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License
Forex broker license
With a daily turnover of $6.6 trillion from over 9 million online traders, the Forex market stands as a crucial financial arena, more dynamic than major stock markets. In 2020, its volatility led to a 300% surge in trading activity, expected to continue. Obtaining a Forex trading license is a necessary procedure for companies aiming to enter this lucrative market. Businesses can confidently operate in this market with licenses issued by regulatory bodies, adhering to financial norms and standards. Brokerage firms must approach the regulatory body of their chosen jurisdiction, with requirements varying from country to country.
Advantages of Obtaining a Forex License
For companies planning to enter the Forex market, obtaining a license can offer several advantages:
Partners and clients perceive your business as operating ethically and transparently, thus, a Forex license helps gain trust and credibility.
Streamlining the opening of corporate accounts and partnership agreements, as having a license simplifies relationships with banks and financial institutions.
Ensuring client fund protection and compliance with risk management protocols, as licensed operations are supervised by regulatory bodies, guaranteeing business financial stability.
Secure and uninterrupted transactions, access to a wider range of payment services, and entry into new markets through recognition agreements by regulatory bodies and certification conducted by all licensed Forex brokers.
Providing an additional level of security, protection from professional risks with client funds safeguarded through access to specialized insurance options.
Forex Market Business Models
Market Maker Model
- Acts as a counterparty to client transactions, providing liquidity.
- Profits from client losses and commissions, assuming all trading risks.
- Generates stable income even during low volatility periods.
- Functions both as a market participant and intermediary.
Agency Model
- Facilitates trading between traders and liquidity providers without taking positions.
- Earnings depend on trading volume, regardless of client profit or loss.
- Profits directly correlate with trading volume.
- Automates trading transfers to liquidity providers and sets buy/sell prices.
Hybrid Model
- Combines features of both market maker and agency models.
- Offers flexibility in transaction processing and revenue generation.
- Allows businesses to adapt their role based on market conditions.
- Jurisdictions for Obtaining Forex Trading Licenses
- Essentials of a Cypriot Forex License
Thanks to the authoritative regulatory body, the Cyprus Securities and Exchange Commission (CySEC), Cyprus has become a favored location for Forex business startups. This regulatory body ensures strict compliance with the Markets in Financial Instruments Directive II (MiFID II). Consequently, the jurisdiction is desirable for clients as offshore Forex licenses here instill high levels of trust in license holders. Other important aspects will be discussed below.
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Gambling licenses
By obtaining a gambling license, you immediately enhance the legitimacy of your business, adhering to international standards and regulatory oversight. Enjoy low or even zero tax rates in some jurisdictions, the ability to open bank accounts in other countries, and numerous other economic benefits.
A license attracts more users, as it boosts players’ trust, giving them assurance of fair play and financial security. Expand your target audience and business growth potential by operating in various regulated markets. Facilitate collaboration with payment gateways, software providers, and industry key players by preferring licensed partners.
Protection from fines, criminal charges, and other potential legal issues. Responsible gaming tools significantly enhance your brand reputation and user trust.
Activities Covered by a Gambling License
A gambling license is necessary to comply with the law, strengthen reputation, and protect against legal issues at all stages of business operations. It’s essential to establish relationships with B2B providers, players, and software developers.
Organizations requiring an online gambling license include:
Online casino operators, namely website owners offering gambling activities such as poker, slots, roulette, etc., and organizing online casino games.
Payment companies – Payment companies dealing with gambling must demonstrate reliability and ensure the security of customer transactions.
Bookmakers – Companies accepting bets on sports, esports, and live events.
Game software developers – Creators of gaming software must comply with legal norms and often require a license.
Service providers, consultants, and entrepreneurs dealing with various types of online gambling, such as online poker, lotteries, and fantasy sports.
Types of Gambling Licenses for Online Operations
Gambling licenses vary by issuing location and the specific activities they cover. Key types of licenses in the online gaming sphere include:
B2B (Business-to-Business) License – Allows game developers to offer their products to online gambling operators, facilitating partnership establishment and game distribution on digital platforms.
B2C (Business-to-Consumer) License – For directly providing services to online casino players.
Software license for developers – Allows creating and distributing gaming software.
Gambling licenses are necessary for organizations offering real money games, including online casinos, poker rooms, and sports betting sites. A license for accepting bets on sporting events and other activities is required for offering bookmaking services.
