For foreign exchange investors, what they are most concerned about when trading is the security of the trading platform, and one of the most basic factors to judge whether a platform is safe is to look at the regulatory information of the platform. In the foreign exchange market, regulators can be broadly divided into offshore supervision and onshore supervision, which we can often hear, but do not understand its meaning. Today, Tianyan Jun will take you to understand offshore supervision and onshore supervision.

What is offshore regulation?

Today's global regulation can be broadly divided into two types, one is offshore regulation, which is a relatively loose regulatory environment, and the other is onshore regulation, which is a very strict regulatory and licensing system.

The offshore regulatory licensing process is relatively quick, usually 2-4 months. At the same time, government department costs and operating costs are relatively low. This type of regulation does not require companies to have local offices, corporate directors or shareholders. Due diligence or suitability requirements for company directors and shareholders are also relatively simple in most cases.

Offshore regulation requires little in the way of reporting duties for licensees, mainly to prove that they have sufficient capital and to submit financial statements. Most offshore regulations have little or no corporate income tax requirements for tax returns. And offshore regulation does not require financial service providers to provide services only locally, nor does it require them to provide services only to local residents. In terms of audit requirements, most offshore regulations only require annual financial statements, although some may require monthly or quarterly statements.

Offshore regulators include the Belize FSC, the Seychelles FSA and, more recently, the Vanuatu VFSC.

What is onshore supervision?

Onshore supervision can also be called complete supervision, which is relatively stricter in all aspects. In many cases, passports, resumes, academic and professional qualifications, including recent public household bills, will not be enough; it will also require good identification, proof of a clean criminal record, proof of non-bankruptcy, proof of tax returns, and so on.

Not only that, the onshore regulation also has relatively high requirements on the local operation of brokers, most of which are mandatory to work in the local office, and even their company staff must be local residents. The report usually includes financial status and minimum funding requirements. Different regulators also require risk management, compliance, anti-money laundering and other specific reports. In terms of taxation, the corporate income tax of each regulatory region is also different, but it is definitely higher than that of the offshore regulatory region.

Onshore regulators include FCA in the UK, ASIC in Australia, FSJ in Japan, CFTC/NFA in the US, FINMA in Switzerland, CySec in Cyprus and many others.

In this way, compared with offshore supervision, the onshore supervision system is much stricter. However, because the review procedure of offshore supervision is relatively simple, the relevant rules are relatively loose, and the time to pass the review is relatively short, for some newly established brokers, applying for an offshore regulatory license is often more time and cost saving than applying for an onshore license, so offshore license is widely favored by new brokers.

It is also offshore regulation that makes it easier for many large brokers, some of whom set up branches in offshore jurisdictions, away from domestic regulation, so that these branches can operate independently, as a springboard to attract clients in more regions. These branches often implement different operating standards from the parent company, take advantage of the loose environment of offshore supervision, and carry out bold illegal operations to mislead investors, resulting in the loss of investors' interests, and make the market cast a shadow over the four words of offshore supervision.

However, we should not deny the ownership of a forex broker because of its offshore supervision, and we should evaluate a broker's business mode and its platform performance more calmly and objectively before making a judgment. There is no absolutely good platform, only suitable for their own platform! Of course, the premise is a formal brokerage platform, rather than a black platform, capital plate.

Source: Forex Eye