In this, eToro is following the lead of major U.S. exchange Coinbase, which also halted trading in the fourth-largest cryptocurrency in the wake of plans to go public with an IPO.
XRP is at the heart of a lawsuit recently filed by the U.S. Securities and Exchange Commission (SEC) which claims that it is an unregistered security sold illegally by Ripple for years. The SEC is trying to claw back more than $1.3 billion from the international payments company and its two top executives, CEO Brad Garlinghouse and executive chairman Chris Larsen.
An IPO requires the SEC’s approval, so both eToro and Coinbase have ample reason to avoid XRP.
“Given the U.S. Securities and Exchange Commission’s (SEC) recent lawsuit against Ripple Labs, Inc., eToro… has decided to prohibit purchases of XRP on the eToro platform and to prohibit any conversion of XRP held in a customer’s eToro Wallet,” eToro said in a Dec. 31 blog post. The ban begins on January 3 at 12 p.m. EST.
Customers with existing XRP positions must close them with sell orders by Jan. 24 at 12 p.m. EST. The company said:
“For now, the above prohibitions affect only U.S. customers and will not affect any customer’s ability to hold XRP in the eToro Wallet.”
It added that all “customers, including U.S. customers, may continue to hold XRP in their eToro Wallet, and those customers still holding XRP on the eToro platform after January 24th can transfer their XRP to an eToro Wallet… [or to] any XRP wallet address unaffiliated with eToro at any time.”
Another big U.S. exchange, Binance U.S., announced on Dec. 31 that it is delisting XRP. The crypto asset trading platform for United States-based customers affiliated with Binance, the world’s largest cryptocurrency exchange will delist XRP beginning Jan. 13.
Soon after the regulator announced its action, a number of cryptocurrency exchanges started delisting the coin, starting with three minor exchanges but then followed by major players such as followed shortly by Crypto.com, and OKcoin. All are suspending trading by mid-January.
While Coinbase delisted within days of the SEC’s enforcement action, it may be too late for the firm to avoid the consequences of having sold what may be an unregistered security. As Modern Consensus reported yesterday, Coinbase was slapped with a lawsuit seeking class action status for $10 million on Dec. 30 for selling XRP, which the plaintiff calls a security the firm was not licensed to sell.
Industry expert Bruce Fenton, CEO of security tokenization firm Chainstone Labs, called the wave of delistings a natural reaction by firms with U.S. customers, given that they could be accused of selling securities without a license.
Ripple downplayed the delistings in a recent statement—without explicitly citing any exchanges by name—claiming that the “majority of our customers aren’t in the U.S. and overall XRP volume is largely traded outside of the U.S.”