- Cyprus is taking steps to enhance the regulation of the crypto sector by imposing strict penalties on crypto service providers (CSPs) operating without proper registration.
- The government defends these penalties as crucial measures in combating the risks of money laundering and financing terrorism, especially considering advancements in new technologies.
- Crypto asset transaction companies, known as CSPs, are required to register with Cyprus Securities and Exchange Commission (CySEC), the country’s financial regulator.
Cyprus has moved to impose stricter penalties on cryptocurrency companies that do not register to operate in the country!
Cyprus Cracks Down on Unregistered Crypto Companies
Cyprus is taking steps to enhance the regulation of the crypto sector by imposing strict penalties on crypto service providers (CSPs) operating without proper registration. The government has proposed an amendment to the “Prevention and Suppression of Money Laundering Law.”
This amendment aims to align Cyprus with international standards set by the Financial Action Task Force (FATF) and recommendations outlined in the MONEYVAL report.
According to the proposed amendment, crypto asset transaction companies, known as CSPs, must register with Cyprus Securities and Exchange Commission (CySEC), the country’s financial regulator. Failure to comply with this requirement could result in serious consequences, including fines of up to 350,000 Euros and a maximum of five years of imprisonment or both.
The government defends these penalties as crucial measures in combating the risks of money laundering and financing terrorism, especially considering advancements in new technologies. Cyprus is not the only country implementing strict measures against unlicensed CSPs.
Malta has introduced penalties of up to six years of imprisonment and fines of up to 15 million Euros for non-compliance with crypto regulations. Similarly, countries like France and Ireland have applied various sanctions, ranging from imprisonment to substantial fines, for similar offenses.
Cyprus Bar Association Expresses Concerns
The draft amendment has faced criticism from the Cyprus Bar Association. The Bar Association has expressed concerns about the scope of the law, questioning why CSPs registered in other EU member states should be required to register in Cyprus, given that they are already under the supervision of their own countries.
Additionally, the bar association has proposed the inclusion of the “Travel Rule,” requiring CSPs to share customer and transaction information with each other and authorities. In response, the Ministry of Finance has stated that the law is in line with the functioning of the single market within the EU. They emphasized that CySEC has jurisdiction over CSPs operating in Cyprus, independent of their registration in other EU countries.
Moreover, they assured that necessary changes to update Cyprus’s existing legislation would allow the timely implementation of the “Travel Rule.” The Legal Affairs Parliamentary Committee is currently reviewing this draft amendment, and it is expected to be adopted soon.
