Forex Brokers that are located Offshore

Richard Montana | November 8, 2022

There are literally hundreds of forex brokers that are located offshore who you can open an account with to start trading forex online. When choosing an offshore forex broker, there are a few important things that you need to consider. Whilst they can provide certain forex trading products, services and features that other forex brokers cannot, this might come with limitations in other areas, specifically regulation. Now this does not mean that offshore forex brokers are bad, but it is important that you know what to look for and understand the risks before you get started.

What is an offshore forex broker?

An offshore forex broker is considered a registered company in an offshore jurisdiction that offers online forex trading services. Brokers move to offshore licenses to circumvent restrictions on leverages, marketing and for lower cost entry into the forex market. This means that they can offer high leverage, forex bonuses and other features to entice customers who feel restricted by regulators in other countries.

What is an offshore regulator?

Offshore regulators who are located on remote islands or tax havens with near to no domestic retail trading demand. The only incentive of these regulators is to attract companies to their jurisdictions and benefit from their presence. The brokers, in return, can get a licence relatively easily for offering their services on a global scale.

Offshore forex broker regulation

There are a few different regulators that you will often see offshore forex brokers fall under. You will find many of them in the Caribbean Island nations of the Pacific. Some of the most popular offshore forex regulators include:

  • Bahamas: Securities Commission of The Bahamas (SCB)
  • Belize: International Financial Services Commission of Belize (IFSC)
  • British Virgin Islands: British Virgin Islands Financial Services Commission (BVIFSC)
  • Cayman Islands: Cayman Islands Monetary Authority (CIMA) and Securities Investment Business Law (SIBL)
  • Malta: Malta Financial Services Authority (MFSA)
  • Mauritius: Financial Services Commission (FSC)
  • Seychelles: Seychelles Financial Services Authority (FSA)
  • Vincent and the Grenadines: Financial Services Authority St. Vincent and the Grenadines (SVGFSA)
  • Vanuatu: Vanuatu Financial Services Commission (VFSC)

Not all offshore forex regulators are the same. Some will be more permissive and have lax regulatory environments. Regardless, offshore forex brokers in will need to have a license to operate, as well as a bank account to be able to receive and pay out funds to their clients.

Typically, the cost of license acquisition, incorporation and bank account opening for offshore brokers are quite low, when compared with similar requirements for top tier regulators such as the FCA in the UK and ASIC in Australia. In addition to this, the process of actually obtaining a license as a forex brokerage is a lot quicker in offshore jurisdictions.

Therefore, the relatively low barrier for entry into the forex brokerage business in these locations is what makes them very attractive to companies who want to open forex brokerages but lack the initial investment that would have been required if the processes were to be done onshore. The estimated costs to complete the broker licensing process, including the capital requirements, are usually less than $100,000.

Why use an offshore forex broker?

The main reason I see forex traders opting for offshore brokers is because they can offer higher leverage forex trading. On the contrary, European residents are forced to trade the forex market with maximum 1:30 leverage and stop-out levels at 50%. Whilst increased leverage does mean that clients can trade larger positions, it also means they increase their risk.

The reason the EU regulators have limited leverage is to protect traders from themselves. It is not uncommon to see beginners use over leveraged positions and wipe out their account. However, if you have the experience and want to trade with increased leverage, this could be a valid reason to look for an offshore forex broker.

USA forex traders might look for an offshore broker because the forex trading products and services are very limited in the USA. Whilst going with an offshore broker can be considered to have higher risks involved, some traders don’t have a choice and want access to a wider range of features that other regulators may not allow.

You will find that many offshore forex brokerages will offer cryptocurrencies as a preferred method of depositing and withdrawing to and from your trading accounts. This avoids them needing to get the required licenses to set up a company bank account, which can arguably increase risk. That being said, some forex traders prefer the anonymity that comes with crypto funding.

Another factor is flexibility over the asset classes that clients can trade. For example, the United Kingdom’s financial market supervisor does not allow trading brokers to offer cryptocurrency CFDs, while such instruments are in massive demand. However, a brokerage with an offshore license can still offer crypto CFDs to its retail customers who are based outside of the UK.

There are plenty of offshore forex brokers that let you open an account instantly and start trading with as little as $1. This is another reason why they attract new traders who are just looking to get a feel for trading in a real environment but cannot meet the higher minimum deposits or pass questionnaires that some onshore brokers have.

Advantages of offshore forex brokers

  • Higher leverage
  • Cryptocurrency funding
  • Crypto CFDs
  • Lower minimum deposits
  • Quicker onboarding process
  • Flexibility on what they can offer

Disadvantages of offshore forex brokers

  • Lack of protection if something was to go wrong
  • Do not have the same transparency
  • Not all can accept bank transfers or card payments

Best offshore forex brokers

Below you will find a list of our best offshore forex brokers based on the hundreds of brokers we have reviewed over the years. We look for brokers who have been around for a long time as this can give extra confidence that they are a legitimate company and will have traders best interest in minds. Other things to consider include minimum deposits, leverage, spreads, commission, execution type, funding options and customer support. Some onshore brokers will even have an offshore branch for traders who want access to certain forex services which can be a good middle ground.

Broker
Rating
Regulated
Min. Deposit
Founded
Max. Leverage
1.
IC Markets Review

ASIC, CySEC, FSA, SCB

$200

2007

1:500

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
2.
Pepperstone Review

ASIC, BaFin, CMA, CySEC, DFSA, FCA, SCB

$200

2010

1:400

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
3.
XM Group Review

ASIC, CySEC, DFSA, IFSC

$5

2009

1:888

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
4.
TradeDirect365 Review

ASIC, SCB

$1

2014

1:200

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
5.
Hankotrade Review

N/A

$10

2019

1:500

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
6.
Hugos Way Review

N/A

$10

2017

1:500

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
7.
KOT4X Review

N/A

$10

2019

1:500

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
8.
FXChoice Review

IFSC

$100

2010

1:200

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
9.
Traders Way Review

N/A

$10

2011

1:1000

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
10.
LMFX Review

N/A

$50

2015

1:1000

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.

Conclusion: should I use an offshore forex broker?

This really is your own decision. Whilst offshore forex brokers can give you access to certain forex trading conditions including higher leverage and crypto funding, offshore licenses do not provide the same trust to traders that onshore counterparts offer. Some may argue that regulation of a forex brokerage may not really matter if the expectations of traders are being met.

If you are happy with and understand the limitations when it comes to offshore forex regulation, then there are plenty of well-established offshore forex brokers to choose from. More and more offshore regulators are now tightening their requirements. They are constantly upgrading regulations to impose increased limitations and restrictions.

It is legal to open an account with an offshore broker. If anything happens to your assets though, then there might not be anything that you can do. It’s important to be aware that you may have no legal rights when it comes to using unregulated brokers.

Whilst being regulated offshore does not automatically mean you should not trust a forex broker, just make sure that you do your own due diligence before you get started so that you can choose a reputable firm.

About the Author

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Richard Montana
Richard has many years of experience in broker research, testing, analysis and reviews. He knows what to look for through years of trading himself with different brokers and listening to the feedback of others.

Review Methodology

For all of our broker reviews, we research, validate, analyse and compare what we deem to be the most important factors to consider when choosing a broker. This includes pros, cons and an overall rating based on our findings. We aim to help you find the best broker according to your own needs. You can read more about our review process.


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