Uniswap and Arbitrum in Regulatory Crosshairs After Prometheum Custodial Platform Addition

• Prometheum Capital plans to add Uniswap (UNI) and Arbitrum (ARB) tokens to its custodial platform, treating them as securities.
• The classification of these assets as securities is controversial and could impact regulatory discussions.

Prometheum, a digital asset trading and custody firm, has announced the addition of Uniswap (UNI) and Arbitrum (ARB) to its custodial platform. These tokens will be combined with Ether (ETH) in what Prometheum calls “digital asset securities.” The custodial services of these assets will be offered by the third quarter of the year. 

We’re excited to announce the addition of the following #digitalassetsecurities, Uniswap (UNI) and Arbitrum (ARB), to the Prometheum Capital custodial platform. Institutional and corporate clients will be able to custody Uniswap (UNI), Arbitrum (Arb) and Ethereum's Ether (ETH)…

— Prometheum (@PrometheumInc) August 21, 2024

Prometheum’s decision to classify Uniswap and Arbitrum as securities has raised eyebrows within the crypto community. This is in line with the firm’s earlier position on Ether, which it also treats as a security. The categorization of such decentralized assets as securities might pose considerable consequences, particularly in the context of current and future regulation. 

Uniswap, a decentralized cryptocurrency exchange, has previously claimed that UNI is not a security. Uniswap issued a response to the SEC’s Wells notice in April stating that UNI is as decentralized as Bitcoin (BTC) and Ether, which are not traditional securities. Arbitrum, a decentralized autonomous organization (DAO), is also under the spotlight, especially after ARB token holders voted for the ARB staking on August 15.

Prometheum’s Expanding Custodial Services

Prometheum aims to be an industry titan in the digital asset custody market by extending its services to ETH, ARB, and UNI through its subsidiary Prometheum Capital. Prometheum Capital is a Special Purpose Broker-Dealer (SPBD) that is current with the United States Securities and Exchange Commission (SEC) and is a FINRA-registered firm. 

The company’s proposition as the ‘only SEC-qualified custodian and special purpose broker-dealer for digital asset securities’ provides it with a competitive edge over other industry participants. The company initially intended to start offering custody services in the first quarter of 2024, but this has been shifted to the third quarter. 

The company’s future plans include the diversification of its digital asset portfolio to encompass debt, equities, ETFs, mutual funds, options, MMFs, and other investment contracts that are issued and transferred on the blockchain. 

SEC and CFTC Clash Over Token Classification

Some critics have questioned Prometheum’s earlier decision to custody ETH, especially with the backdrop of the CFTC ruling that ETH is a commodity. CFTC Chairman Rostin Behnam has also noted the potential conflict, stating that a securities firm that is holding ETH may be in violation of the agency’s rules.

The SEC has also indicated that UNI could be a security, and there may be legal consequences. Uniswap Labs, the company behind UNI, has tried to dismiss this narrative, saying that the SEC’s legal reasoning is rather weak and has been dismissed by courts. In a May blog post, Uniswap Labs stated, “The SEC’s aggressive theories are an effort to expand its jurisdiction beyond exchanges to communications technology – and beyond securities to all markets.”

Following the announcement, both UNI and ARB tokens experienced a positive market reaction, with UNI up 10% and ARB rising by 1% in the past 24 hours.