Crypto Regulations in Cyprus
On May 15, 2018, the Cyprus Securities and Exchange Commission (CySEC) published Circular C. 268. The Act is titled “Introduction of New Rules Governing Derivatives on Virtual Currencies.” In this Act, CySEC clarified several aspects of Cyprus’s cryptocurrency regulation. First and foremost, they announced that cryptocurrencies are currently unregulated by the CySEC.
Second, the Circular made clear that cryptocurrency derivatives can qualify as financial instruments under Cyprus law. Specifically, derivatives on cryptocurrencies can qualify as one of three financial instruments:
- as “any other contracts relating to securities […] which may be settled physically or in cash;”
- as “financial contracts for differences;” or
- as “any other derivative contracts relating to assets […] not otherwise mentioned in this Section, which has the characteristics of other derivative financial instruments.”
Source: Freeman Law
The Central Bank of Cyprus (CBC) also warned about the risks associated with cryptocurrency trading. Mainly, the CBC warned that cryptocurrencies are not classified as “legal tender.” The CBC then listed the four main risks that arise from cryptocurrency trading:
- There are no guarantees or legal obligations for reimbursement of lost or stolen cryptocurrencies.
- Cryptocurrency prices are notoriously volatile.
- Cryptocurrencies are often associated with illegal activities, such as money laundering and crime financing.
- Cryptocurrency exchanges do not have optimal security.
Consequently, the possibility of theft is significantly high. This possibility is a grave concern since, as mentioned above, there are no legal obligations for reimbursement. As a result, someone whose cryptocurrencies are stolen has no way to recoup their losses in Croatia.
Source: Freeman Law
Currently, in Cyprus, there is no specific legal framework in place for cryptocurrencies. Cyprus Income Tax Law and the Cyprus Tax Department have also not provided guidance on how such currencies should be recognized, treated, and taxed. There is however regulation on the activities of companies who offer services related to cryptocurrencies in the blockchain. The 5th Anti Money Laundering directive published in the Official Gazette of the Republic of Cyprus on 23/02/2021 made amendments to the 4th Anti Money Laundering directive to extend control on exchange providers and custody providers and ensure that providers are registered, fit and proper.
Source: Mondaq
The Cyprus Securities and Exchange Commission (CySEC) issued its first regulation regarding cryptocurrencies. Cryptocurrency has an impeccable legal record in Cyprus, and it is recognized as legal tender. The government has no plan to restrict merchants or ban the 8 services. This improves the ability of consumers to trade goods and services for digital currencies. The new rules laid down in the first cryptocurrency regulation by CySEC known as Circular C417 are designed to ensure that Cyprus Investment Firms (CIFs), make provisions to cover investments in cryptocurrencies and that risks involving cryptocurrencies are managed properly. CIFs must first obtain authorization from CySEC to trade in cryptocurrencies because they are not specifically regulated by previous financial regulations, whether in Cyprus or at the level of the EU. Cyprus investment firms, which trade in crypto assets, and/or in financial instruments relating to crypto-assets, are advised by CYSEC to revisit their risk management procedures and strategies and ensure that all risks associated with this product are duly taken into consideration. In 2019, Cyprus’ cabinet published its National Strategy on Distributed Ledger Technologies. The cabinet sought to provide a platform for both public and public-private initiatives employing blockchain applications. The Strategy provides a framework and a high-level road map for examining the applications of DLT, across different sectors, in the context of process optimization and cost efficiency, and addresses the risks arising from the emergence of new products utilizing DLT. This National Cypriot strategy for the development and deployment of such technologies addresses a number of issues. It focuses on the creation of a proportionate regulatory framework that accommodates and fosters innovation and provides legal certainty and protection for consumers and investors alike while preserving technological neutrality.
Source: mof.gov.cy
Grant Thornton Cyprus is constantly monitoring all the regulations regarding digital assets globally, as to cater to its international clientele when it comes to distributed ledger technologies. Our multidisciplinary team covers all aspects of digital asset professional services and is ready to accommodate customized solutions according to your needs. In an effort to raise awareness and educate the general public we have launched a series of articles covering the most important updates from the DLT world. Recently, we had several updates resulting from the wiliness of the Republic of Cyprus to accommodate the use of the technology under its National Strategy for Blockchain. In this article, we summarize the most recent updates in relation to the regulation for crypto assets, DLT and CASP (Crypto Asset Service Providers), as opposed to the definition of Virtual Asset Service Providers (VASPs) used by the Financial Action Task Force.
