eToro Group embraces Regulation

As a group that counts 6 regulated entities in 6 different jurisdictions among its subsidiaries, eToro aims to provide all its users with safety and security, backed up by smart regulation. Where others shy away from oversight, eToro embraces it!

eToro has been in the Fintech industry since 2007 and invented the concept of social trading. The group was built to thrive in a regulated environment and give customers maximum confidence that they are in safe hands. Having established regulated entities in Cyprus, UK, USA, Australia, and South Africa, it comes as no surprise that eToro chose Gibraltar as its sixth jurisdiction – a jurisdiction where eToro could roll out its blockchain products in a regulated environment, once again becoming a leader in regulated cryptocurrency services.

eToroX – Gibraltar Regulation

Aiming to support growth in the Fintech sector, the Government of Gibraltar and the Gibraltar Financial Services Commission (GFSC) established a set of regulations for distributed ledger technology (DLT) that came into effect in January 2018. This framework requires that the GFSC authorize all businesses working with DLT while encouraging growth and innovation in the industry – growth made safer both for businesses and consumers.

Regulation is always good in name, but Gibraltar based its framework on nine core principles designed to offer the flexibility that is required in such a fast-paced industry.

  1. Honesty and integrity: DLT providers must always conduct themselves “with honesty, integrity, and professionalism” and “not pose a risk to the public or to the reputation of Gibraltar.”
  2. Customer care: Providers must always put their customers first by handling complaints swiftly and communicating in an unambiguous and transparent manner while disclosing of any conflicts of interest.
  3. Resources: DLT providers have to show that they have both financial and nonfinancial resources in place, such as available capital, internal procedures, and adequate insurance. As each case is different, each company’s resources are evaluated on a case-by-case basis.
  4. Risk management: A holistic approach to risk management is also required, encompassing all internal systems and procedures.
  5. Protection of client assets: DLT licensed operations must diligently keep records, and strive to maintain data security, aiming to safeguarding client assets.
  6. Corporate governance: This principle stipulates that providers be run responsibly, including its internal structure, working procedures and business strategy.
  7. Cybersecurity: Providers must guarantee ironclad security, be swift and proactive when dealing with threats and also submit to independent audits by approved third-party ICT security consultants.
  8. Financial crime: Providers must also undertake appropriate due diligence and know-your-customer vetting.
  9. Resilience: Finally, DLT providers must also prepare for all eventualities and ensure minimal loss and/or disruption to clients.

eToroX could arguably be considered at odds with the decentralized nature of DLT. Had Gibraltar’s approach been too rigid, it may have stifled the innovation and development of DLT businesses. But the amount of flexibility embodied in these principles has created the perfect environment for eToroX to move forward with the conviction that we can grow while keeping our customers safe. At eToroX we believe that Gibraltar’s well-constructed regulatory framework will provide the following benefits:

  • Only reputable DLT providers will obtain a DLT Licence (i.e. quality vs quantity);
  • Consumers transacting with a DLT Licence holder will have the comfort of knowing that the business they are dealing with is operating in a regulated environment where the GFSC is ultimately protecting the interests of the consumer;
  • With regulation, the blockchain industry will become more secure and transparent, which goes hand in hand with some of the fundamental values and qualities of blockchain technology;
  • The reputation of the blockchain industry and the quality of service provided by DLT businesses will improve;
  • By becoming a regulated industry, more and more multinational companies are seeing the value in utilizing blockchain technology; and
  • The involvement of large multinational companies with vast amounts of capital may lead to further innovation.

Gibraltar is also a leader in transposing European legislation into local law. The jurisdiction has ensured that most relevant EU directives are transposed within their prescribed time limits. Testament to this very fact is the already-amended Proceeds of Crimes Act 2005 which transposes certain parts of the 5th Anti-Money Laundering Directive, treating cryptocurrencies in a similar manner to FIAT for AML purposes. As such, locally-licensed DLT businesses are required to have policies and procedures in place that seek to mitigate any attempts of money laundering transactions in the crypto sphere.

Welcome to the future of blockchain innovation within a secure and regulated environment.

About the GFSC

As the regulator of an international financial services centre, the GFSC is agile and innovative, promoting good business and protecting both the public and Gibraltar’s good reputation.

An innovative regulator, the GFSC supports the safe use of financial and regulatory technology and recognises the role innovation plays in adding value to the delivery of financial services to consumers.

The GFSC’s approach to regulatory processes such as authorisation, supervision and enforcement are underpinned by the work of teams who respond effectively and adapt to changing circumstances within the financial sector. The GFSC regulates in a pragmatic, proportionate and accessible manner and continues to develop trusted partnerships with UK authorities and international standard setting bodies.

More information about the GFSC can be found on their website at the following link: http://www.gfsc.gi/