CySEC issues new policy to regulate registration of crypto-asset providers

abdelaziz Fathi

The Cyprus Securities and Exchange Commission (CySEC) has revealed new details about its policy to regulate crypto assets, hinting more efforts might already be underway. The CySEC wants to increase oversight of cryptocurrencies and related assets by integrating EU anti-money-laundering rules into the Cypriot laws.

The CySEC’s policy statement sets out detailed requirements for crypto firms seeking registration in the regulator’s CASP register. This register is publicly accessible and include information such as the crypto firm’s name, the legal form, its address and services.

The new policy also introduces a definition for crypto assets that slightly extends beyond its traditional legal status.

Depending on their structure, the Cypriot regulator says crypto assets may qualify as financial instruments under the Investment Services and Activities and Regulated Markets Law. Additionally, while cryptocurrencies cannot be regarded as legal tender, they may qualify as “electronic money” or “e-money” in the sense of the Electronic-Money Directive.

Derivatives referencing cryptoassets would not fall under this policy, but we understand they remain subject to ESMA’s current restriction and any future proposals by the CySEC regarding the sale of these instruments to retail investors.

Meanwhile, the CySEC went beyond the requirements set out in the fifth directive as it wants to bring new activities, which are not included in AMLD5, under the AML/CFT obligations.

Demetra Kalogerou, Chair of the Cyprus Securities and Exchange Commission said: “Our proactive engagement with crypto businesses under the CySEC Innovation Hub, aiming to support innovative businesses and to engage with providers of emerging financial technologies, ensured that our expectations were clearly communicated to market participants well in advance and that the Cypriot framework has captured the industry’s pace, alleviating thus the risks involved. Our work on financial innovation at national and EU level is ongoing and we are determined to encourage responsible innovation, whilst ensuring the orderly functioning of the markets.”

As it stands, the current shifting regulatory landscape for cryptocurrencies across the globe is still very confusing as local regulators are struggling to keep pace with the innovations in the space.

Extending AML regulations to cryptocurrency activities is being considered in several countries around the world such as Australia and the UK, and already tracks the EU’s recent push to regulate Bitcoin.

But the big challenge is the absence of coherent direction on cryptocurrency regulation as each country has its own approach. Some countries are welcoming, including Japan, while others are cautious, such as the US and Europe. And some nations like China are downright antagonistic.

Published in June 2018, the AMLD5 is a pan-European anti-money laundering directive that member states had until January 2020 to implement it into their national laws. The legislation was notable because it represented the EU’s first attempt to expressly regulate cryptocurrency activities at EU-level.

Under AMLD5, crypto exchanges and custodian wallet providers were brought within the scope of EU anti-money laundering rules for the first time. The law imposes registration and customer due diligence requirements that force operators to disclose their traders’ identities and report suspicious activity.

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