What Regulations Are Required to Operate an FX Business in Europe?

You can open a currency exchange desk, a cross-border payments app and a forex brokerage with the same idea, “we do FX”, and still end up under three different sets of rules. The licence a regulator expects depends on what your customers actually get from you, and a processor will ask for it before it reads anything else in your application. This guide sets out the regulation that typically applies to an FX business serving customers in the UK, the EU and the EEA, and how to work out which route is yours.

What regulations are required to operate an FX business in Europe?

There is no single European FX licence. Which rules apply depends on your activity: moving money for customers usually falls under payment services rules, offering leveraged forex or CFD trading falls under investment services rules (MiFID II), and almost every route adds anti-money-laundering registration or supervision.

In practice an FX business has to answer three questions. What do customers receive from us: a payment, a stored balance or a trading position? Where are we established? And which countries do we serve? The answers decide the regulator, the authorisation, the capital and the ongoing reporting. The UK and the EU/EEA are separate regimes, so a UK permission does not automatically cover EU customers, and the reverse is also true.

Do I need a licence to run an FX payments or currency exchange business in the EU?

If you execute payments, remit money or hold customer funds between receiving and paying out, you generally need authorisation as a payment institution (or e-money institution) from the national regulator in your home country, under the second Payment Services Directive (PSD2). The European Banking Authority publishes the rules framework and a register of authorised firms.

Authorisation is granted country by country by a national competent authority, which will look at your business plan, governance, own funds, safeguarding of customer money, security controls and anti-money-laundering systems. Once authorised, a firm can usually apply to offer services in other EU/EEA states through a passport notification, though the process and any local conduct rules should be confirmed with the authority or a lawyer. Pure cash-exchange bureaux may be treated differently from payment services in some countries, so confirm the position locally before assuming either way.

Do I need a licence to run a forex brokerage in the EU?

Yes, in most cases. Offering leveraged forex or contracts for differences (CFDs) to clients is generally an investment service, so the firm needs authorisation as an investment firm under MiFID II from its national regulator. That brings capital, conduct, client-asset and reporting requirements well beyond those for a payments firm.

Since 2018, European regulators have also applied product intervention measures to retail CFD trading, including leverage caps that start at 30:1 for the major currency pairs, as announced by ESMA. National regulators may apply or tighten these, so check the current position with the authority that would supervise you. This is the key difference between the two routes: a payments FX firm is judged mainly on safeguarding and financial crime controls, while a brokerage is also judged on how it treats retail traders.

Do I need a licence to run an FX business in the UK after Brexit?

If you provide payment services or issue e-money in the UK, you generally need to be authorised or registered with the Financial Conduct Authority (FCA) under the Payment Services Regulations 2017, with different routes for authorised payment institutions, small payment institutions and registered account information providers. A forex or CFD broker needs FCA authorisation for investment activities.

Some businesses that only exchange currency, without providing regulated payment services, are not supervised by the FCA for that activity but still have to register with HMRC as a money service business for anti-money-laundering supervision. Do not assume that “HMRC registration only” applies to you: if you also send money for customers or hold balances, the FCA route is likely to be needed. When in doubt, ask the FCA or a solicitor before you launch, because operating without a required permission is a criminal matter in the UK rather than a paperwork fix.

What anti-money-laundering rules apply to an FX business in the UK and EU?

Whatever licence you hold, you will normally be treated as a regulated firm for anti-money-laundering purposes. In the UK that means complying with the Money Laundering Regulations 2017 under the FCA or HMRC; in the EU it means applying the national laws that implement the EU anti-money-laundering directives.

The common building blocks are the same: a documented business-wide risk assessment, customer due diligence at onboarding, enhanced checks for higher-risk customers, transaction monitoring, sanctions screening, a nominated senior person responsible for compliance, staff training and a route for reporting suspicious activity to the financial intelligence unit. Rules in this area are being reworked in the EU, with a new authority being set up, so check which requirements apply on the date you launch rather than relying on a guide that is more than a year old.

