2024

In 2025, the need for retail brokers to partner with secure and compliant entities—whether payment providers (PSPs) or trading technology providers—has never been more urgent. With Europe’s regulatory landscape becoming increasingly stringent and transparency gaining importance among investors, the pressure on brokers to scrutinize their partnerships is intensifying.

This article explores the critical issues retail brokers face in ensuring compliance across their payment and trading providers, outlining the risks of inaction and the strategic steps needed to safeguard their businesses and clients.

The Regulatory Landscape in Europe:  A Game-Changer

Europe stands as one of the most tightly regulated financial markets globally. Frameworks such as the Markets in Financial Instruments Directive II (MiFID II) and the European Banking Authority (EBA) guidelines provide the foundation for compliance in the trading ecosystem. The forthcoming Markets in Crypto-Assets Regulation (MiCA), expected to take full effect by the end of 2024, adds another layer of accountability, particularly for trading platforms and payment providers dealing with digital assets.

MiCA aims to establish a uniform regulatory framework across the EU, setting clear standards for anti-money laundering (AML), counter-terrorist financing (CTF), fund safeguarding, and transparency. This regulation is critical for ensuring the security and trustworthiness of trading and payment solutions alike.

According to Deloitte, non-compliance with EU regulations cost financial institutions over €4 billion in fines between 2019 and 2021. For brokers, the message is clear: partnerships with unregulated or poorly regulated payment and trading providers are no longer viable. The risk of regulatory scrutiny, reputational damage, and operational disruption makes compliance non-negotiable.

Risks of Partnering with Unregulated Payment Providers 

1. Reputational Damage

Brokers linked to unregulated or fraudulent providers risk losing client trust—a cornerstone of the retail brokerage industry. Recent cases, such as the Wirecard scandal, illustrate how weak oversight can devastate even established companies.

In 2020, Wirecard, once a high-profile fintech company, collapsed after €1.9 billion was found missing. The scandal exposed vulnerabilities in Europe’s payment ecosystem, highlighting the dangers of working with inadequately vetted partners.

Similarly, trading providers with inadequate risk management or outdated technology can cause execution failures, leading to customer dissatisfaction and loss of trust. In an industry where reputation is paramount, even one misstep can drive clients to competitors with more secure and reliable offerings.

2. Regulatory Penalties

The European Commission and national regulators are increasingly focused on ensuring brokers’ relationships with both payment and trading providers comply with frameworks like PSD2 and MiCA. Non-compliance can result in heavy fines, suspension of operations, or even license revocations.

In 2022, the FCA fined a UK-based brokerage firm £10 million for failing to ensure its trading provider adhered to market surveillance and reporting requirements. This case illustrates that the responsibility is on brokers to verify the compliance of their technology providers.

3. Client Fund Security Risks

Unregulated PSPs often fail to segregate client funds from operational accounts, increasing the risk of misappropriation. Likewise, trading providers that lack robust cybersecurity measures or adequate safeguards against technical failures can expose brokers to significant operational risks.

A 2023 ESMA report found that poor fund segregation and technical malfunctions have collectively resulted in client losses exceeding €300 million over the past five years. Brokers must demand the highest levels of security and transparency from all partners to protect both their business and their clients.

Facts and Figures: A Wake-Up Call

The European financial ecosystem is undergoing rapid transformation, driven by increased regulatory oversight, technological advancements, and shifting consumer expectations. For retail brokers, staying ahead means understanding the numbers that shape the industry. The following data highlights why compliance with regulated providers is not just a legal obligation but a strategic necessity.

1. Heightened Risks with Unregulated Providers

Recent regulatory crackdowns have exposed the vulnerabilities of working with unregulated or poorly regulated payment providers. In one notable case in 2022, an Estonia-based crypto payment provider lost its license after authorities uncovered inadequate anti-money laundering (AML) protocols. The fallout was severe: brokers relying on this provider were forced to halt operations abruptly, straining client relationships and resulting in significant revenue losses.

This incident is not an isolated one. It reflects a broader pattern where insufficient due diligence on digital counterparties leads to operational disruptions, reputational damage, and financial harm.

2. The Growing Threat of Financial Crime

Financial crime remains a persistent and growing challenge in Europe. In 2021, the European Union reported a staggering 70% increase in financial crime cases compared to previous years. A significant portion of these cases involved unregulated entities, which often lack robust anti-money laundering (AML) and counter-terrorist financing (CTF) frameworks.

For retail brokers, partnering with such entities can expose their operations to illicit activities, leading to reputational damage and regulatory penalties. The rise in financial crime underscores the importance of choosing providers that are fully compliant with EU regulations to mitigate these risks.