Source: Grant Thorton
Currently, income from the trading of cryptocurrencies is taxed under corporation tax at a rate of 12.5% since they are recognized as taxable assets. Such income is exempt from deemed dividend tax, withholding tax, capital gains tax, and special contribution of defense tax. Income received from the trading of cryptocurrencies can be reduced by expenses incurred for the production of such income.
Source: Mondaq
The AML Law defines crypto assets under article 2(1) as:
“a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by persons as a means of exchange or investment and which can be transferred, stored or traded electronically and that is not,
(a) Fiat currency, or
(b) Electronic money, or
(c) Financial instruments as defined in Part III of the First Appendix of the Law on the Provision of Investment Services and Activities and Regulated Markets”.
The definition of a crypto assets service provider in article 2(1) builds on ‘the exchange between crypto assets and fiat currencies used in article 2(1)(3)(g) AMLD5, to include:
- The exchange between crypto assets;
- Management, transmission, transfer, holding, and/or safekeeping of crypto assets or cryptographic keys;
- Offer and/or sale of crypto assets, including the initial offering; and
- Participation and/or provision of financial services regarding the distribution, offer, and/or sale of crypto assets, including the initial offering.
Source: gmadvocates
Singapore-based cryptocurrency exchange Crypto.com continues to aggressively expand its reach, becoming the latest crypto firm officially authorized to operate in Cyprus.
Crypto.com has received regulatory approval from the Cyprus Securities and Exchange Commission (CySEC), the firm announced to Cointelegraph on Friday.
The approval enables Crypto.com to offer a number of products and services to customers in Cyprus in compliance with local regulations. The new regulatory milestone comes in line with Crypto.com’s growing global presence as the firm has been actively expanding its operations, receiving approvals to operate in countries like Italy, Greece, and Singapore.
According to Crypto.com co-founder and CEO Kris Marszalek, the exchange currently prioritizes Europe as the main region for continued expansion. That is a “testament to our commitment to compliance and collaboration with regulators,” he said.
Crypto.com is not the only cryptocurrency exchange that has been approved to operate in Cyprus. Major rival exchange FTX has also been expanding in Europe after receiving approval from the CySEC in March 2022. Other exchanges like Coinbase have also been increasingly interested in expanding in Europe amid the ongoing bear market.
Source: Cointelegraph
Police on Saturday called on members of the public not to trust people they meet online after a man from Limassol lost more than €108,000 after investing it in two cryptocurrency exchange platforms.
According to the police, the man reported that he was convinced towards the end of October by two women he met on social media to invest in two cryptocurrency exchange platforms.
He then transferred €108,000 in total to these platforms and, after seeing that he had profits, he tried to transfer the amount to his bank account but was not able to. He was then informed by the two platforms that not only were there no profits, but his accounts were tampered with by strangers, and the money was gone.
Following this new report of fraud, police once again urge the public to be very careful and not to trust strangers, especially those introducing themselves through social networking sites.
Police urged people who may be approached by strangers for similar investments to file complaints to the cybercrime unit at 22808200.
Source: Cyprus-Mail
In Cyprus, the Ministry of Justice and Public Order together with the Cyprus Police are the authorities responsible for the prevention and combating of cybercrime. There is a special cybercrime subdivision in the police which is responsible for the effective investigation of cybercrime. However, the specialized body in the Cyprus Police for cybercrime investigation is the Office for Combating Cybercrime (OCC) which is responsible for the investigation of crimes committed via the internet or via computers. The OCC cooperates closely with EU authorities and third countries on the basis of bilateral and multilateral agreements including, inter alia, the Europol (EC3), Interpol, the European Network and Information Security Agency (ENISA), the European Commission, and many others.
Source: iflr
The Cyprus Securities and Exchange Commission is considering establishing a regulatory sandbox as it acknowledges that digital technologies have ‘re-shaped the landscape in which regulated entities operate’ and presented ‘idiosyncratic risks.
The authority, known as CySEC, has run a ‘call for views on the creation of a sandbox as it looks to expand its innovation-related work and allow private-sector innovators to test new products and services.
CySEC states that the project aims to build on its Innovation Hub, which has helped innovative businesses to navigate laws and regulations since its launch in October 2018.
‘The challenge for regulators is to keep pace so that the benefits provided by new and emerging technologies are unlocked while ensuring that there are adequate systems, controls, policies, and procedures in place to minimize the risks they present,’ the authority states.
CySEC, which is based in capital Nicosia, has sought views on the scope of a sandbox and how it would work from regulated entities such as established banks, fintech, or RegTech (regulatory technology) companies, as well as professional associations from Cyprus and overseas.
Source: Global Government Fintech
