Some of the traders prefer to opt out for a certain FX and CFDs brokerage in order to open and close their bitcoin trades. While there are both the strong and weak points of trading BTCs with a Forex broker, one of the most obvious advantages is the leverage. Unlike trading on a regular exchange, a client of an FX brokerage company may actually trade a larger amount of bitcoins than the value of his capital. In other words, if a trader has $1300 on his account (roughly 1 BTC), he can buy or sell 5 bitcoin (valued at around $6500). Another obvious advantage is that an FX brokerage allows not only buying bitcoins for fiat currencies, but also selling them, also known as going short.
Most of the FX companies in EU are regulated by the Cyprus Securities and Exchange Commission (CySEC), and recently some notorious news have come from this regulator. While the news affect currency traders much more than the bitcoin traders, there is still a significant number of bitcoin Forex brokers and their positions on the BTC are quite huge.
Many FX industry professionals have reported that Cyprus has been a great location for starting-up a brokerage company. While the accessibility to licensing provided by the government resulted in over 200 brokerages moving to Cyprus or establishing their office there, many of these companies have been employing shady tactics from the marketing, sales and operational perspectives. CySEC was unable to regulate the brokerages in a proper manner, and this is why it has decided to take very strict measures now.
Some actions taken by CySEC are triggered by the European-wide regulations. Such practices mostly deal with improper promotions of the financial services – mostly bonuses. As of now, no CySEC regulated broker is able to offer a certain trading benefit, like a deposit bonus, as it will violate CySEC rules. Apart from that, all of the brokers suppose to provide a negative balance protection, which is actually a great advantage for those who trade on a margin. Finally, the maximum available leverage will be restricted to 200:1, which is alright, as most of the professional traders would not need such a high leverage anyway.
Having said this, CySEC has gone one step ahead of the EU-regulation and wants to introduce more harsh methods of overseeing the brokers. The first idea is to ban all of the Introducing Brokers unless they are regulated. Secondly, CySEC does not seem to like heavy sales tactics and will implement some heavier practices for the call-center operators.
First of all, the changes in the regulation lead to the deterioration of the profits. FX brokers are no longer capable of extracting as much revenue from a single client, as well as it gets harder to attract new clients due to the prohibition of the trading benefits. This may lead to the consolidation in the whole retail FX sector, yet before one company acquires another, the currency positions (including cryptocurrencies) of the acquired company would have to be closed. Hence, until the end of the year we may certainly expect some FX brokers selling bitcoins heavily, simply because they have to close the positions of their clients.
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