Финансово-консалтинговая компания CYWORLD WEALTH

How are crypto assets regulated in Cyprus?

04 Sep
How are crypto assets regulated in Cyprus? Advocate Cyprus CYWORLD WEALTH

How are crypto assets regulated in Cyprus?

How are crypto assets regulated in Cyprus?

On January 10, 2020, EU Directive 2018/843 entered into force in Europe, and all Member States were required to implement the Fifth Anti-Money Laundering Law (AML). On 23 February 2021, Cyprus amended its Law on the Prevention and Suppression of Money Laundering and the Financing of Terrorism 188 (I) / 2007 and introduced a new AML Law No. 13 (I) / 202, which amends national legislation accordingly. Among other changes, the new AML Law officially and for the first time introduces crypto assets into the Cyprus regulatory system.

The term “Cryptoasset” is defined as a digital representation of value that:

  • Not issued or guaranteed by a central bank or government agency.
  • Not necessarily tied to a legally established currency.
  • Does not have the legal status of currency or money, but is used by people as a medium of exchange or investment.
  • Can be transferred, stored or sold electronically.
  • Fiat currency.
  • Electronic money.
  • Financial instruments as defined in Part III of the First Annex of the Law on the provision of investment services and activities and regulated markets.

Crypto-assets are digital representations of values ​​or rights that can be transferred and stored electronically using special technology (known as Distributed Ledger Technology – DLT). Crypto assets are inextricably linked with blockchains, as they are the blocks that make up the chains themselves. Crypto assets come in different forms and with different rights and functions.

A cryptoasset service provider is defined as a person who provides or performs one or more of the following services or activities to or on behalf of another person.

Exchange between crypto assets and fiat currencies:

  • Management, transfer, storage and / or secure storage, including the storage of cryptoassets or cryptographic keys or funds that allow control over cryptoassets.
  • Offer and / or sale of cryptoassets, including initial public offering.
  • Participation in and / or provision of financial services in relation to the distribution, offer and / or sale of cryptoassets, including the initial offer.

Financial services in relation to the distribution, offering and / or sale of cryptoassets are defined as the following investment services:

  • Reception and transmission of orders.
  • Execution of orders on behalf of clients.
  • Work at your own expense.
  • Portfolio management.
  • Investment advice.
  • Underwriting and / or placement of cryptoassets based on firm commitments.
  • Placing cryptoassets without firm commitments.
  • Operation of a multilateral trading platform for the purchase and sale of cryptoassets.
  • It is worth noting that all of the above investment services can be authorized under CySEC, as defined by MiFID II, with a Cyprus Investment Firm (CIF) license.

The new anti-money laundering law defines the investment services of cryptoassets investment services MiFID II and finally integrates these revolutionary and innovative financial investment products into the traditional investment services environment.

Under the new AML Law, the Cyprus Securities and Exchange Commission (CySEC) will be the responsible competent authority for establishing a registry of cryptoasset service providers.

A cryptoasset service provider who provides or carries out services or activities on a professional basis in Cyprus must be registered with the CySEC registry. Registration with CySEC will be mandatory, regardless of whether the cryptoasset service provider is registered in another EU state.

Over time, CySEC is expected to publish additional directives for cryptoasset service provider filing requirements. In addition, relevant directives describing organizational and functional requirements and any other obligation to ensure that the Cryptoasset Service Provider complies with all relevant laws must be logically followed.

The above is for informative purposes only.  Further professional advice should be sought for each particular case. Our firm does not accept any responsibility for any loss or damage occurring by acting on the basis of this information.