Cyprus Implements Stricter Crypto Rules to Comply with FATF Standards

Cyprus, long known for its accommodating stance towards the cryptocurrency industry, appears to be gearing up for a regulatory shift. According to an update on October 10th by the Cyprus Mail, the Ministry of Finance is in the process of amending the existing Prevention and Suppression of Money Laundering Law, signaling a move towards stricter oversight.

The proposed amendments have been presented to the Parliamentary Committee on Legal Affairs and are designed to bring Cyprus in line with international standards outlined by the Financial Action Task Force (FATF). These standards pertain to anti-money laundering and combating the financing of terrorism (AML/CFT) and are also influenced by the recommendations from the MONEYVAL report released in November 2022.

Key changes under consideration include mandatory registration for all crypto asset service providers with the Cyprus Securities and Exchange Commission (CySEC). Failure to comply could result in penalties ranging from substantial fines, reaching up to €350,000, to potential imprisonment for a maximum term of five years, or a combination of both.

However, these proposed amendments have not been without controversy. The Cyprus Bar Association has voiced reservations, particularly concerning the obligation for crypto service providers already licensed in other European countries to register afresh with CySEC. This particular provision was introduced by CySEC itself, further complicating the regulatory landscape.

Despite these developments, several crypto businesses have reportedly faced no significant hurdles while registering their operations in Cyprus. Notably, in September, eToro, a crypto-friendly brokerage firm, secured a Crypto Asset Service Provider (CASP) registration from CySEC, following the footsteps of ByBit, which had obtained the same license earlier in June.

In contrast, Binance, the world’s largest cryptocurrency exchange, decided to exit the Cyprus market in July amid intensifying regulatory pressures. Binance cited a strategic shift, emphasizing a focus on larger and more established EU markets as the reason for its departure.

As the crypto landscape continues to evolve globally, Cyprus seems to be adapting its regulatory framework to maintain alignment with international standards. The industry, therefore, awaits further developments to see how these proposed changes will impact the thriving crypto ecosystem in the country.

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