Jan 16, 2024

eToro US CEO Lule Demisse joins "First Mover" to discuss the impact of the spot bitcoin ETF approval to the broader crypto industry as the SEC recently green-lit the products.

Video transcript

Etoro us recently added 700 new US stocks to its platform, expanding investment options available to users to almost 5000 options. Joining us now to discuss is Etoro us, Ceo Lule Demise Lule. Welcome to the show. Thank you for having me. Pleasure to be with you. All right, all anyone's been talking about for the top of January is the spot Bitcoin ETF. This interview we're doing is pre-recorded. So I think by the time we talk, we would have had a decision, but let's uh zoom out a little bit. How are you watching the news? Yeah, and the same sort of excitement and anticipation that everybody does, you know, as a, as a platform that already offers several coins, but we're always welcoming new ways for retail investors as well as institutional this time to access this instrument. I'm curious about your users. You know, this news has caused a lot of excitement within the crypto industry. Are you seeing new users coming to the platform looking to explore Bitcoin because of all of all of this excitement around the spot, Bitcoin ETF. Yeah, not just because of this uh spot Bitcoin, but also you know, uh there have been so many other news events as you know, Bitcoins up a sizable amount year to date already. Um So there's been so many events that have really sort of made the crypto thesis more appealing for retail investors are also um you know, offer so many coins. So already our investors are aware of crypto what it means. So when they're engaging, it's not from a fervor of a new but from a, do I believe in the CSIS today? And do I think valuations are the right place and it's that kind of sort of trade off? They're thinking about earlier this week. It Toro launched their retail investor beat survey. Uh a bunch of statistics released there. Anything surprising that stood out to you uh when it comes to retail investors in the United States? Yeah, you know, I think the one thing you, you, you can tell about retail investors is that they're getting smarter and smarter when it comes to their proximity to the smarter money. So none of them are betting against the Fed. Um So they're really looking at sort of like if interest rates go down, they feel like it's gonna be that much more reason for uh to have a bullish thesis going forward. Um You know, nine out of 10 of them still say they're going to increase their portfolio contribution rather than decrease it. So you definitely, you know, one of the things that you see is the sort of like the continuous leaning in, even though we've had a little bit of uh richness evaluation in the last few months, especially the, you know, the top names. Um You're still seeing people leaning in. The other thing you're seeing is also a pa a cash build up. So again, like we've been talking about this ambidextrous investor for a long time, uh you know, 45% of them are still building up their cash reserve so they can be opportunistic as new, new um means of getting into the market begin. Are you surprised to see this continued interest given, you know, Binance settled a very large fine by multiple government agencies earlier this year, we had Sam Bateman Fried convicted of several fraud related charges last year. Is it surprising to you to see that people are reading these headlines um reading some of the more negative news that comes out about the industry and still exploring on platforms like E Toro. Yeah, you know, it's it's delightfully surprising meaning that um it's good to know that the retail investor doesn't easily get triggered as they used to, right? That they can have two things in their minds, which is like one is it's not good to have a lack of regulations or cleanness of operating model. And so seeing that happening and still saying, but that's not the same thing as the thesis of defi still being viable, right? So they're literally having two thoughts in their minds, which is something I feel like this last round. Not just for Bitcoin across the board. You see that among retail investors to be able to parse out facts if you will. In my intro, I spoke about the 700 new Us stocks. Of course, Etoro also allows its users to trade crypto as we've been chatting about. I know uh when the SEC sued Binance and Coinbase back in July, a few of those tokens were delisted. How are you deciding what tokens to list and what tokens to delist? Especially when we're still yet to get regulatory clarity here in the United States. Yeah, we've not listed new tokens for some time right now. So a lot of our procedures and processes still hold though, which is we review the validity of the actual project, the, the soundness from a due diligence perspective of the facts around it. So all the things you would imagine in assessing a token, but we've not necessarily listed anything new since the uh regulatory uncertainty began. Uh primarily because we wanna make sure that that that sort of certainty and clarity arises before we create uh more disruption on our platform, but we're excited to have the ones that we do. Um And as you said, we are a multi asset platform. So whether it's stocks, ETF S our hope is that when the spot ETF is approved and our clearing broker lists it that we'll be able to offer that to our customers. We have options on our platform. So definitely Toro is all about like engage in the markets how you see fit and that's what you're seeing in our survey as well. People are engaging in the market as they see fit. Um We have interest on cash in our offering. So, you know, for those who are, remember that 45% I told you that are sort of holding powder dry, they're able to make their money work while they're keeping their powder dry on our platform. When you're going through your survey results, are you able to tell if people are actually understanding crypto? Are they here to stay? You know, you often hear people are so confused, especially when they're starting to learn about crypto when they're going to some of these platforms that aren't like completely dey or even some of the more uh large centralized exchanges. Are they understanding it? Are they thirsty for more information? Do you have any kind of insight into that? Yeah, I think at the beginning, what you saw is a shake out of those who are not really necessarily crypton natives but who were um just wanting to ride along on this sort of on the the valuation ride that came about? I feel like now what's left over is people who understand the thesis that doesn't mean the asset class is any less volatile. Um It like any young asset class, it will