Crypto and Forex

How to Create a European Forex Broker Business Through Cyprus?

6/24/2021 8:00:00 AM
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After recent changes in EU directives and regulations, Forex companies that are not regulated by the EU cannot operate in the EU and/or Euro as currencies. However, within the EU, many countries are vehemently anti-financial services, anti-market, and are applying high-tax policies and increasing costs and requirements for operating a financial business or obtaining a forex brokerage license. But Cyprus has decided to swim in another direction and provide an ideal framework to create a European forex broker business. 

As you may know, Cyprus has to offer an amazing landscape, 340 days of sunshine per year, and a relaxed local population. These features, among others, have turned it into a popular relocation destination. But today we will show you why Cyprus is, alongside Malta, the top EU destination for creating a forex broker business. Just to get yourself an idea, since the issuance of its first Forex broker license in 1988, Cyprus now has more than 200 forex broker companies established on the island.

Some reasons and advantages are:

-The country provides practical financial and legal services with very low operating costs. Also, it has a robust banking system.

-Cyprus has also become one of the most famous financial centers in Europe. It is one of the 100 largest financial centers in the world, attracting advisors, compliance specialists, and risk management professionals. They are essential employees for any brokerage.

-Cyprus offers one of the lowest corporate tax rates in the world at just 12.5%, well below other countries within the EU, such as the UK (with a 19% tax rate).

-A forex broker business opened in Cyprus, can pay Cypriot corporation tax while still being able to sell its services to customers in the European market.

-Cyprus has simplified the process to obtain a financial license, including the forex brokerage license. 

-CySEC has provided a quick follow-up service that guarantees priority processing of requests through a “Fast Track” application process. With this, your company can enter the market as soon as possible

Procedure to Open a Cypriot Brokerage Business

While most companies are registered in the same order, forex firms are incorporated in different ways as they are required to comply with both the regulations laid down in the national Companies Law and regulations governing their investment activities. 

In that sense, the registration process can be summarized as follows:

1. Applying to obtain approval from the corporate register for the proposed trading name of the company to be registered as a legal entity. It applies to all businesses operating in Cyprus, not only forex broker companies.

2. Company documents must be filed with the company registrar’s office. For-profit businesses are required to register for tax and social contribution purposes. 

3. You must also have to show the address of your business and be able to open a corporate bank account for your new company. Therefore, you should advance on these steps in parallel. 

3. At the end of the registration process, the investor must obtain a foreign exchange trading license issued by the Cyprus Securities and Exchange Commission. This is a process that you can find more detailed below. 

Please note that in Cyprus, the minimum share capital of the company is set up in order with the specific activities of the business. In this case, companies that operate a multilateral trading facility require a share capital of 730.000 Euros. 

Documents You Should Have in This Process

The documents may vary depending on the type of company you want to set up in the country. However, since we are talking about a forex broker business, these are some of the specific documents you will need to have:

-Corporate documents of the company.

-A detailed 3-year business plan and operations manual.

-Clean criminal records for the shareholders, employees, and the Board of Directors.

-Know-your-client and anti-money-laundering policies must be submitted as well.

What is the Regulatory Framework to Create a Forex Broker Business in Cyprus?

Forex brokerage services were unregulated in Cyprus until 2009. From that point on, a license is required to physically exist in Cyprus in terms of these activities and their staff, facilities, equipment, internal controls, compliance functions, and proper governance. You also need at least one qualified local manager (experienced in this type of financial services and no criminal history). Therefore, this is not a typical setting for a "paper business" and requires considerable investment commitment.

Nowadays, forex brokerage businesses in Cyprus must be licensed by the CySEC (Cyprus Securities and Exchange Commission). This license will allow you to provide all brokerage services and other financial assistance services all across the EU without representatives, branches, or any additional license. A swift notification process will allow you to do business in other EU jurisdictions from your Cyprus office. This includes brokerage services, portfolio managing, market-making, and investment advice.

Your company must have at least two executive directors and two non-executive directors. The majority must be based in Cyprus. 

The Cypriot forex license has a fantastic reputation but won’t come with the costs and complex procedure as other big-league licenses, such as the US, Switzerland, or Japan.

The application procedure is relatively simple. You must submit an application form to receive the authorization. If you want to get to know more details about the Cypriot forex license, you can check this article

We understand that opening a forex brokerage service is not an easy task. When setting up a brokerage company, you are faced with important decisions that need to be made carefully with the help of experts. 

Luckily, Cyprus has a lot to offer when it comes to financial services. 

Disclaimer: The information contained in this article is for informational purposes only and does not constitute financial advice or recommendations. Investing in financial products or cryptocurrencies involves risks, and you should be aware of the potential risks involved before investing. The content on this website is not intended to be a solicitation or offer to buy or sell any financial products or services. The information provided does not take into account your specific investment objectives, financial situation, or needs, and should not be relied upon as a substitute for professional financial advice. You should seek independent advice from a financial advisor or other professionals before making any investment decisions. Please be aware that the legal status of cryptocurrencies and other financial products may vary in different jurisdictions and may be subject to regulation. It is your responsibility to ensure compliance with any relevant laws and regulations governing the sale and marketing of financial products and services in your jurisdiction.

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