Regulation of Forex brokers – the main nuances and features

Forex broker

Buying and selling various assets is one of the basic principles of economics. The Forex market is a very useful element in this system. Every day, a huge number of transactions are concluded here, and the annual volume is trillions of dollars. This sector needs additional regulation from the government. Each forex broker who decides to start a crypto exchangemust obtain a special license. Unregulated brokers do not have access to some markets and instruments, face sanctions, and most importantly, they are not attractive in the eyes of traders.

In theory, the process of obtaining a license is simple. But in practice, if you decide to create your own crypto exchange, the stage of obtaining a license can become quite difficult. Because there are some nuances and peculiarities here. And, of course, the company must consider the legislation of the region where it will operate.

Why Should Brokers Obtain a License?

Many brokers who are thinking about how to start a crypto exchange in Forex are also wondering: “is getting a brokerage license an additional obstacle along the way.” However, this stage is simply necessary for start-up companies. Of course, Forex is happy to provide its clients with maximum opportunities and a wide range of tools, ensuring the free movement of capital. But it’s worth remembering that governments also protect the interests of their citizens.

The main goal is to ensure the safety of traders and protect their interests. The implemented norms and standards do not allow dubious platforms to start a cryptocurrency exchange. And having a license gives confidence that a trader can safely invest money and not be afraid that tomorrow the company will declare itself bankrupt.

This is why traders should only work with licensed brokers. In this case, they understand that they are acting legally, and their rights and interests are reliably protected by the regulator. Of course, there are also unlicensed brokers on the market, but their number is decreasing every year.

Basic Types and Categories of Licenses

Every new broker who decides to start a cryptocurrency exchange must obtain an official license. There are many categories with different requirements and regulations. They are divided into several types:

  •  Category A. These are regulators with maximum requirements for brokers (Japan and USA).
  • Category B. Slightly more loyal requirements for companies that decide to create a crypto exchange (Australia and the United Kingdom).
  • Category C. Average requirements for new companies (Cyprus, Malta, New Zealand, Estonia).
  • Category D. Low rates for novice brokers (Belize, Virgin Islands).
  • Category E. Minimum requirements for creating a cryptocurrency exchange (Seychelles, Saint Vincent, and the Grenadines).

A novice broker should choose responsibly. Having a D or E class license will save you time, but reduce your attractiveness in the eyes of potential customers. Conversely, having a class A or B license will show your reliability and desire to get into the forex prime brokers segment, but it will require additional efforts in the process of obtaining it. Level C can be the best choice for novice brokers. So, the licensing stage and creating a crypto exchange will take a little time, and the company will not face high requirements.

Basic Nuances of Obtaining a License for Novice Brokers

Having a license is very useful and important for novice brokers. Because in this way they can offer their services legally, without fear of sanctions or bans from regulators. Also, the financial regulator monitors violations and financial fraud. New brokerage companies need the help of a specialist in the Forex segment. After all, there are many pitfalls and nuances that you need to know about in advance. This will make the process of starting a cryptocurrency exchange more productive and help avoid common mistakes. What are the nuances to keep in mind when obtaining a license?

KYC (Know Your Client)

First of all, determine which traders and in which region the company will work. A Category A (US) license is optional if you want to create a cryptocurrency exchange for a European trader. Moreover, most of the licenses of category C (Malta, Estonia) allow sites to operate freely on the territory of the European Union. An Australian Class B license is considered reliable, but brokers still cannot operate in Japan or the United States. The SEC license is at the top of this hierarchy.

Credit Leverage

Another important feature to look for if you decide to start a cryptocurrency business. Quality platforms allow their clients to trade more profitably (but also riskier) using leverage. This tool must also meet the requirements. Some countries do not regulate the amount of leverage. Other regions (especially Muslim countries) prohibit its use for religious or other reasons (for example, protection against large losses). For example, Category A platforms do not offer more than 50:1 leverage. Australian requirements set a 30:1. And some countries allow clients to trade at 500:1 leverage.


Brokers licensed and operating in the Forex market must comply with all the rules. In particular, support decisions on economic sanctions made by the regulator. For example, the company has a category A license, and the United States imposes an embargo against Cuba, or sanctions against Iran, Syria, and Afghanistan. This means that now your site also cannot provide services to traders from this region. New users will not be able to register, and the implementation of services for old clients from these countries is suspended.

Tax Compliance

If you are thinking about how to start a forex business legally, you need to think about paying taxes as well. Each licensed broker must pay taxes as required by local laws. The company must have a staff of professional accountants, keep financial statements, have all the necessary statistics and analytics. A quality CRM system helps to solve many problems in this sense. This will make the process of reporting and paying taxes as simple as possible, and the company will be able to avoid many potential problems with the tax service.

White Label Brokerage Solution

So, you are thinking about how to start a cryptocurrency business with maximum efficiency and minimum risks. In this case, the option of cooperation with the white label FX  platform can be an excellent solution. Thanks to this, a novice broker can get access to high-quality white label cryptocurrency exchange software and minimize costs. Moreover, such a model provides access to trading platforms and a reliable liquidity aggregator. How are white label cryptocurrency exchange platforms regulated? It depends on the primary broker that is licensed. After all, it is the company, who the intermediary provides all the services.

Entering the Forex market is associated with certain difficulties. The presence of pitfalls and additional nuances makes it difficult to understand how to create a cryptocurrency exchange. Moreover, the lack of the necessary knowledge can lead to mistakes and bankruptcy of the broker. You need to take your regulator’s regulations and requirements seriously and thoroughly understand the matter. But if you choose to create a white label trading platformthen these problems are a thing of the past. Because the liquidity provider saves time and offers turnkey solutions.

For example, B2Broker can make your entry into the Forex market as efficient as possible. Qualified specialists of the company will help you get a license, register, and avoid typical beginner mistakes. Moreover, you get qualified 24/7 support and a reliable liquidity provider. B2Broker keeps its finger on the pulse and constantly introduces innovative solutions. So, you can win a tough competition for the customer.

Leave a Reply