Trading platform eToro has agreed to limit the extent of cryptocurrencies on its US platform as part of a settlement with the Securities and Exchange Commission (SEC).
The SEC had charged eToro with operating an unlicensed brokerage since 2020 by allowing its users to trade crypto assets being offered and sold as securities. According to the regulator, eToro did not comply with the registration requirements of federal securities laws.
To settle the charges, eToro has paid the SEC $1.5m and stripped back the extent of its crypto trading to Bitcon, Bitcoin Cash and Ether. The firm has also agreed to a cease-and-desist order, with all unsupported cryptoassets to be liquidated within 187 days of the order.
Yoni Assia, eToro’s Co-founder and CEO, said: “This settlement allows us to move forward and focus on providing innovative and relevant products across our diversified US business. US users can continue to trade and invest in stocks, ETFs, options and the three of the largest cryptoassets.
“As a company serving over 38 million registered users from more than 75 countries, the terms of the settlement will have a minimal impact on our global business. Outside of the US, eToro users will continue to enjoy access to over 100 cryptoassets.
“As a global, multi-asset trading and investing platform we continue to experience strong growth and remain committed to becoming a public company in the future.”
US eToro customers will only be able to buy new Bitcoin, Bitcoin Cash and Ethereum from 11 September 2024, and from 11 March 2025 will be restricted to selling only these cryptoassets.
Users will also be able to transfer crypto holdings to the eToro Wallet on 11 March, restricted to 19 supported coins. The timeline gives its customers 180 days after the SEC settlement to sell unsupported cryptoassets, which will be liquidated after 18 March.
Israel-founded eToro – founded in 2007 and active in the US since 2019 – has been keen to emphasise that the SEC settlement and the subsequent limitations to its crypto trading will only apply to the US.
The firm has a presence in over 140 countries; its crypto trading offering will remain the same in these markets. In some territories eToro is actively registered as a crypto broker, such as in Abu Dhabi.
“eToro has been offering regulated securities across the globe since before the invention of crypto,” Assia continued.
“As an early adopter and global pioneer of cryptoassets as well as a significant player in regulated securities, it is important for us to be compliant and to work closely with regulators around the world.
“We appreciate the importance of regulation to protect consumers. We now have a clear regulatory framework for cryptoassets in our home markets of the UK and Europe and we believe we will see similar in the US in the near future. Once this is in place, we will look to enable trading in the cryptoassets that meet this framework.”
The SEC maintains a strict approach to cryptocurrency. eToro is not the only major firm to face enforcement action from the regulator, with digital asset infrastructure developer Ripple Labs paying $125m last month in civil fees after being found in violation of 1,278 institutional sale securities laws.
Its scope is not just limited to the selling and trading of cryptocurrencies – a more recent case saw NFT marketplace OpenSea handed a wells notice, an informal notification from the regulator that an enforcement action is due. The SEC attitude to crypto is not entirely confrontational, however, having approved Bitcoin and Ethereum ETFs this year.
Summarising the SEC’s position on eToro, Gurbir S. Grewal, Director of the regulator’s Division of Enforcement, said: “By removing tokens offered as investment contracts from its platform, eToro has chosen to come into compliance and operate within our established regulatory framework.
“This resolution not only enhances investor protection, but also offers a pathway for other crypto intermediaries. The $1.5m penalty reflects eToro’s agreement to cease violating applicable federal securities laws as it continues its US operations.”