eToro, the Israeli online broker previously known for offering highly leveraged trade on bitcoin, is planning expansion in Southeast Asia and potentially Hong Kong, as it sees growing demand from thirty-somethings seeking to trade beyond their domestic markets.
Chief executive Yoni Assia said he expects Asia this year to contribute up to 30 per cent of the company’s total revenue, up from 15 per cent in 2018, thanks to growing markets in Vietnam, Malaysia, Philippines and Thailand for cryptocurrency trading services.
“In Asia’s competitive landscape, we don’t see a lot of sophisticated tech platforms that enable people to trade the global markets,” said Assia. “People in this region are interested in investing in global markets.”
He said the platform tends to draw a younger demographic than traditional brokerages, with data showing eToro’s registered traders to be 34 on average.
He said eToro’s “social trading” platform aims to target this segment of retail traders in Southeast Asia, as they actively seek out “top traders” through social network and mimic their trade ideas.
Through machine learning, he said, the platform helps users filter out top traders and build portfolios spanning stocks, crypto-assets and commodities among others.
While the firm is not as well-known as it is Europe – which is also its biggest revenue contributor – the online broker is backed by several leading Chinese fintech groups.
Last year, China Minsheng Financial led an investment round of US$100 million with several other investors. This came after Chinese fintech and insurance giant Ping An’s investment in 2015, alongside other European banks.
As a start, eToro is offering cryptocurrency trading to Asia retail investors – through spot trading and a complex derivative called contracts for difference (CFD). Later this year, it will also launch a crypto-assets exchange, eToro X, as it seeks to tap institutional investors.
Together with China Minsheng Financial, Assia said the firm was also exploring the prospect of entering Hong Kong’s “regulatory sandbox” for a virtual asset trading platform, a framework which could see the Securities and Futures Commission issue licences to virtual assets and trading platforms.
As the previous bitcoin bull market reached its peak of close to US$20,000 in December 2017, eToro was one of the early movers in offering highly leveraged bitcoin trade through CFDs, until new rules issued by the European Securities and Markets Authority (ESMA) in 2018 forced brokers to cull leverage to two times for retail investors.
Before the rules, traders said leverage as high as 15 times was not uncommon. Today, such levels of leverage to trade cryptocurrencies are offered through crypto futures exchanges, many of which remained unregulated, and some of which even offer 100 times leverage.
Assia said due to leverage being cut for CFDs, eToro saw trading volume drop by 30-40 per cent from its European crypto-assets trading businesses, primarily due to traders not being able to trade bigger positions as they did prior to the ESMA rule. However, he said he did not see drops in clients’ margin deposits on these trades.
Assia said in China, where it employs 45 people in Shanghai, mainlanders were trading on eToro’s platform through Ping An’s “yizhangtong”, an integrated account through which Ping An’s clients can manage online banking, insurance policies and online investments.
Cryptocurrency trading is not offered to Chinese users, he said.