The decision comes as part of a settlement with the SEC, which the regulator revealed on Thursday
In a significant move that underscores the increasing scrutiny faced by cryptocurrency platforms in the United States, retail trading platform eToro announced that it will cease offering nearly all cryptocurrencies to its American customers. The decision comes as part of a settlement with the U.S. Securities and Exchange Commission (SEC), which the regulator revealed on Thursday.
eToro’s Settlement with the SEC
As part of the settlement, eToro has agreed to pay a $1.5 million penalty to resolve allegations that it operated as an unregistered broker and unregistered clearing agency in connection with its cryptocurrency offerings. According to the SEC, since at least 2020, eToro provided its U.S. customers with the ability to trade various crypto assets that the regulator has deemed to be securities, but the company failed to comply with the registration requirements set forth by federal securities laws.
Despite reaching the settlement, eToro neither admitted nor denied the SEC’s findings. The terms of the agreement will only impact the company’s U.S. operations, leaving its global business unaffected, reported by Retures.
Impact on U.S. Customers and Cryptocurrency Offerings
Following the settlement, eToro announced that it will drastically limit the cryptocurrencies available to its U.S. customers. Moving forward, only Bitcoin, Bitcoin Cash, and Ethereum will remain tradeable on the platform for American users. Customers will still be able to sell other tokens currently held on the platform, but only for the next 180 days. After this period, those tokens will no longer be available for trading on eToro in the U.S.
In a statement, eToro co-founder and CEO Yoni Assia commented on the settlement, stating, “The settlement allows us to focus on providing innovative and relevant products across our diversified U.S. business.” He further emphasized eToro’s commitment to regulatory compliance, saying, “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.”
SEC’s Stance on Cryptocurrency Regulations
The SEC has long maintained that most cryptocurrency tokens are, in fact, securities and, therefore, must adhere to the strict registration rules under federal securities laws. Gurbir Grewal, Director of the SEC’s Division of Enforcement, remarked on the eToro settlement, saying, “By removing tokens offered as investment contracts from its platform, eToro has chosen to come into compliance and operate within our established regulatory framework.”
He further noted that the resolution with eToro “not only enhances investor protection but also offers a pathway for other crypto intermediaries.”
However, many cryptocurrency firms, including eToro, have pushed back against the SEC’s classification of digital assets as securities. The crypto industry argues that the SEC’s approach constitutes regulatory overreach and does not appropriately reflect the unique nature of digital assets compared to traditional securities like stocks and bonds.
Ongoing Legal Battles in the Crypto Sector
The settlement with eToro comes at a time when the SEC is embroiled in multiple legal battles with several high-profile cryptocurrency platforms, including Coinbase, Binance, and Kraken. These platforms are contesting the SEC’s assertion that most cryptocurrencies should be classified and regulated as securities. They argue that digital assets, unlike traditional securities, do not meet the legal definition of securities, and therefore, should not be subject to the same regulatory framework.
eToro’s Future Plans: A Focus on Compliance and Growth
eToro, which has long been regarded as a pioneer in the crypto trading space, appears to be repositioning itself in the wake of its settlement with the SEC. The company is also considering an initial public offering (IPO) either in New York or London, as confirmed by CEO Yoni Assia to the Financial Times in March. This marks a renewed effort to tap into public markets after a previous attempt to go public via a merger with a blank-check firm in 2021—a $10.4 billion deal that was eventually abandoned in 2022.
The decision to limit its cryptocurrency offerings in the U.S. may reflect a strategic move by eToro to align itself more closely with regulatory expectations as it explores potential IPO options. Assia’s recent comments underscore the importance of maintaining a robust compliance framework while continuing to innovate and grow in the ever-evolving financial landscape.
Implications for the Broader Cryptocurrency Market
The settlement between eToro and the SEC is likely to have broader implications for the cryptocurrency industry in the U.S., especially as other crypto platforms closely monitor the developments. As regulatory scrutiny intensifies, more companies may follow eToro’s lead in limiting their cryptocurrency offerings to avoid potential penalties or legal challenges.
At the same time, the SEC’s actions could spur renewed efforts within the crypto industry to seek clearer regulatory guidelines and frameworks that better reflect the unique nature of digital assets. The ongoing legal battles between the SEC and major crypto exchanges could play a critical role in shaping the future regulatory landscape for digital assets in the United States.
In conclusion, eToro’s decision to halt most cryptocurrency offerings for its U.S. customers marks a critical juncture in the evolving regulatory landscape for digital assets. As the SEC continues to assert its authority over the crypto market, platforms like eToro are forced to reassess their strategies and offerings to remain compliant while still meeting customer demand.
For eToro, the settlement provides an opportunity to refocus its U.S. operations and potentially pave the way for a future IPO. For the broader crypto industry, the case underscores the need for greater clarity and dialogue with regulators to navigate the complex terrain of digital asset regulation. As the regulatory environment continues to evolve, both companies and investors will need to stay informed and agile in responding to these changes.