International Forex trading hub Cyprus has signaled that “comply or close shop” standards will be enforced within nine months, causing uncertainty among FX companies, some of them holding Bitcoin/fiat positions.
Retail trading companies located on the island offering clients Bitcoin/fiat pair options have yet to be instructed on Bitcoin options but the latest Cyprus Securities and Exchange Commission (CySEC) statements and the Central Bank of Cyprus’ view on cryptocurrencies may put these operations into question.
Cyprus is host to about 80 percent of the world’s retail FX and binary options companies, nestled in the financial district of Limassol. The rising number of complaints risks tarnishing the industry that is still growing at a fast pace.
On Tuesday, CySEC Chairman Demetra Kalogerou lined up the executives of the island’s Forex firms for an abrupt closed doors meeting. Sources presented at the meeting told Finance Feeds that the change is coming to the industry in what may be a make or break phase.
The retail forex trading industry grew rapidly lately, surviving some scandals. Some firms have already paid heavy fines, already to the tune of over three million euros on the island alone.
As early as 2014, the Central Bank of Cyprus issued a warning on the risks associated with virtual currencies when certain companies have introduced the dollar/Bitcoin pair.
It still holds a neutral stance, while suggesting traders or holders of virtual currencies take steps to protect themselves as they are yet to be regulated. It is uncertain how the latest development will influence companies offering dollar/Bitcoin pairs.
New regulations aimed at protecting clients might affect the cryptocurrency trading options.
Call centers to be banned
Calling out the boiler room tactics used via call centers, Kalogerou looks to ban them entirely. Sales staff will be required to change from cold callers into CySEC licensed and examined professionals starting this year. A warning was raised against reports of giving clients financial advice and offices will have to be set up in countries where a substantial number of clients reside to better represent them.
Affiliate marketing has yet to be called out for a strict ban or not, while Ms. Kalogerou sternly raised concerns as to how to monitor marketers on how and what they advertise to potential clients.
“We do not like introducing brokers at all, we do not like affiliates,” said Kalogerou on the topic of affiliates.
Leverage limits will now be set to a maximum of 1:50 until clients request and show an aptitude for more. Currently, leverage as high as 1:500 is available to retail clients. The commission already requested a 1:50 cap in November 2016, calling anything above that “excessive leverage.”
With European Securities and Markets Authority (ESMA) and Markets in Financial Directive II (MiFID II) legislation set forth by the EU, the market it set to get its act together. Furthermore, CySEC has made it clear that the corporate tax efficient environment of Cyprus will not play host to those who cannot or will not comply.