The term "cryptocurrencies" never disappears from the international or local Cypriot press. After all, it is a popular phenomenon all over the world.
In a recent Reuters post:
“2022 has been a brutal year for international investors. The price of Bitcoin fell by about 63 percent, while the overall global cryptocurrency market capitalization lost as much as $1.63 trillion. The collapse of Sam Bankman-Fried's FTX exchange put a long nail in the coffin for the digital currency market.
Continuation of the report:
“Retail cryptocurrency investors losing huge amounts of money is nothing new. A study by the Bank for International Settlements (BIS), conducted between 2015 and 2022, clearly showed that between 73 and 81 percent of financial market participants likely lost money investing in digital currencies. Trading for retail investors has become more difficult every day as more sophisticated investors, including hedge funds, have entered cryptocurrencies as the market capitalization has increased.”
Current status quo in Cyprus:
There is currently a growing need for regulation of digital assets, especially from an EU perspective, with the European Commission's initiative to establish a single European regulatory offensive. This initiative has reached its final stage with the final text of the MiCA (Crypto Asset Markets Regulation), which was approved by the European Council on October 5, 2022. Everything indicates that Cyprus has already solved many basic issues related to the provision of cryptocurrency-related services on its own. It is very likely that the effects of this will be followed internationally, as currently the media is also reporting that the banking giant Goldman Sachs intends to spend millions of dollars to buy or invest in companies in the cryptocurrency sector. It is hard to find a player who would engage in the market without clear legal regulations! Business intuition should encourage cryptocurrency investors to look for jurisdictions that have clear laws for this asset class.
If you are a cryptocurrency platform owner or other cryptographic asset service provider ("CASP") within the meaning of the Act on Preventing and Combating Money Laundering and Terrorist Financing ("Anti-Money Laundering and Countering the Financing of Terrorism Act") that provides services in or from Cyprus Cyprus, you are required by Cyprus law to formally register with the Cyprus Securities and Exchange Commission ("CySEC").
CASPs in the EEA:
If you are a CASP entity that is already established in the EEA and you have been registered by one or more competent EEA national authorities for AML/CFT purposes for all services or activities undertaken or planned to be undertaken in Cyprus (including Cyprus residents), you must submit appropriate notification by presenting a valid registration document for each service or activity. If the services or activities provided are not covered by legal regulatory requirements, you should register for AML/CFT under Cyprus law by applying for registration as a CASP with CySEC.
All cryptocurrency companies are required by law to register with CySEC before operating in or out of Cyprus.
The new regulatory framework that applies in Cyprus contains restrictive rules established by existing legislation. The new law obliges to:
- Checking the solvency and integrity of CASP beneficiaries and persons holding managerial positions;
- Compliance with the conditions related to the registration of CASP;
- Compliance with organizational and operational requirements;
- Carefully carrying out the "Know Your Customer" procedure and other additional means of duly vetting customers;
- Collecting data on the economic profile of customers;
- Carefully identify the source of customer funds;
- Continuous monitoring of customer transactions;
- Compliance with the obligation to identify and report suspicious transactions;
The new cryptocurrency business rules enacted by Cyprus require a comprehensive risk assessment of customer activities and the taking of proportionate measures for a given customer, a given activity and individual cryptocurrencies.
Registration fees are certainly not excessive:
- The processing fee is EUR 10,000. It is worth adding at this point that selected candidates will not have to pay an additional fee for the first year of registration;
- Thereafter, the renewal fee is €5,000 per year;
The purpose of the newly enacted law by the Cypriot government is to attract attention and encourage major players in the global cryptocurrency market to relocate their operations to Cyprus.
