HomeAttacks on U.S.Crypto Communism: China's Infiltration Threatens Financial System

Crypto Communism: China’s Infiltration Threatens Financial System

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Based on an Op Ed in the Wall Street Journal from Senator Tommy Tuberville.

The concept of “crypto communism” has taken on a new meaning as China seeks to infiltrate the U.S. financial system, while the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (Finra) remain oblivious to the mounting threat. Recent incidents, such as Chinese fighter jets buzzing U.S. military planes, sponsored hackers targeting American infrastructure, and suspected spies attempting to infiltrate military bases, serve as stark reminders that Communist China is our top geopolitical rival and security concern.

Amidst this backdrop, it is disconcerting that America’s financial regulators have failed to recognize the gravity of the situation. Just weeks ago, the SEC and Finra approved Prometheum Ember Capital’s request to operate as a digital asset securities broker-dealer. While this may seem like a routine approval, closer scrutiny reveals concerning ties to China. According to SEC filings, Prometheum has “strategic partners and joint venturers” in Shanghai Wanxiang Blockchain Inc. and its affiliate, HashKey. What is alarming is that Wanxiang Group, the parent company, has deep connections to the Chinese Communist Party.

Founded by Lu Guanqiu, a former senior Communist Party official, Wanxiang Group was posthumously honored by the Party, with President Xi Jinping commending Lu for his unwavering commitment to the Party’s principles. Lu’s son, Lu Weiding, now leads the company, and the Party expressed confidence that he would continue to uphold the Party’s ideals. Public documents submitted to the SEC reveal the extent of the partnership, with Prometheum benefiting from Wanxiang’s technology resources and industry contacts.

However, the approval of Prometheum’s designation as a digital asset securities broker-dealer raises significant concerns regarding data security and privacy. Prometheum collects personally identifiable information from its users, potentially granting Beijing unprecedented access to sensitive data of American investors. The storage location of this data and the involvement of Chinese technology further intensify worries about the Chinese Communist Party’s potential access to this information.

It is imperative for the SEC and Finra to realize that companies based in China ultimately answer to the Communist Party. China’s well-documented data-collection practices have been employed to suppress political dissidents and religious minorities. The approval of Prometheum without a thorough examination of its ties to China raises serious doubts about the regulators’ due diligence.

Sen. Tommy Tuberville is partnering with New York Senator Kirsten Gillibrand to introduce legislation that would prohibit entities organized or established in China, along with their subsidiaries, from acquiring U.S. digital commodity companies. This bipartisan bill aims to safeguard the American digital commodity industry from interference by the Chinese Communist Party, protect data privacy, and ensure the rights of investors.

The Chinese Communist Party’s relentless efforts to infiltrate the American economy and gain control over our markets necessitate swift and decisive action. The SEC and Finra must awaken to this threat and take the necessary measures to safeguard our financial system.

While concerns surrounding cryptocurrency and its disruptive nature exist within the financial community and public policy circles, it is crucial not to succumb to the approach adopted by the Chinese Communist Party, which banned cryptocurrency entirely in 2021.

Cryptocurrencies, with their decentralized nature, have raised apprehensions among banking executives who fear losing control over the traditional centralized monetary system. Bitcoin, the most recognized cryptocurrency, operates on a decentralized model, eliminating the need for a central authority and banks. Its open-source software allows for transparent modifications and improvements based on consensus among users, a stark contrast to potential secrecy within centralized systems.

Furthermore, cryptocurrencies like bitcoin empower the unbanked population and provide a safeguard against the abuses often associated with centralized monetary systems. Governments manipulate exchange rates and create inflation through excessive printing of money, whereas cryptocurrencies offer a transparent alternative.

Prometheum’s Response: In response to Sen. Tommy Tuberville’s concerns about Prometheum’s alleged ties to the Chinese Communist Party, Prometheum Capital emphasizes that these concerns are unfounded and based on outdated information. They clarify that Prometheum had a previous investment and co-development agreement with Wanxiang, a subsidiary of Shanghai Wanxiang Blockchain, but all ties were officially terminated in October 2021. Prometheum has implemented robust cybersecurity measures and safeguards, housing all customer data, servers, and technology within the United States. The company asserts that it is an American-founded and fully controlled entity, and all details of its relationship with Wanxiang were thoroughly reviewed by the Securities and Exchange Commission and the Committee on Foreign Investment in the U.S., with both agencies closing their inquiries. Prometheum challenges Sen. Tuberville’s claim that his office’s due diligence surpasses that of these powerful regulatory agencies, deeming such statements as not in the best interest of the American public he purports to protect.

Author’s Note: It is our experience that once you get in bed with the Chinese Communist Party, you never get out. Their claims of ties being terminated ring hollow.

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