Which regulation applies to my FX business?

Match your core activity to the regime. The table summarises the usual starting point; your own facts and national law decide the final answer.

What your FX business does	Typical UK route	Typical EU/EEA route	Usually adds
Cross-border payments and remittance	FCA payment institution (authorised or small)	Payment institution under PSD2, national authority	Safeguarding, AML supervision
Holds a customer balance or wallet	FCA e-money institution or payment institution	E-money or payment institution	Safeguarding, stricter capital
Exchanges cash only	HMRC money service business registration (check FCA scope)	Varies by country, often AML registration	AML controls, local rules
Offers forex or CFD trading	FCA investment firm authorisation	MiFID II investment firm	Conduct rules, leverage limits, client money

What does an FX firm need in place before applying for a licence or a merchant account?

You need to show a regulator, and later a processor, that you know your regime and can run it day to day. A short readiness checklist for either route:

1. Written description of services, customer types and the countries you serve.
2. The authorisation or registration route you are applying under, and the regulator that supervises it.
3. Governance: named directors, a compliance lead and a person responsible for money laundering controls.
4. A safeguarding or client-money arrangement, including how funds are reconciled.
5. A business-wide financial crime risk assessment, customer due diligence and monitoring procedures.
6. Capital and financial projections that fit your regime’s requirements.
7. Complaints handling, outsourcing and incident reporting arrangements.

For UK payment and e-money firms, the FCA’s supplementary safeguarding regime came into force on 7 May 2026, with a further regime depending on later legislation. The detail is in the FCA’s policy statement PS25/12. The FCA also explains how its money laundering regulations apply to regulated firms.

Regulation and card processing are linked: acquirers underwrite your licence position as much as your chargebacks. Our guide to FX provider fraud prevention in the UK and EU covers the controls processors look for, and our overview of EU and US merchant accounts explains how the regional differences affect approval. See also our page on high-risk merchant accounts.

Frequently asked questions

Can my FX brokerage get a merchant account before it is fully licensed?

Some processors will only consider firms that already hold their licence, while others may look at a pending application with lower limits and tighter terms. Be clear about your status and timeline in the application, because unclear regulatory standing is one of the fastest ways to be declined. Approval is never certain.

Is a UK licence enough for me to serve customers in Europe?

Generally no. The UK and EU/EEA regimes are separate, and a UK authorisation does not automatically allow you to serve customers in EU countries. You may need an EU authorisation or an arrangement in each market, so take local legal advice before you accept EU customers.

Do I need a forex licence if I only send payments abroad for my customers?

Probably not a MiFID-type investment licence, but you are likely to need a payment institution authorisation. The deciding question is whether you provide payment services or an investment service such as leveraged trading. A regulator or specialist lawyer can confirm which applies.

Can I run my FX business from outside Europe and still take European customers?

You can be based elsewhere, but serving customers in the UK or EU/EEA may still require authorisation in those markets, and processors will expect you to show it. Marketing to customers in a country can itself trigger local rules, so seek advice before you launch.

How long does it take to get an FX licence in the UK or EU?

It varies by regulator, firm and completeness of the application, and regulators publish their own target timelines. Plan for months rather than weeks, and do not promise customers or processors a launch date until you have the decision.

Will my FX business be treated as high risk by payment processors even if I am licensed?

Often yes. A licence helps because it answers the first underwriting question, but processors still look at ticket size, fraud rate, outgoing payment controls and the countries you serve. Licensed firms are generally easier to underwrite than unlicensed ones.

Where should you start?

Start by deciding whether you are a payments business or a trading business, then confirm the regulator and the authorisation route before you spend money on systems or a processor. Clear regulatory standing makes every later step easier.

If you run an FX or payments business in the UK or EU/EEA and want to explore processing options that fit your model, contact our team at Offshore Merchants for a no-obligation conversation. This article is general information, not legal or regulatory advice.