The famous US whistleblower Edward Snowden once said, “Arguing that you don’t care about the right to privacy because you have nothing to hide is no different than saying you don’t care about free speech because you have nothing to say.”
Privacy has become a big deal in modern times, particularly where financial services are concerned. Institutions operating in this field have been collecting sensitive personal information about their clients for KYC (Know Your Customer) purposes.
For the most part, these guidelines are in place to prevent financial crimes like money laundering.
However, a large demographic of the global population with upstanding intentions might not feel comfortable divulging their personal data to trade forex due to the fear such information may be compromised; enter no-KYC brokers.
It is now possible to open a live trade using only your name and email address in a few minutes. This proposition is undoubtedly attractive for those who are particularly conscious about privacy. So, let’s explore more about this innovation.
What is a no-KYC broker?
A no-KYC forex broker is simply a firm allowing one to trade currencies anonymously without following the typically prescribed KYC guidelines. With nearly all brokerages, you need to submit an original government-issued ID/passport/driver’s license and proof of address to sign up for a live account.
You might need to provide card information for deposits and withdrawals in some cases. However, a no-KYC broker overrides all these processes thanks to using cryptocurrencies as a payment method.
When transacting with digital currencies, your wallet address is alphanumeric; and so doesn’t reveal any traceable personal information. Therefore, if a broker only exclusively accepts deposits in crypto, they can create accounts with far less information than is the norm.
Typically, clients only need to provide their first and last names (which may not be their real names) and an email address for communication. The most commonly used cryptocurrency for no-KYC brokers is Bitcoin.
It’s worth noting that several brokers do accept cryptocurrencies as payment methods. However, these entities may still follow the KYC procedures, meaning they cannot truly afford the benefits of anonymity.
Why trade forex anonymously?
We’ll now note the various reasons why someone would want to use a no-KYC broker.
- Complete anonymity: Privacy is the most significant benefit of trading currencies anonymously. With a no-KYC broker, there is no way your data can be shared with third parties or used for other purposes, which may not necessarily be favorable.
- Faster sign-up process: If you’re signing up to a traditional broker for a live account, this can take a few hours or sometimes longer. This is because the firm takes time to verify the documents submitted by the client.
However, as no KYC brokers don’t follow this procedure, you could technically be ready to trade within 10 to 20 minutes. This speed is obviously beneficial for a seamless customer experience and can allow you to take advantage of an immediate trading opportunity.
- Faster withdrawals: Most globally recognized brokers process withdrawals within a few days. However, since cryptocurrencies are not tied to the verification process of any bank or other financial institution, you can receive your money or profits much sooner.
- Fewer country restrictions: Thanks to the decentralized nature of cryptocurrencies, no KYC brokers can onboard clients from virtually any country. This contrasts with conventional forex brokerages that cannot provide services to certain countries for regulatory reasons.
- No need for taxation in certain countries: In some nations like Germany, El Salvador, Portugal, and Malaysia, citizens don’t pay capital gains or other similar taxes for any payments in BTC.
Of course, this means traders in those regions can keep virtually all the profits to themselves.
The disadvantages of trading forex anonymously
While numerous benefits exist, there are equally notable drawbacks as well.
- Lack of regulation: Virtually all anonymous brokers don’t fall under any forex-recognized supervisory body like CySEC or the FCA. This factor is the most significant deterrent.
Many of these companies tend to be based in tax-haven nations like Seychelles, Bahamas, Bermuda, Mauritius, Cayman Islands, Malaysia, Vanuatu, and Belize, regions which don’t have the most stringent financial laws.
Because cryptocurrencies are decentralized, traditional regulation doesn’t technically need to exist. However, this creates some pain points because such entities cannot offer some of the benefits of regulated brokers like insurance, bank account segregation, and audits.
Therefore, the risks of financial malpractice or even bankruptcy are relatively high. However, anonymous brokers like EagleFX and PrimeXBT have, to date, received a mostly favorable reception.
- Inconsistent depositing/withdrawal fees: A cryptocurrency like Bitcoin is known for sometimes having uncertain transaction costs. In virtually all cases, funding and withdrawing using a card are cheaper because this method has a predictable cost.
This is in contrast to the likes of Bitcoin, where it can get expensive even just funding relatively small amounts.
- Lack of presence: While somewhat of a minor issue, there aren’t many reputable brokers of this nature presently, meaning one’s options are limited.
Ultimately, cryptocurrencies have brought with them a fascinating new dimension to the forex world. Some traders still highly value anonymity and privacy, especially those who genuinely express concerns about data theft.
Trading using crypto can allow you to bypass the time-consuming withdrawal process one experiences using traditional currencies. Plus, using these brokers may exempt you from paying tax on your profits depending on where you live.
However, anonymous brokers still present some unavoidable downsides, meaning it’s essential to perform thorough due diligence. While forex is technically decentralized, brokers still need some regulatory oversight because central banks issue fiat currencies.
Not having this supervision will always leave room for any potential unwanted problems that you wouldn’t experience otherwise. Therefore, it may be best only to allocate a small portion of your trading capital to use with no-KYC brokers.