In our article, we explored a weird but true reality: India has no major prop firms registered on home turf. Even the ones run by Indian founders are usually incorporated somewhere else — Hong Kong, Dubai, the BVI… basically anywhere but India.
But here’s the thing — it’s not just India.
Across the globe, proprietary trading firms (or prop firms) are setting up shop offshore. You’ll see addresses in places like the Cayman Islands, St. Vincent, Dubai, Hong Kong, or Seychelles more often than you’ll see “Delaware” or “London.”
Why?
Are they hiding? Avoiding taxes? Running shady ops?
Or are they just being strategic?
It’s not (always) about dodging the law.
It’s about playing smart within it.
In this article, we’ll unpack exactly why so many prop firms choose to go offshore — and how that decision helps them avoid unnecessary regulation, optimize taxes, attract global talent, and scale fast.
We’ll break it down step-by-step:
Let’s get into it.
Let’s start with the basics because the term “prop firm” is often used, and half the internet has no idea what it actually means.
A proprietary trading firm (or “prop firm”) is a company that trades the financial markets using its own capital — not clients’ money. That’s the key part.
These firms aim to profit from market movements directly, rather than earning commissions from managing funds for others like a traditional broker or hedge fund.
Old-school prop firms are what you’d imagine on Wall Street:
They keep 100% of profits, because it’s their own capital. Think: elite institutional teams grinding in silence.
In recent years, a new breed of prop firms has exploded — thanks to remote work, fintech platforms, and the creator economy.
Here’s how they work:
This model feels like a trader talent pipeline — and in a way, it is.
But in most cases, you never touch real money.
Even in the funded phase, many firms still use simulated accounts on the front end, and mirror your trades in the background.
This structure avoids dealing with financial licenses, custody of funds, and client deposits — because you’re not a client. You’re more like a contractor or signal provider.
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This modern approach has opened the doors for thousands of independent traders to access serious capital — without risking their own savings. But it’s also created a legal grey zone, which is exactly why offshore setups are now the norm.
Let’s get into why next.
Prop firms don’t go offshore just for appearances. The decision is often based on a cold, strategic calculus — where can they operate efficiently, legally, and profitably? Offshore jurisdictions provide exactly that. Here’s why so many prop firms choose to base their operations in places like the Cayman Islands, British Virgin Islands, Dubai, and Hong Kong.
One of the biggest advantages offshore jurisdictions offer is corporate tax efficiency. In some cases, firms can retain profits entirely tax-free, depending on the jurisdiction and how the revenue is classified.
For example:
For prop firms, this means higher retained earnings, better reinvestment potential, and the ability to scale fast without excessive tax liabilities.
Another powerful draw is the ability to operate legally without falling under heavy regulation. This is known as regulatory arbitrage — choosing a jurisdiction where the firm’s specific business model doesn’t trigger licensing requirements.
Prop firms often position themselves as:
Instead, they offer simulated trading evaluations and education tools. No client deposits are taken. No investment advice is given. No securities are offered. This keeps them outside the scope of most financial regulations in strict jurisdictions like the U.S. or UK.
Offshore jurisdictions, in contrast, may either:
This legal clarity allows prop firms to operate with minimal licensing burdens, provided they stay within well-defined lines.
Despite the word “offshore,” most of these jurisdictions are actually well-connected financial hubs.
For example:
This global reach allows prop firms to:
Being offshore doesn’t mean being disconnected — in many cases, it’s quite the opposite.
Offshore jurisdictions are also attractive for their asset protection features and business privacy laws.
Many offer:
For example:
This adds a layer of protection for prop firm owners — especially in a volatile industry where disputes with traders or global regulators are a risk.
Finally, the ease and speed of setting up a company offshore is a major advantage.
Many jurisdictions allow:
For example:
This makes offshore incorporation attractive to prop firms looking to move fast, especially those run by lean teams or startups who want to launch globally from day one.
In short, going offshore is not about cutting corners. It’s about strategic optimization. It’s a legal, calculated way for prop firms to reduce friction, stay compliant within the right framework, and build a scalable operation that reaches traders worldwide.
