Anonymous Forex Brokers, Should You Trade With Them?
Is it possible to stay entirely discreet to a broker while still enjoying the potential for profiting off the forex markets? Enter an anonymous brokers group, a niche but growing, allowing clients to use their trading services with no provision of an ID, proof of address, or card details.
With the advent of KYC (Know Your Customer or Know Your Client), privacy in the financial markets has largely been compromised. Although the purpose of this adoption is noble, bad actors with malicious intent like cybercriminals can still access personal information.
While clients can trust regulated brokers who follow this process, others may value their personal information sensitively. Thus, anonymous brokers certainly fill a much-needed gap in the industry.
However, how safe is the proposition of 'no KYC’? Are there any considerable risks involved? This article will briefly explain the role of KYC in forex, how anonymous brokers work, and some of the distinct advantages and disadvantages of trading with them.
KYC in forex
KYC is a globally-adopted practice financial services providers adhere to in minimizing money laundering risks by thoroughly verifying the identity of clients. Forex brokers are naturally one of the most targeted financial entities in light of the astronomical daily traded volume in the markets.
While KYC has existed for almost two decades in most countries, there was a noticeable strengthening of the laws in the mid-2010s that ushered in stricter requirements. Virtually all forex brokers follow very similar KYC principles requiring prospective clients to offer the following:
An original, fully-detailed, and up-to-date ID (government-issued ID book/card, passport, or driver's license).
Original proof of address or residence usually not older than three months of the issue date. This evidence can come from a bank account or bank card statement, utility bill, telephone bill, or other official documents.
Furthermore, card payments and withdrawals are usually subject to more personal information such as the card number, expiry date, CVC/CVV code, and, at times, the front and back pictures of the card itself.
How do anonymous forex brokers work?
The glue of dealing with these kinds of brokers boils down to the wonders of cryptocurrencies. By their nature, digital currencies are cryptic where transactions are inherently private. A wallet address does not provide actual personal information like the name and address of the coin holder.
Brokers dealing with traditional payment processors (such as VISA, Mastercard, Neteller, etc.) following conventional guidelines will almost certainly require the personal information of clients.
However, cryptocurrencies eliminate this need where deposits and withdrawals can occur without any exchange of personal data. A trader usually only needs to provide their first and last name and an email address for correspondence.
The broker would not have access to personally sensitive information like the address, ID verification, and bank card information. On their side, they should only see the name which the trader registered and their wallet address for the chosen cryptocurrency to facilitate withdrawals.
The most commonly used digital currencies presently here are Bitcoin, Ethereum, and Ripple.
Pros and cons of anonymous forex brokers
Here below are the main benefits and drawbacks of trading with anonymous forex brokers.
Privacy. Privacy is the biggest benefit in this regard as the risk of identity theft or any misuse of personal information by a third-party is drastically limited. Furthermore, withdrawals coming from cryptocurrencies will not go through other middlemen such as banks and tax practitioners, meaning that profits can also become anonymous.
Speed. Speed is another very apparent advantage of trading with a no KYC broker. Unlike traditional brokers who may take up to a day (sometimes longer) to verify a trader's personal information, the set-up process is significantly quicker with anonymous brokers (usually taking about ten minutes for a client to start trading live).
This speed results not only in a seamless and efficient customer experience but can prevent missed trading opportunities.
No country restrictions. Although this method is not necessarily legal, a trader can bypass any local restrictions by trading with an anonymous broker since they will not have any information on the country.
Every broker will have a list of regions they explicitly do not serve. This data only becomes available through a KYC process, but not through an anonymous one.
Lack of regulation. Nearly all anonymous brokers aren't regulated. For all the advantages of these brokers, their lack of regulation is the biggest detriment. The peace of mind in dealing with an internationally-regulated entity is lost.
Fewer protective measures. Many of these brokers operate from offshore jurisdictions with a reputation for lack of regulation. As a result, these firms cannot offer protective measures, like insurance compensation funds and segregated bank accounts, meaning no authority can mitigate the risk of bankruptcy, malpractice, or fraud.
List of anonymous forex brokers
The number of forex brokerages currently offering anonymous trading is minute, but we should expect it to grow. Hence, this list is not exhaustive as it merely outlines the most well-known brokers providing the service.
The ultimate question is, should traders consider trading with anonymous forex brokers? It depends entirely on how precisely one values their privacy as this is a contentious issue in many spheres.
On the one hand, these brokers provide an efficient service, although their operation model is still relatively new, and the risks are glaring. For those who may ponder on using them, it may be best only to invest a smaller portion of trading capital and allocate the rest to a traditional KYC and regulated broker.