This island nation in the Eastern Mediterranean region has one of the richest and most far-going history in the world. With a very small population of almost 1.2 million, as well as the total area of only 9,251 km2 (3,572 sq mi), Cyprus is quite a small country.
For most people, when they hear about Cyprus, they instantly think about the amazing scenery with warm sun and breathtaking sea and beaches, along with Cyprus’ very welcoming and kind people. Or, perhaps, they may think about all the ancient myths and legends that it was the birthplace of, such as that of the Greek goddess of love, Aphrodite.
While Cyprus is, and definitely should be, remembered for all these amazing things, what many people don’t know is that Cyprus is one of the leading, most important Forex countries in the world, and in this guide, we will learn exactly why that is. Here, we will take a quick overview of the Cypriot Forex market, and discuss all of its strengths, advantages, and disadvantages. The main point of discussion will be Cyprus’ Forex regulation, and how it relates to other countries in the world. By the end of reading this, you will have a great understanding of the Cypriot Forex market and know exactly how and why it reached the level it has today.
Top Cypriot Forex brokers
As you will find below, there are tons of Forex brokers based out of Cyprus. The diversity of choice and options is almost infinite. While this is great, it also gives way to the problem of choosing an appropriate Forex broker. The thing is, when you’re deciding which broker to go with, there is a huge list of things to take into account.
Not only do you have to choose a broker that will give you the best chances of succeeding, but also the broker that can provide you with much-needed safety and security, which is crucially-important on this market. Below, you will find the Cyprus-based Forex brokers that satisfy these exact requirements of providing you with the best possible platform to start Forex trading on the right foot, and start shooting for success right away! Check out all of them below, and you will find your personal favorite broker in no time!
FCA, CySEC, IFSC, ASIC, DFSA
MT4, MT5, WebTrader
Desktop, WebTrader, Mobile
FCA, ASIC, CySEC, FSCA, FMA, MAS
WebTrader, Windows 10 Trader
Cyprus’ Forex regulation
The reason Cyprus is one of the main Forex countries in the world is not because of the fact that Cyprus has the best economy in the world with the biggest potential, or because of some kind of magical power that the country and its populace have.
Rather, the reason for the above is that Cyprus has one of the best, if not THE best, regulatory environments in the world. To date, it is the home to the highest number of Forex brokers as compared to any other jurisdiction. Now, when we say “best”, we don’t mean it to be the best in any specific trait, such as best in safety, the strictest, the most cooperative, or anything else.
Rather, what we mean is that the Cyprus regulations are the most well-rounded and balanced, and, more specifically, they are also really flexible and relaxed, as compared to many other regulators. Because of this reason, a vast majority of internationally-known and recognized Forex brokers are based out of Cyprus. Thousands of Forex brokers around the world have chosen Cyprus to be their home, for the exact same reason we just mentioned.
Now, when we mention that these regulations are relaxed, we don’t want you to get the wrong impression that trading in Cyprus is less safe or anything like that. The point here is that many Forex brokers have unreasonably tough policies. In many countries, the local requirements are so tough, that it’s impossible for many brokers to get started there.
Many of these strict environments are actually counter-productive at times. While they set very high standards for the brokers and thereby heavily filter-out the possible fraudsters and scammers, they also discourage actual legitimate brokers who have trouble operating under such heavy-handed regulators.
Additionally, Cyprus’ approach to these relaxed and flexible regulations are also beneficial for the traders as well, because, with fewer regulations, they themselves gain more flexibility, and can do the sort of trading that would simply be impossible with very strict regulators.
Cyprus Securities and Exchange Commission
The official regulatory body behind this very popular and supportive Forex environment is the Cyprus Securities and Exchange Commission (CySEC). CySEC is a name that is known by pretty much all Forex brokers and many traders. Through their unique approach, they have managed to become one of the most preferred regulators, and have made Cyprus the Mecca of Forex trading.
