In a letter to SEC chair Gary Gensler, Republican chairmen of the House Financial Services and Agriculture committees expressed concern about Prometheum's plan to provide custody services for Ethereum's ETH token to institutional clients. Prometheum intends to offer custodial services for ETH under current regulations that may not permit such activity.

The SEC has not made a clear determination on whether ETH is considered a security or a commodity. Despite the uncertainties, Prometheum's launch of an ETH custody service implies that ETH is viewed as a security. Rep. Glenn Thompson and Rep. Patrick McHenry argued that ETH should not be classified as a security, making it illegal for Prometheum to handle this asset.

Initially, the SEC considered ETH falling under the commodities jurisdiction of the CFTC, similar to Bitcoin. However, confusion arose as the Ethereum network transitioned from Proof of Work to Proof of Stake. The lack of clarity from the SEC regarding ETH's classification only adds to the confusion and uncertainty in the market.

The potential launch of the ETH custody service by Prometheum could have significant implications for the digital asset market, according to the Congressmen. It could also signal a shift in how crypto companies are regulated in the US, with Gensler previously praising Prometheum for navigating regulatory hurdles effectively.

If the SEC approves Prometheum's ETH custody service, it may challenge the crypto sector's argument that current SEC regulations make it challenging for crypto companies to operate legally.