Let’s kill the myth upfront:
Just because a prop firm is registered in a place like BVI, Dubai, or Seychelles doesn’t mean it’s running wild with zero oversight.
The legit firms — the ones that last — aren’t just gambling with legal loopholes.
They’re structuring their model intentionally to stay compliant with the rules that do apply in their chosen jurisdiction.
Here’s how they do it.
Take a look at the terms and conditions of any major prop firm like FTMO or OANDA’s offshore arm. You’ll see a recurring theme:
These aren’t random legal fluff — they’re protective positioning statements.
By clearly stating what the company doesn’t do, they avoid being categorized as:
This is especially crucial in regulated markets (like the U.S., UK, EU), where crossing those lines without a license leads to shutdowns and fines.
OANDA’s BVI prop arm, for example, explicitly says traders are providing signals, not executing live trades. OANDA then decides if and how those signals are used — meaning the trader is not handling money, and the company isn’t offering client accounts.
This kind of language builds a legal firewall between education, simulation, and actual financial services.
Most funded traders think they “work for the firm.”
But in legal terms? Not quite.
What many prop firms actually do is frame the trader relationship in one of these ways:
This is a big deal. It avoids labor law issues, brokerage laws, and even investment manager regulations in some jurisdictions.
Some firms go one step further and require traders to incorporate themselves (as a freelancer LLC or similar), turning the whole thing into a B2B services agreement.
That extra layer of formality protects the prop firm from being seen as employing or managing the trader directly — which can carry tax and compliance implications depending on the country.
Even if a prop firm isn’t technically a financial institution, it still:
Which means banks and payment processors expect them to follow basic compliance protocols, especially around:
Here’s what most serious prop firms do behind the scenes:
Why does this matter?
Because without it, the firm risks:
And once that happens? The business grinds to a halt — even if it’s “offshore.”
Going offshore doesn’t mean avoiding all rules.
It means choosing the right rules, in the right place, and then actually following them — without accidentally becoming a broker, money manager, or legal target.
So far we’ve covered the why behind going offshore. But how do prop firms actually set it up in practice?
Let’s look at some real examples of major prop firms — and how they’ve used offshore structuring either to scale globally, avoid regulatory pitfalls, or in one case… crash hard.
OANDA is a well-known, heavily regulated forex broker with licenses in the U.S., UK, Canada, and more. But when they decided to launch a prop trading service, they didn’t use any of those entities.
Instead, they launched OANDA Labs Trader through an affiliate in the British Virgin Islands (BVI).
Why?
Because BVI allowed OANDA to operate this new business model — a prop-style trading challenge — without needing a brokerage license. No client deposits, no investment advice, just simulated challenges followed by internal allocation.
OANDA even stated publicly that its services “shall not be considered investment or financial services” — a direct attempt to stay out of licensing trouble.
And to reduce jurisdictional exposure, OANDA Labs Trader wasn’t available in the U.S., Canada, or EU — only in markets where the BVI offering was legally clean.
It’s a textbook example of regulatory arbitrage done the right way.
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Axi, an Australian-based forex broker, also entered prop trading. However, instead of using its Australian license, it launched its prop challenge under a company in St. Vincent & the Grenadines (SVG).
SVG is known for requiring no forex brokerage license at all. Just a basic business registration is enough.
This allows Axi to offer funded challenges globally without risking regulatory pushback in Australia. The SVG entity operates separately from Axi’s regulated brokerage arm, giving them freedom to run a prop model while keeping the core business protected.
Again — this separation is crucial. It means their prop arm isn’t exposing the main brokerage entity to legal risk.
Hantec Markets, a broker with operations in the UK and Hong Kong, took a different route: they launched Hantec Trader, their prop program, through an entity based in Mauritius.
Mauritius offers a middle ground between no-regulation zones like SVG and fully regulated hubs like the UK. It has a dedicated regulatory framework for financial services, but it’s generally more flexible and fintech-friendly.
