Congressman Torres Calls for Investigation into SEC's Approach to Crypto Licensing

The U.S. Securities Exchange Commission (SEC) has been the subject of two separate, independent investigations at the request of Representative Ritchie Torres (D-NY) over its handling of digital assets.

Torres has expressed concern about the SEC's choice to grant Prometheum Ember ATS a special purpose broker-dealer (SPBD) license. This platform has a license to act as a cryptocurrency exchange, but it is not currently engaged in this activity and may not be able to do so in accordance with current regulations.

The Congressman has questioned whether the issuance of Prometheum’s SPBD license was a political move by the SEC rather than a genuine effort to integrate digital assets into the existing regulatory framework. He criticized the SEC's decision, calling it a "dubious decision" and an attempt by Chair Gary Gensler to politicize the registration process.

In addition to this, Torres has called for an investigation into the SEC's failure to create a rigorous but workable process for registering real-world digital assets platforms. He plans to send the requests to the SEC’s Office of the Inspector General and to the Government Accountability Office.

The issuance of Prometheum’s license has become a contentious issue in the crypto industry in recent weeks. The SEC and Prometheum’s co-CEO Aaron Kaplan argue that this permit proves that no new regulations or laws are necessary for digital assets such as bitcoin, ether, and thousands of other tokens.

However, a common criticism of Kaplan and his firm is that while it has a license and operates an alternative trading system (ATS) that can trade digital asset securities, it does not currently list any tokens and it is unclear how or when it would be able to do so.

Torres’ letters follow a request made on July 10, 2023, by Senator Tommy Tuberville (R-Ala.) and five other congressional Republicans for Attorney General Merrick Garland and the SEC’s Gensler to investigate Prometheum over ties to Chinese entities Shanghai Wanxiang Blockchain Inc. and HashKey and their alleged ties to the Chinese Communist Party.

Despite the anger, no hard evidence of impropriety has been produced, and there may ultimately be none. The industry is waiting for answers and urging for an investigation to either uncover any impropriety or confirm that these inferences bear no weight.

Torres likened the SEC to "an overzealous traffic agent who arbitrarily tickets drivers for speeding while keeping everyone endlessly guessing about the speeding limit," adding that "regulation by enforcement is no way to regulate."

This development marks a significant moment in the ongoing debate around cryptocurrency regulation, with the outcome of these investigations likely to have far-reaching implications for the industry.