- Cyprus wants to tighten crypto oversight.
- Legislative amendment is underway to introduce new rules.
- Non-compliance will attract a hefty fine or imprisonment.
To bring local crypto oversight to par with international regulation standards, Cyprus is reportedly planning to amend its existing Prevention and Suppression of Money Laundering Law.
According to reports by local media outlets, the development comes after the country’s Ministry of Finance recently submitted the proposed legislative amendment to the Parliamentary Committee on Legal Affairs.
Stringent Penalties for CSPs
The Cyprus Mail reported on October 10 that the proposed amendments would position Cyprus to adopt the MONEYVAL report published in November 2022, as well as the international regulatory standards set by the Financial Action Task Force (FATF), aimed at curbing money laundering and terrorism financing.
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If passed, the amendment will require cryptocurrency service providers (CSPs) to register with the Cyprus Securities and Exchange Commission (CySEC) before operating in the country, regardless of their registration status in other EU member states.
Failure to comply with this provision will attract a range of severe penalties, including a hefty fine of up to €350,000 or imprisonment of up to five years.
Notably, Cyprus has sought the input of various stakeholders to harmonize the proposed amendments, among them the Cyprus Bar Association.
Recommendations by the Cyprus Bar Association
The Cyprus Bar Association reportedly had some reservations about the proposed amendments, especially the provision requiring CSPs with valid licenses in other EU states to still register with CySEC, a clause introduced by the regulator.
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The association also proposed introducing the “Travel Rule” into the amendment, which would require CSPs and their EU intermediaries to collect, verify, retain, and swap personal data of users conducting crypto asset transfers, especially if the transaction crosses a certain threshold.
In response to these recommendations, the Ministry of Finance clarified that even though CySEC would implement provisions for regulating CSPs operating in Cyprus regardless of their registration status in other EU countries, the onus of monitoring such entities lies with the state of registration rather than the hosting state.
Read why Binance withdrew from Cyprus:
Binance Pulls Out Of EU Crypto Hub Amid SEC Crackdown: What’s Next?
Stay updated on Bybit’s entry into Cyprus:
Bybit Seizes Opportunity in Cyprus as Binance Departs
