scorecardresearchAfter cryptos, forex apps woo investors amid unclear regulations: Report

After cryptos, forex apps woo investors amid unclear regulations: Report

Updated: 02 Sep 2022, 11:12 AM IST
TL;DR.

More than half a dozen apps, offered by brokerages registered in distant jurisdictions like St. Vincent and the Grenadines, a Caribbean tax haven, and the British Virgin Islands (BVI) are peddling their online services

Indian laws allow only authorised dealer banks and firms having a forex trading licence to deal in foreign currencies

Indian laws allow only authorised dealer banks and firms having a forex trading licence to deal in foreign currencies

Soon after a massive fall in crypto craze, investors looking for the get-rich-quick bet are jumping the forex bandwagon.

Many are depositing money with forex trading apps to punt on intra-day and short-term price movements of the dollar, Japanese yen, euro and popular foreign currency pairs — trades that regulatory professionals believe could put these small investors on the wrong side of the law, reported The Economic Times.

More than half a dozen apps, offered by brokerages registered in distant jurisdictions like St. Vincent and the Grenadines, a Caribbean tax haven, and the British Virgin Islands (BVI) are peddling their online services — complete with trading literature, webinars, demo accounts, and videos of men and women talking about how the trading tools helped them beat the pandemic lockdown blues.

Local laws permit only authorised dealer banks and firms having a forex trading licence to deal in foreign currencies. Residents are also allowed to trade currency futures contracts such as USD-INR and Euro-INR on local stock exchanges.

But an individual trader cannot trade directly in foreign currencies or even transfer funds abroad under RBI’s liberalised remittance scheme to trade in currencies in offshore financial markets.

But the brokers, offering the apps, spin a different story: “There is no law in India which prohibits Indian traders to trade on our platform. We have a large number of customers from India. Also, the company is a member of the Financial Commission,” said a customer support person of the app OlympTrade in the course of an online chat.

The Financial Commission, however, is not a regulatory body, as a quick internet search would show, but a dispute resolution organisation for forex trades.

First Published: 02 Sep 2022, 11:12 AM IST