By going with Mauritius, Hantec likely secured a light licensing setup that allowed them to run a funded challenge without breaching UK financial laws. And like others, they maintain a clear public stance: no client deposits, no brokerage services, and traders are treated as independent contractors.
FTMO is the most well-known prop firm in the world — and it’s not based offshore. It’s headquartered in Prague, Czech Republic, an EU country with real regulatory oversight.
So how have they survived without a brokerage license?
FTMO built their business on a strict separation between simulated and real trading:
By doing this, FTMO never gives traders direct access to real funds, and never touches client money. It operates as an education and evaluation service, not a broker.
It’s a clever approach — allowing FTMO to stay in a high-regulation jurisdiction while avoiding classification as a financial institution.
Rumors suggest they may also partner with offshore brokerages to execute mirrored trades behind the scenes, but publicly, FTMO keeps everything buttoned up and based in the EU.
Then there’s the cautionary tale: MyForexFunds (MFF).
At one point, MFF was the fastest-growing prop firm in the world — with over 135,000 traders and a massive presence. But in 2023, they were shut down by regulators in Canada and the U.S.
MFF’s parent company, Traders Global Group Inc., was based in Ontario, Canada — one of the strictest regulatory environments in North America.
That turned out to be a huge vulnerability.
Regulators claimed:
They were accused of operating as an unlicensed broker or investment scheme, and authorities froze their assets and filed enforcement actions.
Had MFF been structured with:
…they might have avoided collapse — or at least delayed regulatory intervention.
Their story is a powerful reminder: going offshore won’t save a broken business model, but for legitimate firms, it can be the firewall that protects the entire operation.
As we’ll explore next, many firms combine what we’ve seen here into a hybrid structure — one public-facing company in a reputable country, and another behind-the-scenes entity offshore to handle the actual trading.
Let’s break down how that works.
If you’ve ever wondered how prop firms manage to dodge regulation while still paying traders, here’s the secret: most legit firms run two separate companies behind the scenes.
One handles the front-end, public-facing evaluation model.
The other manages the backend — where actual funds (or mirrored trades) live.
This structure gives them:
Let’s break it down.
This entity is the public face of the business — the one running the website, handling customer support, collecting challenge fees, and managing dashboards.
It usually:
Since it doesn’t handle client money or offer investment services, this part of the business can often operate without a financial license. Especially if it clearly states that all activity is simulated.
Many firms register this entity in:
This is where the real magic (and risk) happens.
This second entity is usually offshore, registered in a jurisdiction like:
Its job is to:
Importantly, this company rarely interacts directly with traders. Instead, it may be referenced in the contract, or handle payouts silently in the background.
Because it’s not soliciting investments, not managing client money, and not offering services to the public, it avoids being classified as a broker — especially in jurisdictions that recognize proprietary trading as a private activity.
This two-company model serves several purposes:
Legal separation:
If regulators ever challenge the business, the evaluation entity can say:
“We don’t trade. We just sell educational tools.”
Meanwhile, the trading entity can say:
“We’re not serving clients. We only trade our own capital internally.”
Risk isolation:
If a trader breaches terms, blows an account, or sues, only one entity is exposed — not the whole operation.
Jurisdictional efficiency:
You can register the front-end in a high-trust country for credibility, while using a low-tax jurisdiction for trading and profit retention.
Flexibility and exit strategies:
If regulations tighten in one jurisdiction, you can pivot that piece of the business without shutting everything down.
Here’s a quick table to visualize the split:
| Function | Evaluation Company (Front-End) | Trading Company (Back-End) |
| Purpose | Sell challenges, provide education | Allocate capital, mirror trades, pay profits |
| Jurisdiction | UK, Hong Kong, EU, US LLC | BVI, Cayman, Dubai, Mauritius |
| Customer Relationship | Directly interacts with traders | Rarely public-facing, operates behind the scenes |
| Legal Exposure | Operates as unregulated business (education) | Not offering public financial services |
| Tax Considerations | May pay local corporate tax (if applicable) | Often tax-free or low-tax on profits |
| Licensing Needed? | Typically not | Usually not, if structured carefully |
| Risk Handling | Collects fees; no market risk | Takes on trading risk with internal funds |
| Visibility | Has website, support, marketing, brand | Often invisible, or just a name in contracts |
This setup creates a legal and operational firewall.
