Cyprus is in a constant race to adopt emerging technologies to ensure that its markets remain competitive in the global scene, its citizens are educated, and to support its most prominent sector, being the services sector. 

One such technology is the blockchain and its cryptocurrency assets. According to Singapore Blockchain firm, Triple A, the number of cryptocurrency holders and users exceeds 420 million globally, or a 4.2% ownership rate as of 2023. Cyprus’ recent history in the crypto market has been turbulent to say the least. The collapse of the FTX platform tells a cautionary tale for the island’s regulators, as well as regulatory frameworks globally. 

While the blockchain and cryptocurrencies aim to be, and should be decentralized to be considered as such, implementing regulations is imperative to ensure an effective adoption of the technology globally, and to bolster the technology’s integrity. The World Economic Forum suggests that “letting crypto play a regulated role in economies is the optimal way to promote the advantages of innovation while curtailing the potential downsides.”

With this in mind, let’s explore how Cyprus and the Cyprus Securities and Exchange Commission (CySEC) is proceeding with its regulatory efforts in the crypto space. 

CySEC holds crypto assets and organizations under scrutiny as the impact of FTX’s collapse is still fresh. Among their regulatory efforts, CySEC urges Crypto Asset Services Providers (CASPs) to formally register with CySEC to ensure that services and activities that are not covered by the regulatory framework under anti-money laundering (AML) and terrorist financing law (CFT) purposes are valid and approved. In 2021, CySEC ensured that existing crypto-asset activities were entirely compliant with AML/CFT laws, and that future businesses adhere to the same frameworks.

In addition to CySEC’s efforts, Regulate United Europe, an organization dedicated to guiding and advising businesses operating within the financial, IT, and crypto sectors. They provide an extensive guide on crypto regulations in Cyprus, as well as within Europe. Their guide entails an extensive breakdown of the procedures required to be fulfilled in order to successfully register a cryptocurrency-related business. 

Among their Cyprus crypto regulation guide, they provide an overview that indicates “the standard corporate income tax rate in Cyprus is 12.5%, which is one of the lowest in the EU.” They also indicate that “Cyprus authorities are willing to cooperate with crypto market participants for continuous improvement of regulation.” These factors contribute to why some of the biggest names in the crypto space are choosing to move their operations to Cyprus.

Due to the extensive and elaborate regulations in Cyprus that support crypto-related activities within the European Economic Area (EEA), Revolut, one of the largest digital banking platforms valued at $33 billion, selected to establish a crypto-asset hub in Cyprus in 2022. As the Cyprus Profile documents, “Revolut said its choice was down to the sophisticated regulatory regime of the country, which has already attracted the likes of Crypto.com, eToro, and BitPanda.”

Binance, the world’s largest cryptocurrency trading platform that enables individuals to buy, sell, and trade more than 600 cryptocurrencies has also established their presence in the island. In a discussion at the University of Nicosia, Binance’s co-founder, Zhao, otherwise referred to as CZ, stated that “we just got our registration last month in Cyprus for a cryptocurrency exchange license… We are thankful for the support the Cyprus regulators and government have been giving us.”

Regulating emerging technologies, especially one such as blockchain and cryptocurrency assets that are decentralized, will take time and requires extensive communication between stakeholders and regulators. Cyprus seems to be making headway in this manner, while further establishing itself as a reliable and dependable regulatory body within the EEA. Considering the impact of the collapse of FTX on regulators in Cyprus, the island has tightened its approach and is looking to further reinforce its integrity among the EU and the Eastern Mediterranean region.

Seeing as leading entities in the cryptocurrency space are welcomed in Cyprus, and are choosing Cyprus as a hub, the future for Cyprus’ role as a key player seems promising.