continue to be volatile. Uh But you do see that there is an intellectual understanding of, of what it is regardless of the fact that indeed people need to understand that volatility is a part of this asset class. Uh I steered us away from regulation but I want to come back to it because you actually have a voice here in the U SI know, late last year you joined uh Finra Fintech Committee. Are you able to tell us how you're speaking about crypto in that committee? What are you looking forward to in 2024? And what can folks expect when it comes to Finra? Yeah. So, you know, for Etoro we function in over 100 different countries, we really regulation is at the core of what we do, right? Because at the end of the day when you're in financial services, you can't fight that and you have to make sure you do right by your customers. So this was just another extension of our presence in a regulatory infrastructure and making sure in the US that we have a voice, there's three things we really champion. So one is to make sure that whatever we do from a regulatory perspective doesn't have a negative unintended consequence of icing out the retail investor. Sometimes in doing the, you know what you think is prudent as a regulator, you might, you might really tha and chill um regulate an entry point for retail investors. So that's one of the things we're always going to be championing access lower barrier to entry to retail investors. The other is to make sure that the regulations that we formulate actually allow for innovations to happen while still making sure that we're not, we're, you know, we're sort of ironing out all the uncertainty and making sure that bad actors don't thrive in this space. But for us, you know, and then lastly, it's really just making sure we're always partnering with our regulator whenever we're innovating something. Um Finra is a great uh regulator in that sense, they really do try to understand where innovations are going and making sure we're, we're making sure we're keeping a good line of communication with them. The big question everyone's asking is if we'll see any crypto legislation ahead of the elections later this year, what do you think? You know, I, I wish I was a, a clairvoyant futuristic person, I would say. I hope so. Um It seems highly improbable just because there's so many things that are occupying our country right now. But it's great that they, that the, the legislation has moved at least out of committee, the first version of it. Um And that, you know, my hope is that at a minimum, there's something that's shovel ready that, you know, whatever new administration it is, whether it's this one renewed or next one that, that can be something that can be advanced fairly quickly. You know, the o an overarching theme I hear when you talk and not just on the show, but when I've listened to you speak before is the, the commitment you have to financial inclusion and equity. That's a narrative that I think sometimes gets lost. When we talk about this space. It is one that underpins Cryptocurrency. But you know, when we're watching that price go to the moon and then come back down. Sometimes we we forget about that. What do you think about the industry? Do you think that it's doing enough to include those who have been traditionally traditionally left out by financial systems? You will never find me saying it's enough and partly because enough is only going to be known when there is actual distribution of ownership that feels like it represents our population, right? Um You do see in crypto ownership, that is the case, right, more than 50% of it is people of color, very heavy in terms of ownership that is very heavy ownership among young people. So you do see it in the asset class of crypto, but I'd love to see it across the board. Um because we know right, you know, there is no wealth building without participation in capital markets and investing in these kinds of spaces. So I think that it will be enough when we see an equal representation of what the population looks like and how what the investing public looks like. Do you think something needs to change though? Do you think that in some ways the same barriers and challenges that existed in traditional finance are being replicated within this industry and, and maybe we don't know we're replicating them but, but I, we have to be honest, when we look at the industry, I see some of them being, being replicated. Do you think we need to be a little bit more thoughtful? Yeah, I mean, for sure, more thoughtful. I do think that a lot has happened to date to make that access possible, right? So when you look at minimums that have dropped uh fractional shares when it comes to ETF S and stocks, so many things have happened commission free that have really, I think that that's where you have entry point, right? When you have less barriers to entry, I think as I said, regulation making sure that it doesn't unintentionally make it exclusive, right? In, in the attempt to try to be um protective of the investors to make sure that it doesn't end up um icing out um new to investing or people of color investing. Um and then the other thing is, you know, it matters who's, who's speaking, right? So the more of a rainbow, the people who are talking about investing look like the more inviting that is we know this to be the case, right? People end up being who they see. Um So this conversation we're having and so many others, like it is going to be important to show that everybody can invest no matter what their background or she or creed. All right, we are going to have to wrap it up in just a moment. But since we're sitting in January, what do you think is going to be that key narrative that drives the industry this year? What are you watching? So, you know, one is that, you know, I never fight the macro uh environment and I feel like if the fed decides to shift, you can't fight the Fed, right? So I think that that will be true for retail investors, for our industry and the broader landscape. If that happens, I think that means you're gonna just keep on seeing persistent retail participation, especially if the economy doesn't soften. Um So that's exciting, right? Being able to see retail have stick to itiveness if not more uh more share of the investing pie. Um in terms of like what I'm looking for from our particular industry when it comes to fintech and digital assets. It's really hoping that we have regulatory clarity on a lot of fronts so that we can keep innovating on behalf of the retail investor Lule. Thanks so much for joining first mover. Thank you so much for having me. That was it Toro us, Ceo Lule demise.

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