Are Binary Options Regulated?
Binary options trading is regulated in a significant number of reputable jurisdictions. A very important thing to remember here is that the fact that if binary options aren’t regulated in a particular country it doesn’t mean that they are illegal. A lack of regulation means that the state is indifferent towards this practice (as in, you can trade because it’s no one’s business).
But as I said above, binary trading is regulated and is legal in a number of jurisdictions and countries such as the United States, the United Kingdom, Cyprus, Japan, and Malta. These countries have special agencies such as the CFTC in the US, FCA in the UK and CySEC in Cyprus that oversee the financial trading market. (Source: Wikipedia)
In order for brokers to be able to operate in these countries, they’re obliged to apply for a trading license. A license will only be awarded to completely legitimate companies that exclusively offer safe and fair services. National regulators are extremely strict about supervising the online trading market because the state also generates taxes from this practice. The state can only levy taxes from legitimate businesses.
What about countries where binary trading isn’t regulated?
In the majority of countries on the planet binary trading is not regulated. However, as explained, this does not necessarily mean that binary options are illegal in those countries. Binary options are only illegal if a country has a law that specifically says that they are. If they don’t have any law of any kind related to binary trading, it means that binary options are de facto legal.
You can look at this like as with collecting coins, for example. When you collect coins, you basically deal with real money transactions but the state you’re living in most likely does not have a law that says that coin collecting is legal. However, the lack of a law that makes coins collecting legal does not mean that coins collecting is illegal.
This is the same with binary options. Unless you are doing something illegal, such as money laundering, then it’s perfectly legal to engage in financial trading activities on the internet. It’s only illegal to trade financial assets if there is a law that says that trading on financial assets is illegal.
At this moment, to my knowledge, there is no country on the planet where binary trading is illegal by law.
Regulation is not a synonym for legality. Something that is not regulated (such as coins collecting, in my example) can still be perfectly legal unless it’s stated otherwise.
But how can I know that I won’t be scammed if binary trading isn’t regulated in my country?
Living in a country where binary options aren’t regulated comes with no disadvantage whatsoever. Traders living in such countries just have to make sure to only register at regulated binary options brokers that received their licenses from another reputable jurisdiction such as the UK, USA or Cyprus.
Brokers licensed in any of the countries that regulate binary options are forced by the law to treat traders living in other countries the same as they would treat traders from the country in which they received their binary options trading license. What this means is that traders living in unregulated markets are protected from abuses the same way traders from regulated markets, provided that they register at brokers regulated elsewhere.
As explained, it’s imperative to only register and trade at brokers that are regulated in at least one reputable jurisdiction, even if this a different country than the one you’re living in. If traders register at an unregulated binary broker, then nothing will protect them from potential fraud or abuse. It’s always recommended to stay on the safe side.
Binary Options Regulation – The Industry Going Mainstream
The regulation of online trading basically means that a lot of important countries, such as the UK and the USA, officially recognize binary options trading as a mainstream activity. This means that national governments themselves have admitted that binary trading is a legitimate business and investment possibility.
Governments of countries such as the United States and the United Kingdom would never legalize a fraudulent business model and would most definitely never offer financial service provider licenses to binary options brokers. In short, binary options regulation proves that trading binary options is a legitimate form of investing.
Experts believe that in the future many more countries will decide to regulate binaries. There are basically two motives why countries decide to regulate options trading: The first is to protect traders’ safety and security, while the second one is to be able to tax binary options brokers.
By regulating the market, governments are able to make sure that their citizens will only be offered completely legitimate services by legitimate binary options brokers. This keeps a country’s financial system in check and will prevent money illegally exiting the country.
However, governments are also interested in the regulation of binary options trading for taxation purposes. Regulating the options trading market in order to make sure only legitimate companies operate will allow the state to cash in tax revenue from these companies.
Regulated Binary Options Brokers
As I use to say in all of my articles, traders should register and trade only at regulated and licensed binary options brokers. It’s only these brokers that offer safe and fair services. Unlicensed brokers usually don’t have a license for a reason. They were either refused a license as a result of conducting shady practices or didn’t even apply for a license in order to be able to conduct shady practices in the future.
However, it also matters in what country a broker is regulated. At this moment, the only reputable regulatory authorities are in the USA, the UK, Cyprus, Malta, Japan and South Africa. Other countries at this moment don’t yet have a fully functional online trading regulatory framework.
In particular, stay away from brokers that are ‘regulated’ in some weird jurisdictions such as the British Virgin Islands and similar. Such jurisdictions are known to be infamous tax havens for various shady companies and businesses from around the globe. Avoid brokers operating from these countries at all costs.
Licensed binary options brokers protect traders from all countries…
As I explained initially, you’re still safe to trade if you’re located in a country where financial trading is not regulated. Remember, regulated does not mean legal. Something that is not regulated can still be legal if there’s no law that explicitly states that the practice in question is illegal.
For example, if you’re from Germany, it’s perfectly fine to trade at a binary broker that’s licensed in the UK or France. The same safety laws and rules that protect traders in the United Kingdom and from France also protect traders from Germany. This is, of course, valid for all other countries as well.
If you want to find out more about online trading regulation, safety and licensing then check out my additional articles about this subject. If you’re interested in becoming a successful trader then please read my strategy articles for more information. If you want to find the best regulated binary options brokers then check out the ones that I listed in the tables on my site.