The global Forex industry is growing and shifting. Location matters for brokerages more than ever, with regulations, taxes, and licensing rules tightening, and access to other markets and talent becoming more pressing.
For a long time, Cyprus reigned as the Forex headquarters, but Dubai is stepping up as the new dominant power. So, who is going to lead the next generation of Forex?
Regulations overview in Cyprus and Dubai
Cyprus is regulated by СySEC, a notoriously strict and comprehensive regulator that
also provides local brokerages compliance with MiFID II – a major EU regulatory framework focused on increasing transparency, strengthening investor protection, and standardising regulation across the EU. The post-ESMA landscape (introduced as a response to high retail losses and the need to protect investors better) shows tightening rules, making complying with CySEC even trickier for smaller, less capital-rich brokers.
Dubai is regulated by the DFSA (DIFC) and SCA (mainland UAE). The differences between the offshore and onshore licenses are loud and clear. The regulatory framework is fast-evolving and well thought-out, listens to market needs, and has gained a reputation for innovation and fintech support.
Dubai is hands-on but more flexible, while Cyprus is becoming increasingly rigid, which is good in terms of market player protection but threatens its leading fintech hub position. Dubai is driving a startup culture, while Cyprus focuses on the institutional aspect of trading.
Business environment
Cyprus has one of the lowest corporate tax rates across the EU at 12.5%, but it can’t compete with Dubai’s 0% income tax rate and no corporate tax (except for a 9% tax introduced in 2023 for smaller businesses with some exemptions).
Dubai entices businesses with its complete foreign ownership options in free zones, but Cyprus has something everyone on the market wants – access to EU banking and legal systems.
The infrastructure for running a business
When considering what location is more beneficial and friendly to an industry, one can’t ignore the infrastructure or lack thereof.
Cyprus has been a fintech hub for decades, allowing it to build an ecosystem of talent and supportive businesses. The workforce there is experienced and skilled.
Dubai is still relatively new to the game, so it can’t boast similar ecosystems yet. The cost of business operations and living costs in Dubai are much higher than in Cyprus, creating a limitation.
Strategic location
In terms of location, both Cyprus and Dubai have something to offer.
Cyprus is the ultimate gateway to the EU and has strong connections with CIS and Eastern European markets. Dubai is located ideally to cater to both Europe and Asia, and it’s a gateway to the Gulf Cooperation Council (GCC), Asia, and Africa.
Technological advantage
Dubai is undoubtedly leading the tech game. Its digital infrastructure is modern, robust, and well taken care of. Generous investments and regulatory support from the government help it adapt to the latest tech and beat Cyprus. Dubai is also much more open to crypto and DeFi than the more stable, mature, but ultimately conservative Cyprus.
Vanity metrics
The two rivals are close in terms of credibility, prestige, and client trust. Cyprus might have a long history with fintech and credibility among brokers. Still, its reputation is somewhat tainted by the dodgy companies on the market from less regulated times.
On the other hand, Dubai is pioneering transparency and advocating for a reliable and future-oriented mindset amongst the industry players. Dubai is positioning itself as a premium location, backing those claims up. We see increasingly more high-net-worth clients opting for Dubai, and many global and Tier-1 brokerages and related firms are launching their operations in the market.
Dubai vs. Cyprus: Who is the winner?
Ultimately, both locations have exciting things to offer brokerages. Dubai and Cyprus are championing regulations and want to build a strong and decent network of businesses to develop the region.
Startups launching their operations and choosing between the two have to think carefully. Apart from the financial and licensing criteria, it’s essential to consider your strategic plans. What regions are you planning on expanding to? Cyprus would work better if your primary market were the EU, but it may limit your growth potential to Asian, GCC, and African markets.
If you’re unsure where to launch or expand your operations and need help choosing the solution to streamline the process, email us at sales@t4b.com, and we’ll be happy to guide you and offer the tools to excel right from the start.