If one entity ever gets hit with regulatory scrutiny, the other isn’t automatically taken down.
It also lets prop firms:
This structure became even more popular after the MyForexFunds incident, where running everything under one Canadian entity left the company exposed and easy to shut down. Smart firms took note.
Not all offshore jurisdictions are created equal. Some give you full tax freedom but zero credibility, others offer solid legal infrastructure but come with moderate oversight. The smartest prop firms choose their jurisdiction based on what part of the business is being run — and what image they want to present.
Here’s a breakdown of the most commonly used jurisdictions in the prop trading world:
| Jurisdiction | Key Benefits | Drawbacks / Risks | Best Used For |
| Cayman Islands | – 0% tax on income, capital gains, or corp profits- Strong asset protection laws- Legal system based on English common law | – High cost to set up and maintain- Substance requirements apply- Banking must often be done abroad | Backend trading entity; hedge fund-style capital pooling |
| British Virgin Islands (BVI) | – 0% corporate tax- Simple incorporation process- Very common for trading & fintech startups | – Lower public trust than jurisdictions like HK or UAE- Difficult to get top-tier banking directly | Backend capital structure or low-profile holding company |
| Dubai / UAE | – Free zones offer 0% corporate tax (with conditions)- Fast setup- 100% foreign ownership- Major fintech and trading hub | – Costly compared to others- New 9% corporate tax (partial)- Licensing may still apply in regulated free zones | Either front-end or back-end entity, especially for credibility |
| Hong Kong | – Low taxes with territorial system- Robust banking & legal infrastructure- Global credibility- High business privacy | – Income sourced in HK is taxed- More regulatory scrutiny possible- Setup takes more time than BVI/SG | Great for the public-facing evaluation company |
| Mauritius | – Friendly to financial services- Reasonable regulation- Increasingly popular for fintech firms | – Must maintain some level of local substance- Slower banking options than HK/UAE | Prop firms seeking light regulation with a bit of structure |
| St. Vincent & Grenadines | – No forex license required- Super cheap and fast setup- Very flexible (almost zero oversight) | – Terrible credibility- Risk of being flagged by regulators/banks- Difficult to scale reputably | Low-cost entry for micro prop firms or high-risk plays |
| Seychelles | – No corporate tax- Basic company registration is quick- Cheap to maintain | – Red flags in payments and banking- Reputation issues- Hard to onboard with payment processors | Same use case as SVG — entry-level structure, not public-facing |
Smart firms often combine jurisdictions — for example:
Next up, let’s walk through the compliance risks that still apply, even offshore — and how smart firms build structures that regulators can’t poke holes in.
Going offshore gives you space to operate, but it doesn’t give you immunity. Regulators, tax authorities, and banks don’t care where you’re registered — if your setup crosses certain lines, you’re a target.
Here’s a breakdown of the biggest risks prop firms face, and the tactics they use to avoid legal blowback.
This is the #1 danger zone — when a prop firm’s model starts to look too much like a broker or investment service.
Here’s how it happens:
At some point, if you’re not careful, a regulator may say:
“You’re acting like a broker or asset manager — where’s your license?”
To stay safe, smart firms do two things:
This is why FTMO’s legal copy is airtight. It constantly reminds you:
“We do not provide brokerage services. This is not a real trading account.”
And it’s why MyForexFunds got hammered — because regulators believed the firm blurred the line between simulation and real-money activity, and didn’t disclose how trading actually worked.
Prop firm owners can’t just hide income offshore and call it a day.
Most high-tax countries have CFC laws — rules that require you to declare and pay tax on income earned by foreign companies you control, even if that income stays offshore.
