Cyprus Moves to Regulate Cryptocurrencies and Blockchain Technology
A Step Towards Establishing a Clear Framework
In an effort to position itself as a leading hub for blockchain technology, Cyprus has taken significant strides in regulating the use of cryptocurrencies and distributed ledger technologies (DLTs). The country’s Ministry of Finance recently published a draft bill aimed at developing a conceptual framework for DLTs, providing legal certainty for smart contracts, and safeguarding consumers and investors.
Key Provisions of the DLT Bill
- Regulates the status of records and transactions carried out on services supported by DLTs
- Defines smart contracts as legally binding and valid contracts that can be used in courts
- Emphasizes the need for these contracts to adhere to traditional contract law principles
Industry Concerns
Industry experts have raised concerns over several aspects of the bill, including:
- Failure to clarify how Cyprus will distinguish itself as a leading location for DLT projects
- Lack of clarity on ensuring credibility and legal certainty for users
- Insufficient support for innovation within the legal framework
CySEC Policy Statement
Separately, the Cyprus Securities and Exchange Commission (CySEC) has issued a policy statement outlining its position on the registration and operations of crypto asset service providers (CASP). According to the policy:
- CASPs must register with CySEC if they provide or carry out services related to cryptocurrencies
- New rules require CASPs to perform know-your-client due diligence measures, monitor client transactions, and report suspicious activity
Classification of CASPs
CySEC has classified CASPs into three classes based on their scope of activities and initial capital requirements. The classification aims to ensure that CASPs comply with relevant laws and regulations.
Overlap with EU Directive
Industry experts have expressed concerns over the overlap between CySEC’s guidelines and the EU’s 269/2021 Directive on cryptocurrency services.
Expert Guidance Available
Grant Thornton, a leading professional services firm, has offered its expertise to help companies navigate the complex regulatory landscape surrounding cryptocurrencies and blockchain technology. The firm’s specialized team has analyzed the recent DLT guidelines and is available to provide guidance on legal and regulatory requirements.
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