Cyprus Forex and Fintech Sector Under Strict Regulation, Boosting Economy and Employment

The foreign exchange sector in Cyprus is firmly regulated and plays a vital role in supporting the national economy, employing thousands of people and contributing significantly to growth.

At a recent conference dedicated to explaining the institutional framework of the industry, stakeholders highlighted that forex is a legitimate and strictly supervised financial activity, clearly separate from illegal operations and fraud.

Strict supervision and full European compliance

Forex companies operating in Cyprus function as financial institutions under the close oversight of the Cyprus Securities and Exchange Commission and other relevant global supervisory bodies. These firms adhere to rigorous institutional and regulatory standards, fully comply with European directives, and undergo ongoing, comprehensive, and substantive audits.

Supervision of the sector is described as strict, institutionally safeguarded, and fully aligned with European regulatory requirements. Authorities emphasised that oversight mechanisms ensure transparency, accountability, and adherence to the same standards applied across the European Union.

Clear distinction from illegal schemes

Conference speakers stressed unequivocally that illegal operations, including so-called “boiler rooms”, bear no connection whatsoever to legitimate forex activity. Reference was made to a recent announcement by Europol concerning the dismantling of an international fraud network involving more than €700 million. This case involved unlawful call centres providing illegal investment advice to defraud individuals.

Such criminal operations, participants clarified, operate entirely outside legal supervision, outside regulatory frameworks, and beyond the scope of legitimate forex companies.

Within the conference discussions, organisers emphasised that so-called “boiler rooms” are not forex businesses, just as forex is not made up of betting firms, online gambling platforms, or cryptocurrency exchanges. They warned that misusing the term to describe unrelated and unregulated activities creates a misleading and unfair perception of a highly supervised financial sector.

Cyprus not chosen for weak supervision

The event also directly rejected claims that forex companies select Cyprus because of supposedly relaxed regulation. Officials noted that CySEC strictly enforces the full European regulatory framework, is itself subject to European-level supervisory review, and carries out systematic and demanding audits.

As highlighted, the standard of supervision in Cyprus is fully equivalent to that in all other EU member states.

Services limited to brokerage execution

Another key clarification made during the conference was that forex firms typically provide only one core service: executing brokerage orders through electronic platforms involving financial instruments such as contracts for difference (CFDs) on indices, currency pairs, gold, and other assets.

They underlined that these firms do not offer investment advice, do not manage client funds, and do not guarantee profits or returns.

Strict anti-money laundering and security procedures

Strong safeguards are also in place to prevent money laundering and terrorism financing. Supervisory authorities worldwide, including CySEC, along with domestic and international banking institutions, carry out detailed checks both on forex firms and on client transactions.

A critical safeguard is the prohibition of third-party deposits and withdrawals. Investors must fund their trading accounts using their own bank account or payment card. Similarly, any withdrawals are returned only to the same account.

This system ensures that funds cannot be redirected to unrelated third parties, effectively eliminating risks associated with the laundering of illegal proceeds or the financing of terrorism.

Significant contribution to the Cypriot economy

Speakers also highlighted the sector’s measurable economic impact. Forex companies employ thousands of workers in Cyprus, contribute meaningfully to GDP, and attract foreign investment to the island.

The sector was described as a fully regulated and supervised global industry with decades of presence in both Europe and the United States.

Organisers concluded that maintaining a clear distinction between legitimate forex firms and illegal activity is not simply a communications matter but an issue of institutional accuracy and the protection of a key pillar of the Cypriot economy.

From “forex trading” to “financial technology”

Participants also addressed how the terminology used to describe the sector has evolved. They explained that the terms “forex trading” and “forex companies” remain widely used in everyday language but no longer fully reflect the sector’s scope.

These terms originated during the early development of online trading platforms, when services focused mainly on foreign exchange transactions. While the terminology persisted, the sector itself has expanded far beyond those beginnings.

Today, the term “financial technology” or “fintech” more accurately reflects the modern reality. Investment firms now offer access to a broad range of financial instruments, including CFDs on indices, commodities, shares, and other products, all supported by sophisticated technological infrastructure.

Client onboarding, deposits, withdrawals, and related services are conducted through digital platforms and electronic systems designed with a strong emphasis on security and technological resilience.

Ultimately, the sector now represents a modern, technologically advanced financial industry that combines strict regulation, innovation, and substantial economic contribution.

By fLEXI tEAM