CySEC was established back in 2001, and since then, it has, for all intents and purposes, been doing an absolutely amazing job. Since it was started off, the definition of CySEC’s obligations was to supervise the securities market, the investments market, and the whole investment and asset management field in Cyprus. Under its regulatory umbrella are the Cyprus Stock Exchange and all of its participants, investment funds, investment consultants, investment services companies, mutual fund companies, and, of course, all the Forex brokers in the country.
Back in 2004, Cyprus joined the European Union, and due to this, many things started to change. Cyprus aimed to bring its local laws and regulations in harmony with the guidelines and standards set by the countries in the Eurozone, meaning the guidelines and standards of the Markets in Financial Instruments Directive (MiFID). At the time, Cyprus had a bit of a controversial reputation because many considered it to be a tax haven due to its overtly relaxed tax regulations and loopholes that it allowed. After joining MiFID, though, a lot of things started to change.
Specifically, the standards are now much higher, and the strictness with which the brokers have to comply with these standards is also higher, which we will discuss below. With that being said, Cyprus is, still, considered to be one of the more liberal and supportive environments for the brokers, and many of the brokers still prefer to be based in Cyprus due to this reason.
What exactly are these favorable conditions? Well, as an example, the taxes are much more favorable in Cyprus as compared to most other countries in Europe. This means, that if a broker is targeting their services for one of the major European countries, they can be licensed by CySEC, but still legally provide their service to any European country, thanks to the policies of MiFID. Additionally, it’s all very simplified, as they can follow the guidelines set by CySEC, as opposed to having to follow each and every rule by each and every country they operate in. With that out of the way, let’s talk about some of the specific rules, regulations, and standards that CySEC operates by, and necessitates the brokers.
Minimum operating capital
One of CySEC’s key approaches to increasing the safety and stability of the market is necessitating the brokers to have the minimum operating capital of €100,000. This was increased from the previous amount that the brokers were subjected to, which was €75,000. The brokers are required by law to keep this minimum capital at all times, and in case of failing to do so, they will be penalized accordingly.
This practice of minimum required capital is a fairly common one and is practiced by dozens of Forex regulators around the world. Thanks to the fact that most of the Forex brokers are now licensed with CySEC, it means that most decent Forex brokers you will be dealing with will most likely have this kind of a safety mechanism.
This is a great feature, as it greatly boosts the safety of the broker, and thereby boosting the safety and well-being of you, the trader. This would put the broker in a much better position to brace for the volatility and other dangers of the market. After all, if a broker is always on the verge of running out of money, it can’t possibly be a safe bet to trade with them, right?
Frequent audits and reports
Another thing that has been working great for CySEC is the requirement of frequent, thorough audits and reports of the brokers’ activities. This rule requires the brokers to constantly make reports and audits about things like their financial transactions and current financial state, their dealings with the customers, reports of the customer service provided to the traders, and much more.
Beyond this, CySEC also works closely with the traders and other market participants to identify any possible malicious brokers and discipline them accordingly. Specifically, CySEC has shown to have excellent success with whistleblower programs, where it encourages the people who are aware of the broker’s wrongdoings to inform them without any risk or repercussions.
This ensures, that CySEC is able to keep a close track over the activities of the brokers, and control and prevent any possible illegal or malicious practices. Besides the reports by the brokers, CySEC also conducts its own research as well, and based on all the information, they take the appropriate action in response to the broker’s behavior.
Protection of clients’ funds
CySEC offers great protection for the traders by making certain measures mandatory for the brokers. As an example, CySEC implemented the rule of mandatory account segregation, which has become pretty much a worldwide standard at this point. Brokers are required by law to hold the funds of their clients and their own funds in separate bank accounts. This aids in increasing the safety greatly, because this way, in case the broker goes bankrupt, the clients’ funds will be safe separately.
Additionally, the brokers are required to run an investor compensation fund, which serves as a protection fund for the clients, which also acts as a savior in case of a broker’s bankruptcy. The brokers are required to compensate a total of €20,000 per trader. Although ICF is one of the most popular compensation schemes on the market and has helped out thousands of traders and investors, it’s considered to be one of the lowest ones in the industry right now.
