Bob Dylan sang it best “the times they are a-changin” and nothing is truer for Forex, Contract for Difference (CFD) and Crypto exchange merchants. In April 2018, Mastercard announced they will regard these operators as high risk and, in a nut-shell require a licence to operate in countries where one is available or if not provide a legal opinion from a local lawyer where they accept transactions from.
The consequences of not complying with this Mastercard rule is a Business Risk Assessment and Mitigation (BRAM) violation and a potential fine. Where does this leave these industries?
Life finds a way and this ruling will not mean extinction for either of these sectors. In fact, it will help to legitimise them. Obviously, this will affect Crypto exchanges the most due to lack of licencing guidelines. Forex & CFD at least have the option to gain a Cysec or an FCA licence, which covers European processing, whilst other licences are also available across the EU and the rest of the World.
Acquiring legal opinion from every country they accept transactions will be costly and extremely time-consuming, but if they want to accept Mastercard then they have no other option. If Visa follow suit, then this will completely change the face of how they operate.
However, history has a habit of repeating itself. Seven years ago the gambling industry was in a very similar position. The regulation was driven by the local jurisdiction and the schemes are compelled to uphold their laws.
The gambling companies adapted and so can 6211 & 6051 processors, along with taking solace from the fact that globally business is booming despite tighter regulation.
So, what’s next?
Even more countries will create their own regulatory framework, requiring brokers who wish to operate in their country to obtain a licence. This will force companies to decide if it is profitable to remain in that jurisdiction due to local taxes and set up costs.
Preffered local payment methods are going to be more important than ever before, enabling locals to pay in their method of choice. Whilst not all of these are suitable for Forex, CFD or Crypto right now, we believe changes in this space and even more methods being introduced to fill the card void.
We expect to see an increase in mergers and acquisitions as the larger merchants look to acquire smaller brokers who don’t meet the required standards. Potentially, they will use the customer base to strengthen their own proposition in markets where they have licences or legal opinion.
As the clock ticks down to the 12th October Mastercard Registration Programme (MRP) deadline, these companies have a lot of decisions to make and just like a Martin Scorsese film we can expect more twists in the plot.