Why are most binary options brokers located offshore?
When starting to work on the exchange, few people wonder why most binary options brokers are located offshore. This is, of course, due to the legal address and company registration. There are several reasons for this practice.
Offshore regulators
The popularity of binary options is undeniable. But not everyone can understand the intricacies of brokerage practices to choose the most reliable company to work with.
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Having certificates and licenses means that companies are checked and regulated by financial associations and commissions that may revoke or refuse to issue a license if violations are detected.
Inspections of such organizations can be conducted secretly, with the inspector registering as an ordinary trader. Most organizations are located in offshore economic zones.
The most popular offshore exchange trading regulators are:
• FSC (Financial Services Commission) is located in Mauritius;
• CySEC (Cyprus Securities and Exchange Commission);
• IFSC (International Financial Services Commission of Belize) – commission for international financial services in Belize;
• BVIFSC (Financial Services Commission) – the British Virgin Islands Financial Services Commission;
• FCA – Financial Conduct Authority of the UK.
But the popularity of offshore registration is explained not only by obtaining the status of a reliable organization.
The reason for the popularity of offshore zones
All offshore zones are located in countries with relative economic and political stability. Therefore, businesses opened in offshore zones are also quite stable. They enjoy tax breaks. There are no sanctions or military conflicts.
In offshore jurisdictions, the registration of dealing centers providing financial services, which is essentially what all brokerage companies are, is simplified, accelerated, and offers a host of advantages.
Another reason for the shift toward free economic zones is the acquisition of foreign counterparty status. This allows for the attraction of foreign investors and the expansion of the list of participants.
The broker can count on confidentiality and a certain degree of economic freedom.
Legal entities operating offshore are free to open bank accounts in foreign countries. But, of course, the main reason is to minimize taxes. Reducing the tax burden when registering in a free economic zone is beneficial not only to Russian representatives. Many foreign market participants also resort to such tricks.
When registering, Russian organizations often resort to creating two legal entities simultaneously. They open a consulting center in their home country, while establishing the main company, through which financial transactions are handled, in an offshore jurisdiction. This is also advantageous from the standpoint of protecting against potential claims.
If a trader decides to sue a broker for any reason, they will face significant costs for legal proceedings in a foreign country.
Conclusion
Binary options brokers registered offshore gain numerous benefits, including the status of a reliable foreign company, optimized taxation, and a host of other advantages, which is why registering in a free economic zone is so attractive.
