Cypriot Forex brokers have been adjusted to cryptocurrency

CySEC, the Cypriot financial regulator, yesterday presented CIF-licensed Forex / CFD brokers with guidelines for offering trading on "cryptocurrency" instruments. The list consists of 11 points that local brokers must follow.

Limitation of leverage 1: 5 and lack of capital protection

The Cypriot commission, not wanting to wait any longer for EU regulations covering the cryptocurrency market, and in particular CFDs on cryptocurrencies, has taken its own steps to increase the security of this new investment industry. The result is the issuance of its own regulations, which will apply to local investment firms with a Cypriot license. There are many "news" and limitations.

One of the most important is reducing the leverage to 1: 5. Until now, local brokers have offered leverage on Bitcoin at the level of 1:10, 1:20, and even 1:50 - so the reduction is strongly felt.

Be sure to read: Brokers offering Bitcoin - 2017 offers list

The second important provision is the lack of coverage of traders by the so-called compensation fund (Investor Compensation Fund). Such fund guarantees refunds in 100% up to the amount 20 000 EUR. However, CySEC recognized that derivative instruments for cryptocurrencies are burdened with large, and even immeasurable risk.

Below is a full list of 11 guidelines:

• Brokers with a CIF license having cryptocurrencies on offer must meet all requirements for other derivatives,
• Before the broker offers CFD clients for digital currencies, he is obliged to inform about the lack of European regulations regarding this market, high risk level, high volatility, lack of protection resulting from the compensation fund as well as the lack of possibility to report unfair practices of companies that offer BTC trading.
• Liquidity providers for cryptocurrency instruments must be independently checked by a broker with a CIF license,
• The maximum financial leverage on all CFD instruments for cryptocurrencies may be 1: 5,
• The broker must present a methodology for calculating the purchase and sale prices (Bid and Ask),
• The broker should use the services of more than one liquidity provider to ensure the best execution of orders and price offers,
• The broker may only use the services of licensed liquidity providers and reliable market data,
• The broker must adequately monitor the risk related to cryptocurrency activities,
• The investment firm's revenues from trade in cryptocurrency funds should not exceed 15% of total quarterly revenues,
• The broker should have official consent from liquidity providers and quotes to carry out regular audits.
• The broker can not use the so-called "Passport law" when offering cryptocurrency instruments in all EU countries. It is the responsibility of the company to properly assess the legal status of Bitcoin and its derivatives in a given jurisdiction.

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