Safe and Savvy: How Regulation and Reputation Can Help You Choose the Right Crypto Broker
We are living in a time where the world moves incredibly fast and every aspect we knew ten years ago is slowly starting to change; from how we work, how we buy products and services, how we communicate, and most notably – how we spend, invest and trade money.
The term ‘money’ has changed dramatically over the last decade thanks to the invention of cryptocurrency.
While cryptocurrency is hardly considered a ‘new’ topic these days, there are still many misconceptions about what this overall currency is today and what it can be in the future.
When we add online trading into the mix, even more questions arise; can we really trade stocks as we did with fiat, but with various crypto assets? How can this be considered secure? How can we trust the broker and the overall process? How does it really work?
All valid questions, we are going to dive into this topic in more detail. Get ready to be introduced to a new world of financial trading and possibilities.
How Do NDCs Work?
If you are not familiar with Non-Deliverable Contracts (NDCs), also referred to as Non-Deliverable Forwards (NDFs), let’s start by giving a brief explanation.
To put it simply, a trader and a broker agree to take opposite sides of a given transaction (typically short-term) at a contracted rate based on the currency value at the time of the trade.
The difference is settled when the trade is closed (by the trader), which means either the profit or the loss is based on the difference in the agreed rate with the closing rate in combination with the total value of the position. This is how derivative trading is calculated and hence how Non-Deliverable Contracts are executed.
Why Should Traders Always Work with a Regulated Broker?
Given the above explanation of NDCs, you may already have a general idea of why it is so important to work with regulated brokers: Trust and safety of funds are of the utmost importance for any trader.
While NDCs or NFDs can involve any form of currency, in this article we focus on cryptocurrency and hence, Non-Deliverable Crypto Contracts.
The most important factor when working with a regulated broker is that your funds and account are protected by the local regulatory body your broker operates under.
When picking the wrong broker, traders can put themselves at risk. Unregulated brokers are known to conduct unlawful business practices which ultimately put a trader’s funds at risk.
When a broker is regulated, it must adhere to the rules and regulations of the given local regulator (regulators are typically based within a geographical area). For example, the Labuan FSA, which sits under the Ministry of Finance in Malaysia is also part of multiple international financial centers.
Working with a regulated broker ensures the protection of account balance, ethical margin requirements, and minimum capital requirements, among other factors.
How Important is Reputation?
No matter what industry we are discussing, reputation will always remain important. Thanks to the internet, it is very easy to discover whether a brand or broker has a good reputation (or not).
Of course, not everything we read online is always correct and we must make our own opinion based on various resources, such as TrustPilot, trading forums, social media and otherwise.
If one thing holds true when it comes to reviews and overall reputation management, people, in general, will almost always post a review online when something goes wrong – and usually the same goes when they’ve had an excellent experience with a brand or broker.
How Do Regulation and Reputation Complement Each Other?
For a broker to be regulated from the beginning of their activity is naturally the best way to start.
A regulated brand will convey an element of trust with its users, which is why you want to build a good reputation from the start. It is the responsibility of the broker to always offer quality customer service, incentives (such as trading bonuses), secure practices and more importantly, efficient withdrawal processes.
When trading NDCs involving cryptocurrency, it is very important to consider how these funds are stored. Given the many hacks which have occurred with companies like Binance, and just recently, FTX, clients are more worried than ever about storing their funds in crypto wallets.
So, what is the solution to this? Effectively, the most secure option for storing a trader’s funds is to tie these funds to a fiat currency which is stored in a reputable bank. Cerus Markets does exactly that. All funds of the client are stored in an insured and protected fiat bank account based in the United States.
This factor makes the given broker more attractive to regulators as well, tying further together the importance of the correlation between reputation and regulation.
What is Labuan FSA?
As we mentioned earlier, Labuan FSA operates under the Ministry of Finance in Malaysia and is the integrated regulator of the Labuan IBFC, also considered a premier statutory body in Asia.
The Labuan FSA prides itself in operating strictly based on ethics of integrity and transparency, with operations running for over 25 years. The two main Consultative Bodies under Labuan FSA are the Shariah Supervisory Council and the Financial Stability Committee.
The Shariah Supervisory Council, also known as the SSC, is a council which ensures that any offered financial instruments are in line with the Shariah law requirements.
The Financial Stability Committee, known as FSC, is a committee appointed by the Labuan FSA with the purpose to maintain the integrity of the regulatory body.
It is also notable to mention, Labuan FSA is part of multiple international communities, including the Financial Action Task Force (FATF), the International Association of Insurance Supervisors (IAIS), Asia/Pacific Group on Money Laundering (APG), the Group of International Finance Centre Supervisors (GIFCS), among quite a few other organizations.
Considering the Labuan FSA’s status as a regulatory body, its reputation is certainly taken seriously considering its involvement with so many additional international councils.
It is important to mention, Cerus Markets is currently licensed and regulated by the Labuan FSA, giving us the opportunity to build initial trust with our clients.
If one chooses to embark on a journey in online trading, the first pillar of success will always be education. Education in trading (and most things in life) is truly your greatest asset.
Getting started with an online broker requires research and focusing on important factors like regulation and reputation. Any financial activity must absolutely start with trust, even more so when the financial activity involves crypto, considering recent global events.
We invite our readers and potential users to always reach out to us with any questions which can make your trading experience better. If you have yet to register with us, you may get started today and enter a new world of digital asset trading. Remember… It’s always a bull market somewhere.