Many companies, apps, platforms now offer options to buy and sell anything you wish. The list also includes cryptocurrency, oil, and gas-commodities that are traded in different countries. Celebrities like Elon Musk have voiced their support on trade through Dogecoin to Bitcoin. Before you get excited and jump into the usual buying spree you need to be very careful who you choose as your broker. A broker is the middleman or the medium that facilitates security trade options for you.
If you check carefully your emails or own a credit card then you might have received emails that claim Reserve Bank of India (RBI) forbidding foreign exchange trade under Foreign Exchange Management Act (FEMA).
There are many reasons RBI forbids foreign exchange trading but only three main reasons. First if you trade through any broker who does not have an affiliation, he might decide to forfeit your investment. In such case the top bank and Indian authorities will have not control to remedy the fraud. And the second reason, whenever you make any payment in any currency except Indian Rupees RBI needs to list that payment against foreign currency which decreases country’s Foreign Exchange (ForEx) reserve. And the third reason is to avoid any possibility of money laundering. Usually as per law you are innocent unless proven guilty however under FEMA you are guilty until proven innocent. Still it’s not doom and gloom. The Central bank still allows you to trade four international currencies through registered brokers which are Japanese Yen (JPY), Euro, Pound Sterling(GBP) and United States Dollar (USD).
Now-a-days you will come to know about lots of apps and platforms such as RobinHood, WazirX, PowerBank etc via online advertisement and friends and family. Usually these brokers are not registered with the Securities Exchange Board of India (SEBI). Usually a SEBI registered broker has to deposit a certain amount and adhere SEBI guidelines strictly. The case for non-registered traders is just the opposite. Therefore in the event of any loss or damage you cannot hold these brokers or apps responsible.
Hence, it is strongly recommended to deal with SEBI registered broker to safeguard your investment. Currently trading cryptocurrencies also are not authorised by the RBI. However there is a bill in motion which might change the situation in future.
How to know if the broker is SEBI registered?
SEBI mandates every registered broker to mention it’s registration number on it’s website. You can usually find them at the bottom of the home page. Zerodha, ICICI, HDFC Securities, SBI Smart are such brokers.
Do not just stop at finding the registration number. Copy that registration number and search it in the SEBI database to be sure that the broker is actually legitimate. You can do that by clicking on this link or searching SEBI brokers list on Google. Only trust the broker if you can validate their registration number.
There are thousands of small and large SEBI registered brokers all over in India. You can choose anyone of them depending on your requirement and their brokerage rate. No matter how poor their customer reviews could be, but you can still be assured that if the broker tries to double cross you, you will have your back by SEBI.
It is understandable to fall for hype and FoMo(Fear of Missing Out) when every one is buying Dogecoin or selling bitcoin. But a smart investor is one who does not fall for hype and instead of looking for quick buck, looks for long and steady growth.