as a security would bring it under the SEC’s purview, potentially hindering its role as a utility within decentralized applications (dApps).
The situation remains fluid, with the SEC yet to make its stance on Prometheum’s ETH custody services and ETH’s classification in general. The outcome of this potential conflict could have significant ramifications for the future of cryptocurrency regulation in the United States.