3. Consumer Awareness and Trust

Today’s retail trading clients are more informed than ever, and compliance is at the forefront of their decision-making process. According to a 2023 PwC survey, 78% of retail traders indicated that a broker’s adherence to regulatory standards is a critical factor when selecting a platform.

This statistic reflects a broader trend: clients demand transparency and accountability. Brokers working with unregulated payment or trading providers risk losing credibility and trust, pushing clients toward competitors that prioritize regulatory compliance and client protection.

4. Regulatory Spotlight on Digital Assets

The rapid rise of digital trading has drawn regulators’ attention to providers operating in the crypto-asset space. The EU’s Markets in Crypto-Assets Regulation (MiCA), set to take full effect by end of 2024, represents a milestone in the regulation of digital assets and associated services.

MiCA introduces stringent requirements for providers dealing with cryptocurrencies, including:

• Enhanced Transparency: Providers must disclose transaction details and ensure compliance with AML and CTF regulations.
• Stronger Safeguards: Clear rules for fund segregation to protect client assets from misappropriation.
• Accountability: A standardized framework across the EU, reducing ambiguity and ensuring consistency in regulatory enforcement.

For brokers, MiCA represents both a challenge and an opportunity. It demands a reassessment of existing digital counterparties to ensure compliance. However, aligning with MiCA-compliant providers can serve as a competitive advantage, demonstrating a broker’s commitment to security and regulatory excellence.

Why This Matters to Brokers

The facts speak for themselves: the stakes are high. With financial crime on the rise, consumer demands for transparency intensifying, and regulators like the EU setting the bar higher, retail brokers cannot afford complacency. Each of these figures quoted here serves as a reminder of the risks and opportunities in today’s market, urging brokers to prioritize partnerships with regulated, reliable payment and trading providers.

Time to Review Digital Counterparties

The landscape in our industry is undergoing a seismic shift, driven by rapid technological advancements and intensified regulatory scrutiny. For retail brokers, adapting to these changes is not just a matter of competitiveness but a necessity for survival. The spotlight on providers handling digital assets, particularly cryptocurrencies, has never been brighter, making it imperative for brokers to review and reassess their partnerships.

In addition, the introduction of the EU’s Markets in Crypto-Assets Regulation (MiCA) further amplifies the urgency of reviewing digital counterparties. MiCA establishes stringent compliance requirements for crypto-related providers, including clear protocols for transparency, fund security, and AML measures. For brokers, aligning with MiCA-compliant providers is no longer optional—it’s a foundational step to ensure operational continuity and regulatory adherence.

The Cost of Complacency

Failure to act now could leave brokers exposed to significant risks, including:

• Regulatory Penalties: Non-compliance can result in fines, operational suspensions, or even license revocations.
• Reputational Damage: Associations with non-compliant or fraudulent providers can erode client trust and drive customers to competitors.
• Operational Disruptions: Dependence on unstable providers increases the likelihood of sudden service interruptions.

By proactively reviewing and updating digital counterparties, retail brokers can safeguard their operations, enhance client confidence, and position themselves as leaders in a highly competitive market.

Taking the First Step

Now is the time for brokers to take a hard look at their payment and trading providers and ask the critical questions: Are they regulated? Do they comply with the latest AML standards? Are they prepared for the implementation of MiCA? Answering these questions can be the difference between thriving in a regulated market and falling behind.

Key Questions Brokers Should Ask 

Retail brokers must perform rigorous due diligence to ensure they are working with compliant and reliable payment and trading providers. Here are five critical questions to ask:

1. Are you licensed and regulated in the EU or UK?
   Ensure the provider holds appropriate licenses, such as an EMI license (for PSPs) or MiFID II authorization (for trading providers).

2. How do you handle AML and KYC compliance?
   A strong provider should have robust procedures for verifying client identities and monitoring suspicious transactions.

3. Do you segregate client funds?
   Fund segregation ensures that client deposits are protected in the event of provider insolvency.

4. What security measures do you employ?
   Look for providers implementing multi-factor authentication, encryption, and fraud detection systems.

5. How transparent are your reporting practices?
   Regular reporting to both brokers and regulators demonstrates operational integrity and compliance.

Conclusion: The Cost of Inaction

In 2025, the risks of working with unregulated payment and trading providers are too significant to ignore. Retail brokers must act now to audit their digital counterparties, ensuring compliance and operational resilience. By aligning with secure, regulated partners, brokers can protect their businesses, maintain client trust, and stay ahead in a competitive market.

Isn’t it time to review your digital counterparties? Discover how GCEX can provide you with cutting-edge, fully compliant payment and trading solutions tailored to your needs.

For more information and to explore how GCEX can benefit your operations, request more information here.

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