Cyprus, renowned for its crypto-friendly regulatory environment in Europe, is contemplating stricter standards in its crypto industry regulation. The Cyprus Ministry of Finance, as of October 10, has set forth a proposal to amend the existing Law on the Prevention and Suppression of Money Laundering and Terrorist Financing. The amendment is aimed at aligning Cyprus with international anti-money laundering and countering the financing of terrorism (AML/CFT) standards as defined by the Financial Action Task Force (FATF), along with recommendations from the Expert Committee on Anti-Money Laundering and Countering the Financing of Terrorism Assessment. This report was published by MONEYVAL (Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism) in November 2022.
Under the proposed amendment, every crypto-asset service provider is required to register with the Cyprus Securities and Exchange Commission (CySEC), the financial regulatory authority. Failure to comply with this requirement may result in penalties ranging from fines of up to €350,000 (approximately $370,000) to imprisonment for a term of up to five years, or a combination of both.
While the crypto community in Cyprus appears generally supportive, the Cyprus Bar Association has voiced reservations regarding certain aspects of the amendment. In particular, there are concerns about the obligation for crypto service providers that hold agency licenses from other European countries to register with the Cyprus Securities and Exchange Commission (CySEC). This provision is part of an amendment to CySEC itself. However, the registration process has not posed significant issues for crypto companies. Notably, eToro, a crypto-friendly brokerage, secured CySEC's registration as a crypto-asset service provider in September of this year. Similarly, Bybit obtained the same license in June.
Nevertheless, Binance, the world's largest cryptocurrency exchange, decided to withdraw from the Cyprus market in July. This move was attributed to Binance's desire to concentrate on the broader European Union-registered market and occurred amid increasing regulatory pressures faced by the company.
