What are eToro Digital Assets tokens?
The tokens are digital tokens that exist on the Ethereum blockchain. The Ethereum blockchain is the underlying platform which allows the tokens to be created by eToro Digital Assets and transferred by eToro Digital Assets and tokenholders using the exchange services offered by eToroX.
The tokens are representations of underlying real-world assets which seek to broadly replicate the economic exposure of holding the underlying asset. The value of the tokens is pegged by reference to the value of the underlying asset, however the tokens do not give tokenholders any rights in relation to the underlying asset and they are not securities, derivatives, electronic money or any other kind of regulated instrument.
Will the value of the tokens always correspond exactly with the value of the relevant notional amount of the underlying asset?
No. It is possible that the prices offered by the Market Maker or the prevailing market price for the tokens may deviate from the value of the relevant notional amount of the underlying asset. However, the Market Maker has committed to a maximum average spread of 5% per calendar day during normal market conditions which should serve to limit any deviation.
The value of the tokens may also fall below the value of the relevant notional amount of the underlying asset in circumstances where the Market Maker chooses not make a market or is not able to offer prices at the level required to allow tokenholders to buy and sell for an amount of cryptocurrency approximately equal to the relevant notional amount of the underlying asset. This could occur, for example, in the event of abnormal market conditions or if the Market Maker became insolvent.
What are “normal/abnormal market conditions”?
Normal market conditions are conditions that are not abnormal market conditions.
Abnormal market conditions are a prescribed set of exceptional circumstances in which the Market Maker is not obliged to make offers to buy and sell the tokens through eToroX. Abnormal Market Conditions broadly includes the following circumstances: (a) extreme volatility impacting the majority of our tokenized assets or their underlying; (b) war, industrial action, civil unrest or cyber sabotage; (c) the suspension or closure of any exchange or the nationalization, government sequestration, abandonment or failure of any instrument on which our tokenized assets are based; (d) any significant release by central banks, heads of states or other significant announcement which has a material impact on the financial markets of our tokenized assets; (e) any breakdown or failure of transmission, communication or computer facilities, interruption of power supply, or electronic or communications equipment or software failure, interruption in telecommunications or internet services or network provider services or error or breach which shall occur in blockchain or in any other networks in which our tokenized assets are being issued or traded.
Do the tokens give tokenholders rights in relation to the underlying asset?
No. The tokens do not give tokenholders any rights in relation to the underlying asset – for example, a tokenholder does not have ownership rights in relation to the underlying asset, does not have the right to call for delivery of the underlying asset, and does not have the right to be paid a return by reference to the underlying asset.
Do tokenholders have the right to redeem their tokens against any eToro entity?
No. Tokenholders do not have the right to redeem their tokens against any eToro entity.
How do the tokens “seek to broadly replicate the economic exposure of holding an underlying asset”?
The tokens seek to broadly replicate for tokenholders the economic exposure of holding a notional amount of a specified underlying asset. This effect is achieved by the activities of the Market Maker on the eToroX exchange which seek to peg the value of the tokens by reference to the value of the underlying asset (for more details about the Market Maker and its role see the description of the tokenization structure above).
In normal market conditions, the Market Maker will seek to make offers to buy and sell the tokens through eToroX at prices denominated in certain other cryptocurrencies which are also listed on eToroX (such as Bitcoin). The Market Maker will seek to offer prices that allow tokenholders to buy or sell the tokens on eToroX for an amount of cryptocurrency having a value approximately equal to the prevailing market price for the relevant notional amount of the underlying asset. In order to do this, the Market Maker will enter into agreements with Tier-1 Liquidity Providers which back its exposure in relation to its marketing making activities on eToroX.
- 1 eToro EURX token is intended to broadly replicate the economic exposure of holding 1 euro.
- The Market Maker makes offers to buy and sell eToro EURX through eToroX at prices denominated in cryptocurrencies (such as Bitcoin).
The Market Maker will seek to ensure that the prices at which it offers to buy and sell the token are approximately equal to the prevailing market prices for the relevant cryptocurrency/EUR pair, with the aim of allowing a participant on eToroX to buy or sell 1 eToro EURX in exchange for an amount of the relevant cryptocurrency that is approximately equal to the value of 1 euro.