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- eToro settled with the SEC, agreeing to limit U.S. users to trading only Bitcoin, Bitcoin Cash, and Ethereum.
- The SEC claimed eToro was operating as an unregistered broker, leading to a $1.5 million fine.
The U.S. Securities and Exchange Commission (SEC) has reached a settlement with eToro USA LLC, resulting in a $1.5 million penalty for failing to register as a broker and clearing agency. The SEC’s action addresses violations of federal securities laws related to eToro’s crypto asset trading platform.
Since 2020, eToro has been offering its US customers the ability to trade several crypto assets that the SEC has deemed to be securities. The SEC noted that eToro did not even register its platform in the United States, which is a violation of the country’s securities laws. In its operations, the company acted as an unregistered broker and clearing agency and conducted trades while not being federally registered, which is against the law.
The SEC noted that federal registration requirements are important investor protections, and the settlement demonstrates the agency’s ongoing work to enforce these laws against cryptocurrency intermediaries. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, echoed the need to follow the rules, stating that this case would be a compliance model for other crypto companies.
eToro Agrees to Limit US Crypto Offerings
Under the settlement, eToro has committed to offering only Bitcoin, Bitcoin Cash, and Ether on its U. S. platform. The legal status of Ether has been in question, with the SEC announcing earlier this year that it may be considered an unregistered security. This restriction is a major change in the company’s operations, as it had previously allowed its clients to trade a large number of cryptocurrencies.
In line with the settlement, the US clients will be given 180 days to liquidate all the other cryptocurrencies offered on eToro’s platform before they are removed from the marketplace. Securities that cannot be transferred will be liquidated, and the proceeds will be returned to customers within 187 days.
SEC Continues Broader Crackdown on Crypto Exchanges
The settlement with eToro is a continuation of the SEC’s clampdown on crypto exchanges and platforms that are not in compliance with U. S. securities laws. In the past year, the SEC has focused on major platforms such as Binance, Coinbase, and Kraken for violating similar federal rules.
This comes after the high-profile bust of FTX, a cryptocurrency exchange company owned by Sam Bankman-Fried, at the end of 2022. That incident led to the U. S. authorities paying closer attention to crypto-related companies and firms.
Moreover, the SEC has brought charges against other crypto projects and companies like Tron and OpenSea, which suggests that the SEC is expanding its enforcement efforts to more players in the crypto market. Robinhood has also recently been informed by the SEC of a potential enforcement action regarding its crypto business.
eToro has agreed to the cease-and-desist order issued by the SEC but has not admitted or denied the investigation’s findings. The settlement also requires the company to improve its internal controls and compliance measures to ensure future compliance with federal laws. The investigation was led by Jon Daniels, Alison Levine, and Tiantong Wen and supervised by Mark R. Sylvester and Jorge G. Tenreiro of the SEC.
