How Safe Is Etoro In 2022?

Online brokerage eToro was founded years ago and is known for its best trading platform. It crossed the million mark for registered users in February 2020, and its global presence continues to grow; however, there is a sense of excitement.

To learn if eToro is safe and a platform you can trust with your money, you need to take a step back. We did our due diligence before joining eToro because security should concern anyone who deals with brokers.

How Does Etoro Work?

Individual investors, or retail investors, are eToro’s target market, as it is a company mainly emphasis captivating first-time investors to the financial markets. The social buying and selling feature is usually used to copy other people’s trades on the “social investment network.”

What Etoro Make Its Money From?

Most eToro’s revenue comes through a process commonly used by brokerage firms called the market maker model.

If you get started with a trade, you will see that a bid price appears alongside an “ask price.” This difference between these prices is called the spread, and the bigger the spread, the more profiteers there are on eToro.

Etoro Will Be Listed On A Public Exchange:

In March 2021, SPAC FinTech Acquisition Corp. V announced its intent to become a pure public exchange company by merging with SPAC Acquisition Corp. The reverse merger is expected to close in the 3rd quarter that year.

By doing so, eToro has avoided the time-consuming process of a conventional IPO and partnered with a company that has experience in the fintech sector and allows investors to peek at the financials for the first time.

Their income statement illustrates a conventional business model from 2016 to 2020. Again, they are operating at a high-efficiency level, except for 2016. But, again, except for 2016, their margins have been comfortable.

How Would Etoro React If It Went Bankrupt?

1. Segregated accounts are maintained for securities:

You must have a good understanding of how eToro works, as it operates similarly to other concerned brokers, acting as a mediator that deposits your ETFs, shares, or other securities.

The broker cannot claim the Investor’s assets in bankruptcy since the Investor’s securities are held in a segregated account.

Therefore, in practice, you will have to wait until you have received the notification from the financial authorities that the assets belong to you and that you can transfer them to an alternative broker.

The company’s customers would receive their share of the eToro segregated funds if it went bankrupt, less any fees related to the handling and distribution of the funds. It would simply be a formality if it worked this way always.

2. Protection of investors

Other factors could lead to the company going bankrupt, in addition to its current asset separation: fraud, theft, hacking, administrative malpractice, operational errors. The risk factors for eToro are depicted on their website.

In that case, Investor Protection comes into play. Several top tier securities markets regulators oversee the day-to-day activities at eToro to ensure fair dealings and transparency:

  • It is accredited by Cyprus Securities and Exchange Commission.
  • The financial Conduct Authority regulates it.
  • The Australian Securities and Investment Commission holds it for eToro AUS Capital.
  • eToro Ltd has been registered by the Financial Services Authority Seychelles. 
  • eToro USA LLC is a licensed member of the Financial Industry Regulatory Authority and is a Money Services Business.

The Department of Justice’s civil enforcement efforts cover civil cases involving companies that commit unauthorized activities, do not fully implement risk management tools, or contribute to other irregular practices. However, the Department of Justice does not provide insurance against any losses you may incur due to their failures.

3. Compensation plans for Investor

The following Investor Compensation Schemes are also maintained by eToro to CySEC, FCA, and ASIC:

  • eToro (Europe) Ltd is a subsidiary of the Cyprus Investor Compensation Fund, which protects up to €20,000 for investment losses;
  • Under the Financial Services Compensation Scheme, investors under eToro (UK) Ltd are eligible for compensation up to £85,000.
  • The Financial Industry Regulatory Authority protects investment portfolios in the US up to $500,000, while the Federal Deposit Insurance Corporation covers cash holdings up to $250,000.

It is important to note that you might not gain any advantage from the investment protection mentioned above if you invest in cryptocurrencies! This is because ASIC does not provide protections for pre-defined amounts of investment.

How Else Can I Protect Myself?

The eToro Insurance program provides additional protection over and above the mandatory regulatory protections. Every new eToro investor who opens an account is automatically granted free insurance up to one million Euros, GBPs, or AUDs. This insurance is provided by Lloyd’s of London, through which eToro has partnered.

If you own a £100,000 account and are a British investor, this insurance pays $15,000 for losses above the investor compensation scheme’s projected amount of £85,000.

Following the Insurance Policy, eligible claimants are only entitled to an aggregate payment of $10,000,000. The insurer pays all eligible claimants up to that amount. If the total losses exceed the maximum cap, you may not receive the total amount of your losses.

The insurance company follows the same procedures, covering cash, CFD positions, and securities. Hence, Cryptocurrencies are not covered by insurance.

Here Are Some Things To Keep In Mind:

In sum, eToro offers its clients three layers of protection against insolvency:-

  • Liquidation of assets: the assigned liquidator will manage, if necessary, the distribution of funds among eToro’s clients.
  • Regulators provide clients with protection: Clients under CySEC or FCA regulation are compensated by the Investor Compensation Scheme. In contrast, clients below the £85k threshold are covered by the
  • Private insurance: The private insurance offered by Lloyd’s of London shall serve as a complementary measure to mitigate the insolvency risk. Up to one million GBP/Euro/AUD per client.

You’ll need to keep in mind that “Regulatory Protection” and “Private Insurance” both require that eToro submit an “Excess of FSCS Claim Form” to the FSCS within 12 months of the default date.


Investing has become more accessible thanks to online brokers, who allow anyone with an internet connection to do so. However, their ease of use has also raised concerns about the security of these new market participants.

It would be best if you were pretty confident concerning the security measures at eToro after reading this post. We hope you have done your due diligence concerning our security measures. EToro’s security measures should make you feel quite confident. However, although eToro is likely to stay in business for decades to come, you should be aware of what could happen if something terrible were to happen.

Upon beginning to trade, keep a record of your holdings, trade confirmations, and account statements every month so that insurance companies can make a claim more efficiently

Frequently Asked Questions (FAQs)

Can I trade on eToro safely?

As part of the FCA, CySEC, and ASIC regulatory framework, eToro operates safely and securely. Don’t forget to look for security indicators on your browser before you begin trading on eToro. Client funds are kept in tier 1 banks, and personal information is safeguarded using SSL encryption.How bad is eToro?

On the negative side, eToro’s non-trading fees are high, including withdrawal fees and inactivity fees. On the other hand, it features innovative features such as social trading, which lets you copy the strategies of other traders. You can only withdraw and keep your cash in USD if it is slow to draw.Does eToro allow you to lose money?

The Equity of an eToro account is typically positive, which means that you can never lose more money than what you deposit into it.When will eToro’s money be returned to me?

They will use this fund to compensate their clients if their operations cease and they cannot meet their financial obligations. By doing so, you will be able to claim the funds in your account if they do not meet their financial obligations.Binance or eToro: which is better?

They have reasonable fees compared to other exchanges, so eToro is a good platform for learning, socializing, and copy-trading. The Binance exchange is one of the world’s largest cryptocurrency exchanges by volume. It offers some of the lowest fees of any sale and supports more than 250 cryptocurrencies.

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