Cyprus Bans Brokers that Accept non-EU Traders
4th of August 2013
One of the most important forex and binary options regulatory bodies on the planet, the Cyprus Securities and Exchanges Commission announced that it would cancel the licenses of those forex and binary options brokers that accept the registration of non-European Union clients.
Due to recent developments and events in the United States and other jurisdictions, the financial trading regulator of Cyprus, CySEC, decided to only license forex brokers and binary options brokers that exclusively deal with European Union clients.
Those companies that currently accept the registration of clients from non-European Union countries will either have to block the registration of those clients or face the cancellation of their online trading licenses. Most companies are expected to take the second decision.
This decision was most likely made in order to prove to other jurisdictions, especially to the United States that Cyprus is a serious online trading regulatory jurisdictions. In the past, US authorities such as the SEC and CFTC accused Cyprus of harboring binary options and forex brokers that operated in the United States without a license.
Financial analysts believe that while this decision does indeed make a lot of sense from a legal standpoint, at the same time it would also completely destroy the Cypriot financial trading business. This is because most brokers, both forex and binary options, generate the bulk of their money outside of Europe.
These brokers will extremely likely request their Cypriot licenses to be cancelled. As a solution to this problem, most brokers will most likely request a license either in the United States or in the United Kingdom. Brokers would in the future have to pay much larger taxes as a consequence, but at this moment this is the only viable alternative to a Cyprus license.
On the other hand, this is extremely great news for retail traders both in the forex and in the binary options business. This is because Cyprus was known as one of the countries with the most lax rules and regulations when it came to financial online trading. A lot of brokers managed in the past to get away with a lot of not so moral (perhaps even legal) stuff due to these laws.
Now, these brokers are forced to either go rouge and not get a license at all (possibly facing legal challenges in various countries as a consequence) or apply for a license in the United Kingdom or in the United States. Most brokers will decide to do the latter.
However, from now on these brokers will not get away that easy with breaking regulations and laws. More so, the trader safety regulations and laws of the UK and USA are much stricter than those of Cyprus. This means that brokers will be obliged to completely restructure and improve their trader safety methods before even applying for a new license.
So, all in all, this decision of Cyprus to ban companies that accept the registration on non-EU traders is a very good thing for traders. It is a measure that indirectly will ensure a safer and fairer and much better regulated binary options and forex trading business.