The Republic of Cyprus is moving in the direction of the implementation and regulation of FinTech. Undoubtedly, it is the financial sector of the future, is part of the broader implementation of the Digital Transition, and involves all sectors of the economy.
The advent of blockchain and the development of cryptocurrencies is a revolution that Cyprus has decided to embrace independently, while respecting European standards.
According to the European Innovation Scoreboard, Cyprus ranked second after Stockholm (Sweden). This result places the island in the elite of the most advanced countries in digital progress.
The Republic of Cyprus is committed to digital change in both the public and private economic and business sectors.
The Deputy Minister for Research, Innovation and Digital Policy, Kyriacos Kokkinos, spoke at a conference in Larnaca, organised by the Swiss consultancy firm, which has branches in various countries including Cyprus. On this occasion, he discussed with local businesses the topic of financial technological innovation and its regulation, as well as the digital resources of startups. H.E. Minister Kokkinos highlighted the results of Cypriot research in terms of fintech and its application in the business world.
Cyprus Security Exchange Commission (CySEC)
Cyprus has taken the first steps towards Asset Regulation with the draft law on DLT (Distributed Ledger Technology). This bill includes definitions on crypto-assets, provisions on smart contracts and the enactment of laws on CASPs (Crypto Asset Service Providers). In practice, it authorises the Cyprus Securities Exchange Commission (CySEC) to issue secondary legislation in the area of supervision of crypto-asset service providers (CASPs). It also introduces provisions on the ownership of tokens and their transfer, and the enforceability of smart contracts.
Also related to the TLD is the Prevention and Suppression of Money Laundering and Terrorist Financing Act of 2007 (L.No. 188(I)/2007), which introduced a definition of CASP in accordance with the Fifth Anti-Money Laundering Directive.
However, the notion of CASP under Cypriot law, and the related guidelines and policy statements issued by CySEC, encompass a broader definition.
FinTech and Crypto-Asset Regulation
Indeed, Cyprus is becoming a hub of interest for service providers in the crypto-asset space, due to a detailed licensing and authorisation framework covering them.
In fact, the clear regulatory framework and supervision of their operations add legitimacy and confidence to the cryptocurrency market. Consequently, FinTech and Crypto-Asset Regulation are the tools that will help the development of startups and innovative entrepreneurship. Furthermore, the conference highlighted several aspects to be taken into account in the transition to cryptocurrencies.
Firstly, the Cypriot banking system is extremely conservative and particularly cautious considering also the financial crisis of 2013. Secondly, Cyprus’s membership of the EU as a member state makes it particularly careful to comply with the obligations of European laws and regulations. Thirdly, one must also beware of the ‘vacatio legis’. Minister Kokkinos mentioned the case of Malta, where the absence of clear regulation, while attracting many cryptocurrency and blockchain companies, has also increased scrutiny and criminal cases.
Crypto-Asset Reporting Framework (CARF)
Speaking at the event for Invest Cyprus were CEO George Campanellas and Vice-President Spyros Vassiliou. In their speeches, they emphasised how the diversification of the Cypriot economy over the past few years had helped stem the collapse in tourism activity during the pandemic compared to other Mediterranean countries. Furthermore, Kendris CEO Christian Lyk spoke about the OECD’s Crypto-Asset Reporting Framework (CARF), a new global regulatory framework on tax transparency.
This framework aims to provide reporting and exchange of information, in crypto-asset-specific terms, enabling the automatic exchange of financial account information between participating countries.
The International Environment
The G7 financial chiefs urged nations to adopt comprehensive regulation of cryptocurrencies. According to Reuters, the group issued a draft statement to this effect during their meeting in Koenigswinter, near Bonn, Germany.
Cyprus is considering whether to pass its own national cryptocurrency law before the ECB finalises a uniform regulatory guideline. This could entail the risk of over-regulation.
The developments of the Cypriot Crypto-Asset Regulation with a view to cooperation and investments for national and international companies are followed with interest by the Italian-Cypriot Chamber of Commerce which is already receiving the specific requests for information.
For further insights on this article and information on the activities of the Italian-Cypriot Chamber of Commerce, write to: firstname.lastname@example.org
Last modified: June 9, 2022