eToro Limits Crypto Offerings in U.S. After SEC Settlement, Will Pay $1.5 Million Fine

Israeli trading platform eToro has agreed to halt most cryptocurrency offerings for U.S. customers following a settlement with the U.S. Securities and Exchange Commission (SEC). The platform, which boasts over 35 million users worldwide, will restrict U.S. users to trading only Bitcoin, Bitcoin Cash, and Ethereum after being accused of operating as an unregistered broker and clearing agency.

The SEC alleged that eToro allowed U.S. customers to trade crypto assets that it classified as securities since at least 2020 without meeting federal registration requirements. As part of the settlement, eToro will pay a $1.5 million fine, though it neither admitted nor denied the SEC’s findings. The company has given U.S. customers 180 days to sell any tokens not included in its newly limited offerings.

eToro CEO Yoni Assia emphasized the company’s commitment to working with regulators. “We now have a clear regulatory framework for crypto-assets in the U.K. and Europe, and we believe we will see similar in the U.S. in the near future,” Assia said.

The SEC’s stance on cryptocurrency has triggered numerous legal battles with other platforms like Coinbase, Binance, and Kraken, with the central issue being whether crypto tokens should be treated as securities. By reaching this settlement, eToro is choosing to align its operations with the SEC’s regulatory framework, a move SEC enforcement director Gurbir Grewal praised for enhancing investor protection.

For U.S. users of eToro, the settlement with the SEC brings significant changes to how they can trade cryptocurrencies on the platform.

1. Restricted Cryptocurrency Trading: Users will only be able to trade Bitcoin (BTC), Bitcoin Cash (BCH), and Ethereum (ETH). This means the majority of altcoins and tokens previously available for trade will be removed from the platform in the U.S.
2. Time to Sell Other Tokens: U.S. users have a 180-day window to sell any other cryptocurrencies that are no longer available for trading. After this period, it is unclear what will happen to these tokens, but users are encouraged to liquidate them to avoid being locked out of trading.
3. Refund or Conversion Options: Although not explicitly detailed, it is possible that users who fail to sell their tokens may have their holdings converted into available assets like BTC or stablecoins, or be subject to forced liquidation if eToro deems this necessary to comply with the settlement.
4. Customer Impact and Uncertainty: This change could frustrate many U.S. users who have diversified crypto portfolios, as they will have to liquidate or transfer out assets that are no longer supported. This could also lead to potential tax implications for users who must sell their tokens.
5. Continued Support for Bitcoin, Ethereum, and Bitcoin Cash: While altcoins are being removed, the most established cryptocurrencies—Bitcoin, Ethereum, and Bitcoin Cash—will continue to be supported, ensuring users can still participate in mainstream crypto trading.

This settlement marks another step in the SEC’s broader crackdown on crypto platforms operating outside traditional financial regulations, signaling a shift toward more stringent oversight in the crypto industry. Whether this move will prompt other crypto companies to follow suit remains to be seen.

Ben Tang
Financial Desk