Cyprus to Strengthen Cryptocurrency Regulations in Alignment with FATF

The Ministry of Finance plans to revise the current Prevention and Suppression of Money Laundering and Terrorist Financing Law.

Cyprus, known as one of the more crypto-friendly European jurisdictions, is considering tightening regulations in the industry. The Ministry of Finance has expressed its intention to amend the existing Prevention and Suppression of Money Laundering and Terrorist Financing Law, as reported on October 10 by the Cyprus Mail.

The proposed amendments, presented to the House of Representatives Standing Committee on Legal Affairs, Justice, and Public Order, aim to align Cyprus with international standards for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) set by the Financial Action Task Force (FATF). Additionally, the amendments aim to address recommendations outlined in the Committee of Experts on the Evaluation of Anti-money Laundering Measures and the Financing of Terrorism (MONEYVAL) report published in November 2022.

According to the proposed changes, every crypto asset service provider must register with the financial regulator, the Cyprus Securities and Exchange Commission (CySEC). Penalties for noncompliance range from fines of up to €350,000 ($370,000) to imprisonment of up to five years or a combination of both.

While these amendments have been introduced, some reservations have been expressed, particularly by the Cyprus Bar Association. Concerns focus on the obligation for crypto service providers with licenses from other European countries to register with CySEC, a provision added by CySEC itself.

Despite the potential regulatory changes, crypto companies have not reported significant issues registering in Cyprus. Notably, eToro and Bybit received crypto asset service provider registrations from CySEC in September and June, respectively. However, Binance, the world's largest crypto exchange, chose to deregister from the Cyprus market in July, citing a strategic focus on larger registered European Union markets amid increasing regulatory pressures.

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