Mille Lees Mille Lees, Wednesday 18th September 2019, 11:58 AM CEST
EToro Cryptocurrency Exchange

ESMA Regulations Don’t Affect EToro

It’s been almost a week since the Ethereal Summit took place in Tel Aviv. Numerous executives from the cryptocurrency industry spoke at the conference, including the Chief Executive Officer of EToro and the Founder of Ethereum. Yoni Assia has positive growth to display for her firm, indicating that etoro platform is growing to new heights. Previously called RetailFX, this brokerage has a decade of experience in crypto markets. They originally began as a currency market platform, but have moved on to various asset classes, including social trading services.

EToro has progressively fought for innovation in the last two years, facing significant backlash from government authorities like the European Securities and Markets Authority. The firm fought back against the ESMA by moving their services to the United Kingdom, which recently seceded from the European Union. This brought on EToroX, which provides commission-free trading for equities to thousands of clients in the UK. Reporters were lucky enough to speak with Assia on the growth in activity over the last two years, and the commission-free trading that was enacted.

She stated: “Equities trading has been overgrowing on our platform over the past couple of years. We’ve seen triple-digit growth, and there’s also a lot of cross-pollination there in terms of people who come for equities and move on to trade other asset classes. We see commission-free trading as a great way to give a basic service and then to have more people enter the eToro platform and access more of our services. We see commission-free trading as a great way to give a basic service and then to have more people enter the eToro platform and access more of our services.”

These tactics being implemented by EToro is allowing for lower costs. Stock trading with assets used to mean higher levels of compliance, which increased data costs. Inevitably it wasn’t a significant moneymaker for stockbrokers. This is what prompted the commission-free trading, which has allowed for their asset stock trading services to outcompete the likes of Robinhood. The free level of trading has assisted EToro with increased registrations, prompting new levels of activity that they’ve never seen in their decade of operations.

ESMA Regulations Ineffective for EToro

The last year has been pivotal for EToro and EToroX, the two firms managed by Yoni Assia. Operating in the retail trading industry, they’ve managed to both release new products amidst unfavourable market conditions. These products helped sustain activity on both exchanges and showed the ESMA that their product measures were virtually ineffective. The standards were first released in August 2019, and it immediately impacted the majority of crypto brokerages across the Union. Revenues declined, player activity dropped, firms shut down, and exchanges moved to offshore jurisdictions. However, Assia guaranteed that these product measures barely impacted revenue streams for etoro platform. The substantial customer base and significant product offerings allowed them to withstand a considerable portion of the fallout.

Assia continued her statements with: “We do see regulators imposing leverage restrictions across the globe. Generally, that’s a good thing, but I think people who do understand the risks of trading should be able to continue accessing higher leverage. For us, because we have 11 million customers and have been offering many products. Aside from FX and CFDs, for several years, I think the transition was easier. From a customer lifecycle point of view, the regulations were very positive. We’re seeing customers stay with us for a significantly longer period than they had before ESMA’s regulations being put in place.”

The Lira Project

The EToro Chief Executive Officer quickly turned discussions towards other aspects in the company’s future, mainly the Lira Project. This is slated to be an open-source platform that employs simple coding to build derivatives for cryptocurrencies. This would enable clients to create futures and contacts-for-difference with counterparties. Open programming of this nature could be substantially beneficial for EToro’s growth in new and old markets.

The comments made by Assia on the Lira Project reads as: “Lira is an open-source programming language for money. It allows you to write, in a simple form, complex financial contracts. For now, we’re open-sourcing it, getting feedback and running it like an academic project. Eventually, we want to put those contracts on to the EToroX ecosystem and let people create and trade in them.”

The program would be an immediate innovative for retail clients and would push EToro more into the marginal retail trading market. Most regulators in this space aren’t privy to blockchain or cryptocurrency technology. EToro could unknowingly be digging themselves a grave that forces them back into blockchain markets or to shut down services entirely. However, it’s highly unlikely that this will happen. The Lira Project will more than likely be beneficial for the exchange.

Regarding regulatory concerns, Assia stated: “First of all, we’ll be providing liquidity on those derivatives contracts. The derivatives market is not going anywhere; it’s worth more than $500 trillion. Yes, it’s more of a market for institutions, and there’s always going to be a split between that and the retail sector. We see this as a long-term process where blockchain eats traditional finance. Lira is part of the infrastructure that will facilitate that process – yes it can run on the retail Ethereum blockchain, but it could also fit on to JP Morgan’s network too.”

Mille Lees

Author: Mille Lees

Millie has been with whichbroker.com since the start. She has a passion writing financial news after an internship at Bloomberg London. Millie's background in journalism and politics means she has an eye for a good story. Millie graduated from LSE and has a masters from Durham University England. Mille Lees can be contacted at [email protected], View all posts by Mille Lees

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