Key Points
- eToro agrees to pay $1.5 million to settle SEC charges for operating an unregistered crypto trading platform, and will cease trading nearly all crypto assets except Bitcoin, Bitcoin Cash, and Ether.
- The settlement marks a significant shift in eToro’s U.S. operations and highlights the SEC’s ongoing efforts to regulate crypto asset trading within existing securities laws.
In a landmark decision that underscores the intensifying regulatory scrutiny of cryptocurrency trading platforms, eToro USA LLC has reached a settlement with the U.S. Securities and Exchange Commission (SEC). The agreement, announced on September 12, 2024, requires eToro to pay a $1.5 million penalty and significantly curtail its cryptocurrency offerings to U.S. customers.
SEC Charges and Settlement Terms
The SEC charged eToro with operating as an unregistered broker and clearing agency in connection with its crypto asset trading platform. According to the SEC’s order, since at least 2020, eToro has been facilitating the buying and selling of crypto assets that were being offered as securities, without complying with the registration provisions of federal securities laws.
As part of the settlement, eToro has agreed to cease and desist from violating applicable federal securities laws. The company will also dramatically reduce its crypto asset offerings, limiting U.S. customers to trading only Bitcoin, Bitcoin Cash, and Ether on its platform.
Impact on eToro Users and Crypto Holdings
The settlement terms have significant implications for eToro’s U.S. customers. Following the SEC’s order, eToro will provide its users with a 180-day window to sell all crypto assets other than the three permitted cryptocurrencies. This grace period is designed to allow customers to liquidate their holdings in an orderly manner.
Additionally, within 187 days of the order, eToro is required to liquidate any remaining crypto assets being offered as securities that it is unable to transfer to customers. The proceeds from these liquidations will be returned to the respective customers.
Regulatory Landscape and Industry Implications
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasized the significance of eToro’s decision to comply with existing regulatory frameworks. “By removing tokens offered as investment contracts from its platform, eToro has chosen to come into compliance and operate within our established regulatory framework,” Grewal stated. He added that this resolution not only enhances investor protection but also offers a potential pathway for other crypto intermediaries.
This settlement is part of a broader trend of increased regulatory action in the cryptocurrency space. It signals the SEC’s commitment to bringing crypto trading platforms under the umbrella of existing securities laws, potentially setting a precedent for other companies operating in the sector.
As the cryptocurrency industry continues to evolve, this case serves as a reminder of the ongoing challenges faced by platforms operating at the intersection of traditional finance and digital assets. It also highlights the importance of regulatory compliance for companies seeking to offer crypto trading services to U.S. customers.
The eToro settlement marks a significant moment in the ongoing dialogue between regulators and crypto platforms, potentially shaping the future landscape of digital asset trading in the United States.