So if:
Then guess what? Your home country might still tax you personally unless you’ve changed your residency or structured things very carefully.
That’s why many prop founders relocate themselves to Dubai, Thailand, or tax-friendly jurisdictions — not just their companies.
If you don’t fix your personal tax situation, your offshore setup means nothing.
Even unregulated prop firms handle real money — fees in, payouts out.
And that means they’re visible to banks, processors, and governments.
Most offshore jurisdictions now require:
This isn’t optional anymore. Payment platforms like Stripe, PayPal, crypto onramps, and even banks demand it.
Fail to implement KYC/AML, and you risk:
Smart firms implement automated KYC at sign-up, flag suspicious accounts, and log every payout with a contract and invoice.
Jurisdictions like Cayman, BVI, and Seychelles used to let you run a business with nothing more than a registration and a PO box.
Not anymore.
Thanks to global pressure from the OECD, many offshore hubs now have “economic substance” rules. If your prop firm is considered to be engaged in a “relevant activity” (like finance or holding assets), you may need to:
Prop firms that fall into this category must either comply or restructure to avoid fines or being struck off.
The trick?
Most firms argue that pure prop trading with the firm’s own funds isn’t a “relevant activity” under substance rules — but if the firm also offers services, owns IP, or pools capital, things get murky.
That’s why it’s important to have a good offshore corporate services provider managing filings and substance declarations behind the scenes.
Let’s be clear: just being offshore doesn’t protect you from regulators in high-enforcement countries.
If:
…those governments might claim jurisdiction — especially if something goes wrong.
This is exactly what happened to MyForexFunds.
They were based in Canada, but regulators said they violated U.S. laws by accepting U.S. users and misrepresenting how trading worked.
Other firms learned fast. Today, many:
In short: if you operate in a country, you need to follow its rules — even if you’re legally based somewhere else.
Bottom line: Compliance is not optional — even when offshore.
Smart prop firms don’t run from regulation. They design around it, keeping operations clean, structured, and agile.
For a long time, prop firms flew under the radar.
They weren’t brokers.
They didn’t hold client funds.
They didn’t give financial advice.
They sold “challenges” and “education”, and regulators let them run.
But now? The game is changing.
What started as a niche internet model has grown into a global financial ecosystem.
Major platforms now have:
We’ve already seen enforcement in Canada, lawsuits in the U.S., and warnings from central banks in Asia and the Middle East.
Even retail traders are starting to ask, “Is this prop firm legit or just a repackaged broker?”
The more mainstream the model becomes, the more pressure there will be to regulate it — just like what happened to crypto platforms in 2017–2020.
Some regulators are waking up and asking:
“What is this prop firm model — and how do we regulate it without killing it?”
Instead of banning them outright, we’re likely to see:
This could actually be a good thing — for legit firms.
Why? Because compliance weeds out the bad actors and builds trust.
Countries like Mauritius, Cyprus, and Estonia are already exploring frameworks that let prop firms operate legally under a light license — not a full brokerage license, but something tailored to their hybrid model.
Expect others to follow.
Some prop firms are playing the long game.
They’re:
Why?
Because when regulation hits, they’ll be ahead of the curve.
It gives them:
It also gives them a real moat. Because when the rules come in, the shady firms fold, and the regulated ones clean up.
In short: the offshore, loosely structured, “we’re just a demo platform” era isn’t over, but it’s fading.
The future belongs to firms that:
If you’re thinking about starting your own prop firm, now’s the time to get the structure right — before the rules change.
It’s easy to hear the word “offshore” and think someone’s up to no good.
But in the world of proprietary trading, going offshore isn’t about hiding — it’s about optimizing.
Optimizing for:
The smart firms use offshore structures the right way:
Done right, the offshore model is a strategic advantage, not a red flag.
That said, the offshore path isn’t a free pass.
You still need integrity. You still need structure. You still need compliance.
Because when regulators show up (and they will), the firms that survive aren’t the ones that flew under the radar — they’re the ones that were built to last.
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Now you’ve seen how the top firms do it.
The question is: will you?
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