No conflict of interest
One of the main security concerns that many traders and the Forex regulators have had for many years is the conflict of interest between the brokers and the trades. How can this happen? Well, one common thing that many brokers maliciously committed for many years was opening positions against their traders. This, of course, is an obvious conflict of interest with the client and opens up the possibilities of the broker misleading the client into doing something for the broker’s own gain.
Additionally, CySEC strictly controls, that the brokers do not attempt to create any favorable conditions for themselves at the expense of the trader. While this may sound like an abstract concept, this is exactly the reason as to why CySEC focuses so much on audits and reviews, and always keeps a close track on the activities of the brokers. Their goal is to ensure the well-being of the traders, and obviously, preventing malpractice from the brokers is one of the main things to do for achieving this goal.
What is the Cypriot economy and landscape of Forex trading like in the country?
Having finished our lengthy discussion of the regulatory and operational specifics of CySEC – which was definitely warranted, considering CySEC’s importance as an international regulatory authority – let’s now move to the actual specifics of Forex trading in Cyprus.
Cyprus, as a country, is a fairly small one, not only in terms of its territory and population but also in terms of its economy. However, thanks to this low number of population, the country, and its citizens enjoy a reasonably high GDP per capita of around $28,000. This makes them one of the most prosperous nations in the Mediterranean region.
Cyprus, as a country, is not much of an exporter. In 2019, it was just a few million shy of $3 billion exports, meaning exports are definitely not a major part of its economy.
Some of the strongest economic strengths of the country are sectors like tourism, as thanks to its rare scenery, amazing weather, and breathtaking beaches, Cyprus remains one of the top holiday destinations year-round. It is estimated, that over 2 million tourists visit Cyprus every year, which is around twice as much as the actual population of the country. In fact, this sector is so important for the country, that Cyprus’ Tourism Organization is classified as a semi-governmental organization, independently charged with regulating the sector in the country, and taking various independent actions to promote it.
Additionally, oil and gas are projected to become a major part of the Cypriot economy. According to several pieces of research, there are about 2.831 trillion cubic meters of untapped gas reserves laying between Cyprus and Israel, which is almost as much as the whole amount of natural gas the world uses every year.
This, of course, opened up some huge investment opportunities from foreign companies, among them giant ones like Shell, Avner, and Delek. However, oil is definitely not the ONLY sector where Cyprus is seeing a lot of progress. Food, cement and gypsum, beverage processing, ship repair, and rebuilding. Although Cyprus doesn’t excel at one single thing in a very major way, it definitely has a lot of different branches where it has been having great progress.
In fact, Cyprus, for quite some time, was regarded as one of the fastest-growing countries in the Eurozone. This is especially impressive, considering where the country started. After joining the European Union and adopting the Euro as its currency, it has all been seemingly going better and better for the country. Since them, they have very impressively managed to keep up the case, and are showing no signs of slowing down.
This balanced and fast-growing economy definitely opens up doors for anyone who is interested in Forex trading.
The verdict on Cyprus Forex market
By now, you should have a very good idea as to how great of a Forex environment Cyprus offers.
- Home to CySEC, one of the most important Forex regulators in the world
- A thriving Forex market with motivated community
- The fast-growing economy of the country
- Great economic relations with major European countries
The list of benefits can be endless, and we can really go on and on and on. The point is, Cyprus is one of the main Forex countries for a reason – as a small island country that doesn’t have access to huge amounts of natural resources as is the case with countries like Russia or Kuwait, Cyprus knew that it had to work hard, and find its own unique approach as setting themselves as one of the interesting countries for international trade.
As such, Cyprus took on the role of a facilitator of the international Forex traders, and are now one of the main countries where all the Forex brokers are flocking to. If you are interested in Forex trading where you can really be in the center of the action and be at the right place at the right time, then you really can’t go wrong with trading with Cyprus/CySEC-based Forex brokers.
On top of all this, you can keep on trading and making progress with complete peace of mind, considering the fast-growing and reliable economy of Cyprus, and their dedication to advancing and growing as an economic force in their region. Considering all of this, we can definitely whole-heartedly recommend going with the Cypriot Forex market!