Why is foreign exchange licence indispensable?

In 2019, there were vast opportunities for foreign exchange trades in China and Peer to Peer (P2P), domestic commodities market, private equity, P2P and other institutions have shifted their discourse to focus on the foreign exchange market. Along with it also came rising illegal underground forex trading crimes such as the use of unregulated underground banks. Under the crackdown of the black market and heavy domestic regulations by government agencies, the financial system has achieved positive results in implementing various tasks and measures to tackle the illegal underground forex crimes by the end of 2019.

With the rectification of financial processes, many domestic unlicensed foreign exchange companies have withdrawn subsequently. At the same time, China continues to clamp down some non-compliant foreign exchange platforms, and their related activities. Thus, resulting in the forex-trading affiliated companies walking on a tight rope. In the face of the situation, the question posed is what should foreign exchange platforms do to show compliant, and how should it continue to develop and operate in the foreign exchange market. The way moving forward is deemed by most is implementing a two-prong approach – compliance supervision and adoption of licence applications for foreign exchange brokers.


Fast forward to today, global financial operations, including China, are in a more stable state, mainly due to the strict supervision of financial regulators situated in various countries or regions. According to the applicant’s business nature, these financial regulators issue licenses to operate in the corresponding regions while being subjected to compliance supervision.

There have been rumours circulating in the market that it is possible to operate and flourish as an unlicensed forex brokerage or be an unlicensed broker. However, the annual increase in financial licence applications indicates otherwise; if companies want to expand in the long term, it is necessary to apply for forex licenses from official regulators.

Applying for a licence is not an easy process. For one, the difficulty of opening an account has rendered most forex platform businesses helpless. One may wonder why forex platforms need to apply for a licence. After collecting and evaluating back-end data, many forex platforms face similar issues in attracting customers to use their forex dealings system. Some challenges include the high barrier to opening forex accounts, low deposits, and increased losses. These stem from the lack of regulated licenses, making it hard to attract and win potential customers’ trust. Coupled with the bombardment of endless confusing media reports, it whittles away the confidence in a new and old customer. It amplifies the importance more than ever for the need for a regulatory licence. Some of the benefits are briefly listed below:

1. Building a Strong Brand

It is not easy for start-up brokers to gain a foothold in the competitive foreign exchange market. In order to become a market-trusted and reputable broker, start-ups must first hold a licence issued by one or more reputable regulators. In this way, licenses help companies increase their attractiveness and influence and broaden business development channels and customer base.

2. Level of Customers’ Trust

Understandably, when investors choose a foreign exchange trading platform, they are most concerned about the safety of funds and the regulatory licence that the platform holds. The foreign exchange regulatory licence is the most direct assessment to measure if a foreign exchange broker is reliable and has the qualifications to perform related operations. Therefore, it is also one of the focus of investors to choose a broker with legal supervision. It is undeniable that the licence from a reputable regulator holds certain weightage to draw customers. It is also the key to the long-term development and growth of a platform. In the foreign exchange industry, there is no single conglomerate that does not possess multiple regulatory licenses. Companies that prioritise foreign exchange licenses will have a “first-mover advantage.”

3. Legal compliance

A compliant brokerage’s prerequisite is to have a globally recognised regulator’s regulatory licence because it ensures an effective and transparent regulatory system, strict fund protection for customers, rigorous net asset regulations and corporate management requirements, and reporting. There are also complete regulations in terms of monitoring and control.

With such comprehensive regulatory requirements and a transparent regulatory environment, it ensures companies put in place regulatory and compliance procedures for checks and balances. Gone are the days of thriving frenzied and unregulated forex platforms. Only by actively embracing supervision and keeping to a compliant business, forex platforms businesses can seize the opportunity in the market reshuffle to thrive on.

The continuous optimisation and enhancement of national policies and the gradual opening of the foreign exchange market have become an essential indicator of the current foreign exchange ecosystem and the reforms required to keep up with the regulatory frameworks. Undeniably, foreign exchange is bound to become an excellent opportunity for financial investment projects and entrepreneurs who can capitalise on opportunities will become the biggest beneficiary.

With the tightening of compliance and regulatory, some advantages of foreign exchange financial licenses mentioned in our past article will aid some of the forex platforms. For non-licensed brokerage that is of considerable size and with good market reputation, the possession of foreign exchange licenses gives an extra boost to scale up and offers more growth opportunities.

Consult the Financial Licence Expert – Desfran

Financial licenses have always been one of Desfran’s core business. We have applied for financial licenses for over 100 brokers. With offices in destinations of the global financial core, the team can advise and customise your business needs’ best-suited financial licence.

Always abreast of the current trends in the financial industry, Desfran is able to provide firms with comprehensive solutions, explore, and maximise your business potential, and help your business grow.

Contact Desfran for a free consultation now.

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