European clients of eToro intend to obtain from the Cyprus Securities and Exchange Commission (CySEC) the revocation of the platform’s licence after the forced closure of crypto CFDs, according to CoinDesk.
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The company is accused of breaching the user agreement by giving clients little time to respond to the planned 100% margin increase on crypto CFDs. The accompanying note explained that to avoid this situation, additional funds would need to be deposited and/or other positions closed.
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“The notice arrived by email four hours before the closure of all leveraged crypto CFDs. Users woke up in different time zones and found that their positions had been liquidated,” explained Slavko Vesenyak, a lawyer from Slovenia representing the interests of some of the platform’s clients.
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Amy Butler, eToro’s head of public relations, said that these policy changes, prompted by “extreme market volatility”, did not affect the overwhelming majority of clients.
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“We are aware that there are a few dozen disappointed clients, and we are doing everything to ease their discontent,” she explained.
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According to Butler, the temporary decision to reduce the leverage level on crypto CFDs was made “from a risk-management perspective”. She added that it was not connected to potential plans for an IPO.
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A few days ago, eToro raised the minimum recommended deposit from $200 to $1,000. The move came in response to retail investor frenzy to get in on the growth of the cryptocurrency market.
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.@eToro has seen an unprecedented demand for our services from new users. To manage demand & ensure our existing community of 17M registered users can continue to access our services uninterrupted, we have temporarily increased the minimum deposit amount for new users to $1,000.
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— eToroService (@eToroService) January 8, 2021
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“eToro clients will get their funds back. If eToro does not return them, this will be done by the Cypriot state,” said Yuri Toplak, adjunct professor at Fordham University, who also represents the interests of the platform’s affected users.
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In an interview with the publication, he suggested that against the backdrop of growth of the cryptocurrency market to new records, eToro concluded that it was not in a position to pay clients that much money and simply terminated the contracts. He added that he would seek a revocation of the licence at CySEC.
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As reported, the new tax regulation in Germany has effectively prohibited the trading of crypto derivatives in this country since 2021.
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Earlier, the UK Financial Conduct Authority (FCA) banned the sale of derivatives and exchange-traded notes based on cryptocurrencies to retail investors.
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