The era of digital money is not just approaching – it is already here. And Cyprus finds itself in a unique position: with the right strategy, it can evolve into a regional leader in the field of digital payments and innovative financial services.

As recently stated by George Karatzias, Executive Board Member of the Central Bank of Cyprus (CBC), Cyprus currently ranks fourth in the EU in terms of the number of licensed Electronic Money Institutions (EMIs). In total, the country hosts 28 EMIs and 12 Payment Institutions (PIs), with dozens of applications under review. This dynamic picture is no coincidence; it reflects the strategic importance the market places on the flexible and innovative payment solutions offered by EMIs.

Even more impressive is the figure highlighted by Mr. Karatzias: the total transaction value through EMIs and PIs rose from €16 billion in 2019 to €70 billion in 2023. We are talking about a quadrupling in just four years. These figures are indicative of the demand for solutions that are simple, fast, and tailored to the needs of the modern business and consumer.

However, as Mr. Karatzias correctly pointed out, 95% of the sector’s revenue comes from a limited number of institutions. This concentration poses risks, which the CBC is seeking to address through its new supervisory strategy. Key pillars of this strategy include: the creation of a dedicated Supervision Directorate for EMIs and PIs, strengthening the sector's resilience, and maintaining Cyprus’ attractiveness as a fintech destination while enforcing strict compliance standards.

The challenge, therefore, is not just to host more providers, but to ensure they operate with professionalism, security, and transparency. And this is not solely the responsibility of regulators – it is also the responsibility of the market itself.

Additionally, Jürgen Schaaf, Advisor to the European Central Bank (ECB), was in Cyprus recently and presented the plan for the implementation of the Digital Euro – a digital form of the euro that will act as the electronic equivalent of cash. Mr. Schaaf explained that the need for the Digital Euro stems from the declining use of physical cash, the dependence of many Eurozone countries on international payment schemes, and the need to enhance geopolitical resilience against BigTechs and stablecoins.

He also referred to the prospect of using technologies such as Distributed Ledger Technology (DLT) for wholesale Digital Euro transactions – a prospect already being tested through partnerships with the EIB, Siemens, and the World Bank.

In this rapidly evolving environment, EMIs are called to play a decisive role. The increased use of EMIs is a direct result of the real needs of the market. Customers, especially businesses, demand flexibility, speed, competitive costs, and innovative solutions – and EMIs respond to these needs more effectively than traditional banks.

Regarding the Digital Euro, I believe it presents a significant opportunity, but also a major challenge. It requires all of us to demonstrate technological readiness, upgrade our infrastructures, and adapt to new compliance standards. Organizations that manage to adapt quickly will gain a clear strategic advantage in the European market.

Cyprus, therefore, has a historic opportunity ahead: to become the nucleus of a new era in payments and digital finance. It has the foundations – skilled human capital, geostrategic positioning, and regulatory will. What remains now is boldness and consistency.