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Sunday, April 14, 2024

SBP declares online forex trading platforms illegal

In a circular dated May 18, 2022 State Bank of Pakistan has declared online forex trading platforms such as OctaFX, Easy Forex etc. illegal and has barred Authorized Dealers from facilitating forex trading activity on these platforms.

State Bank of Pakistan took notice of the growing illegal forex trading activity on online platforms such as OctaFX and Easy Forex. State Bank of Pakistan observed that “a number of offshore foreign exchange trading, margin trading and contract for difference (CFD) trading websites/apps/platforms (such as OctaFX, Easy Forex, etc.) are offering their products to residents in Pakistan, luring public through social media advertisements to buy their products/services”.

State Bank clarified that such activity is in violation of Foreign Exchange Regulation Act (FERA) 1947. In the circular section 4(1) and 5(1a) were cited which bar unauthorized and unregistered persons from dealing in forex trading.

Read More: SBP takes measures to restrict dollar outflow

Section 4(1) of FERA reads “except with the previous general or special permission of the State Bank, no person other than an authorized dealer shall in Pakistan, and no person resident in Pakistan other than an authorized dealer shall outside Pakistan, buy or borrow from, or sell or lend to, or exchange with, any person not being an authorized dealer, any foreign exchange”.

Similarly, section 5 (1a) further clarifies “Save as may be provided in and in accordance with any general or special exemption from the provisions of this sub-section which may be granted conditionally or unconditionally by the State Bank, no person in, or resident in, Pakistan shall— (a) make any payment to or for the credit of any person resident outside Pakistan”.

Since the online forex trading platforms including Octa FX and Easy Forex are neither authorized dealers in Pakistan nor do they have any special permission from the State Bank of Pakistan hence they have been declared illegal. Similarly, any activity through these platforms in Pakistan is also illegal.

SBP further observed that Authorized Dealers are facilitating financial transactions through their payment channels to such illegal forex trading platforms. Therefore, the Authorized Dealers have been advised to ensure compliance with FERA.

SBP directed Authorized Dealers to take all necessary measures to stop payments to the illegal forex trading platforms by their customers through any payment channels. SBP recommended following actions to the Authorized Dealers:

  1. Inform their customers regarding inherent risks and illegality of such trading with any such person/entity.
  2. Institute a mechanism of ongoing monitoring whereby such trading websites/ apps/ platforms are identified and blocked from making payments through any payment channel.

Lastly the statement by the SBP warned of pecuniary or administrative action against those failing to comply with FERA.

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It is pertinent to note that a growing number of Pakistanis have been investing in forex through the online forex trading platforms such as OctaFX, while a few profit from such investments many have suffered losses. All the illegal forex trading activity adversely effects the foreign exchange reserves which are already depleting fast.