Gaming platform license – Developing and managing online gaming platforms hosting various games.
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Payment license
Electronic Money Institution
An Electronic Money Institution (EMI) is a legal entity that holds the official right to create quasi-money, electronic funds. It also facilitates payments using these assets.
The primary distinction between an EMI and a traditional bank lies in the fact that an electronic money institution is not authorized to issue loans or accept deposits. Its main purpose is to facilitate payments and serve both businesses and individuals.
Legal regulations governing EMIs are constantly evolving worldwide, necessitating thorough research for each new project.
In the European Union, each licensing authority responsible for EMI adheres to Directive 2009/110/EC. This directive serves as the foundational legal framework for issuing electronic money.
What is a payment institution license?
PSD2 (Payment Services Directive 2) regulates Payment Institution (PI) licenses and serves as authorization for companies to offer a wide range of payment services. For companies aiming to operate successfully in the EU, this license becomes one of the optimal choices.
Its main features include legal legitimacy and access to a vast market. Additionally, the license is essential for companies planning to offer direct debit services, payment operations, money transfers, and account information services. In turn, PSD2 ensures that payment services are considered technologically neutral, fostering continuous innovation.
Key differences between EMI and PI licenses
EMI (Electronic Money Institution) and PI (Payment Institution) licenses serve different functions in the realm of financial services. An EMI license, including options such as electronic money issuance, permits the issuance of electronic currency and the creation of various payment instruments like e-wallets and payment cards. Conversely, a PI license is limited to account management and facilitating money transfers without the ability to issue electronic funds.
With an EMI license, companies can safeguard client funds for longer periods, introduce transaction speed innovations, and reduce payment fees, thereby enhancing customer loyalty. These advantages make it a strategic move for companies seeking to establish themselves in the digital payments space through a digital payment license.
EMI and MSB licenses
While a PI license covers a broad spectrum of payment services, an EMI license (Electronic Money Institution) is regulated by the Electronic Money Directive 2 (EMD2). It allows for the issuance of electronic funds, the digital value of which is stored electronically. This license is necessary for ensuring electronic fund storage and providing payment services. EMIs have higher financial obligations related to security and protecting electronic funds and clients’ financial interests.
On the other hand, a Money Service Business (MSB) license is essential in Canada, encompassing financial services such as currency exchange, money transfers, and operations involving virtual currencies. Those seeking an MSB license must comply with anti-money laundering and counter-terrorism financing rules, as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Ensuring the integrity of financial transactions is crucial here, much like in EMI, where a high level of operational transparency and compliance is vital.
The regulatory framework for EMI and MSB is rapidly evolving. Authorities in this niche prioritize consumer protection, financial stability, and combating crime. Therefore, there are both new challenges and opportunities for businesses in the fintech sector. The development of the digital economy is becoming increasingly important not only in Europe and Canada but also in many other countries and regions worldwide, including the United States, Australia, Singapore, and beyond.
Financial Licensing Business Environment
Czech Republic and Lithuania currently lead the EU in the number of enterprises seeking EMI licenses. By 2021, there were 40 PSP/EMIs operating in the Czech Republic and 104 smaller payment organizations. The number of payment systems in Lithuania reached 112, significantly more than the 63 in 2018.
These jurisdictions attract businesses with lower labor costs in the EU, streamlined EMI licensing procedures, and transparent tax systems. While in other EU countries such as Germany and Malta, license processing takes 6 to 12 months, Czech Republic and Lithuania operate more swiftly. Lithuania allows applications for licensing without a pre-established company.
The requirements for obtaining an EMI/PSP license in the EEA are practically identical, ensuring a uniform process with minor differences in formalities.
For businesses considering entering the financial licensing market, Taurus Legal Group offers expert guidance and support tailored to your needs. With our comprehensive understanding of regulatory landscapes and personalized assistance, we streamline the licensing process, minimizing complexities and ensuring compliance. Contact us today to explore how we can assist you in obtaining your EMI license and thriving in the evolving financial services sector.
Partnering with Taurus Legal Group for your licensing needs can streamline your entry into the financial market. Our expert team offers tailored support and guidance throughout the licensing process, ensuring compliance and minimizing complexities. With our comprehensive understanding of regulatory environments, we can expedite your licensing journey, enabling you to establish a strong presence in the financial services sector. Contact us today to begin your licensing journey with confidence and efficiency.
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