US lawmakers demand SEC clarity on Ethereum’s asset classification

A group of Republican lawmakers, including the chairmen of the House Financial Services Committee and House Committee on Agriculture, has formally requested SEC Chair Gary Gensler to provide clear guidance on the regulatory stance regarding the custody of non-security digital assets by Special Purpose Broker-Dealers (SPBD).

The March 26 letter specifically demands clarity on the status of Ethereum (ETH) and further requests the regulator to establish clear definitions for various terms related to crypto, digital assets, securities, and investment contracts.

The letter was signed by 48 members of Congress, including House Financial Services Committee chair Patrick McHenry and House Committee on Agriculture chair Glenn Thompson. Lawmakers asked for a response to their questions by April 9.

Ethereum’s status

According to the letter, the SEC has failed to propose a rule or provide comprehensive guidance for asset classification, and the term “digital asset securities” remains undefined.

Lawmakers said that despite a public record from both the SEC and the CFTC identifying ETH as a non-security digital asset, there is concern over the lack of transparency in the SEC’s SPBD regime and the potential regulatory implications of allowing such custody services.

The letter poses the question:

“Is ETH a digital asset security?”

The query is followed by several other questions depending on the answer.

The letter comes in the wake of Prometheum Inc.’s announcement that its subsidiary — Prometheum Ember Capital, a FINRA-approved SPBD — plans to offer custody services for Ethereum to institutional clients.

They emphasized the “alarming scenario” posed by Prometheum’s announcement, arguing that it could lead to “irreparable consequences for the digital asset markets” if allowed to proceed under the current regulatory framework, which does not explicitly permit SPBD custody of non-security digital assets.

Exacerbating the issue

Highlighting the discrepancy between…