In a bid to fortify its cryptocurrency regulatory framework, Cyprus has issued a stern warning to Crypto Service Providers (CSPs): register or face severe penalties.
The island nation is becoming more strict on the crypto industry and is adopting standards set by the global Financial Action Task Force (FATF). This includes initiatives to combat money laundering and terrorism financing.
Cyprus Tightening Crypto Exchange Rules
Cyprus plans to impose stringent penalties on CSPs failing to register with the Cyprus Securities and Exchange Commission (CySEC). This is regardless of their registration status in other EU states.
This follows a proposed legislative amendment to the “Prevention and Suppression of Money Laundering Law,” by the Ministry of Finance.
Non-compliant CSPs could face penalties, including fines of up to €350,000 and imprisonment of up to five years. This is a testament to the government’s commitment to minimizing risks associated with illegal activities and terrorism financing.
In the face of these stringent measures, there have been reservations expressed by the Cyprus Bar Association regarding the obligation for CSPs registered in other EU member states to also register in Cyprus.
In response, the Finance Ministry maintains that the responsibility for monitoring entities initially lies with the state where the CSP was first registered.
FATF Pushing for Widespread ‘Travel Rule’
Further enhancing regulatory oversight, Cyprus is also discussing the implementation of the “Travel Rule.” This rule, currently not part of Cyprus’ legislative framework, would require CSPs to share customer information during transactions.
It hopes these rules will aid in the prevention of money laundering and other illicit activities.
FATF Travel Rule Implementation Issues for Crypto Exchanges and VASPs. Source: Sygna
In a related development, amid a US crackdown on crypto firms, Europe is emerging as a popular destination for these entities.
eToro, the crypto and stocks trading platform, has recently registered as a CSP with CySEC.
eToro has reportedly received a regulatory green light from the European Union (EU) as more crypto firms expand into Europe. The legislation will come into force from July 2024. After that, eToro will be able to offer its services to all EU countries through a single entity.
Dr Hedva Ber, the deputy CEO at eToro, said:
“Europe is a hugely important region for eToro, it’s where the majority of our users are based, and we want to continue offering to European investors direct access to a wide range of crypto assets as part of a diversified portfolio.”
With these measures, Cyprus is taking significant steps to create a well-regulated cryptocurrency environment.
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