(Reuters) -Retail trading platform eToro will stop offering nearly all cryptocurrencies to its customers as part of a settlement with the U.S. Securities and Exchange Commission, the regulator said on Thursday.

eToro also agreed to pay a penalty of $1.5 million to settle charges that it operated as an unregistered broker and unregistered clearing agency in connection with its cryptocurrency offerings.

The SEC alleged that eToro provided its U.S. customers the ability to trade crypto assets that the regulator deemed to be securities since at least 2020, but did not comply with the registration requirements of federal securities laws.

The company neither admitted nor denied the SEC's findings. The settlement will only affect the company's U.S. users.

In a statement, eToro co-founder and CEO Yoni Assia said that the settlement allows the company to "focus on providing innovative and relevant products across our diversified U.S. business."

"As an early adopter and global pioneer of cryptoassets as well as a significant player in regulated securities, it is important for us to be compliant and to work closely with regulators around the world," Assia said.

Going forward, the only cryptocurrencies eToro customers in the United States will be able to trade on the platform will be bitcoin, bitcoin cash and ether. eToro will provide its customers the ability to sell all other tokens for 180 days.

"By removing tokens offered as investment contracts from its platform, eToro has chosen to come into compliance and operate within our established regulatory framework," said Gurbir Grewal, director of the SEC's division of enforcement, in a statement.

"This resolution not only enhances investor protection, but also offers a pathway for other crypto intermediaries."

The SEC has argued that most cryptocurrency tokens are securities and subject to its registration rules, while many crypto firms have disputed that and accused the regulator of overreach.

The SEC is locked in legal battles with a number of crypto platforms including Coinbase, Binance and Kraken, all of which argue that crypto assets - unlike stocks and bonds - do not meet the definition of securities.

eToro is weighing an initial public offering in New York or London, Assia told the Financial Times in March. The company had tried to go public through a merger with a blank-check firm in 2021 in a $10.4 billion deal, but abandoned that deal a year later.

(Reporting by Hannah Lang in New York; Editing by Mark Potter and Emelia Sithole-Matarise)