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Retail_Trading_Status

Allowed-Regulated Unknown
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#495
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Created
2025-06-26 13:18
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Executive Summary

Retail cryptocurrency trading is legally permitted in Cyprus, subject to a developing regulatory framework. This framework is primarily driven by the EU's Markets in Crypto-Assets (MiCA) Regulation, along with national AML/CTF requirements. The Cyprus Securities and Exchange Commission (CySEC) actively integrates crypto-assets into its regulatory purview, particularly concerning AML/CTF obligations, and maintains a register for Crypto Asset Services Providers (CASPs). The Central Bank of Cyprus (CBC) monitors developments and highlights the risks, emphasizing that crypto-assets are not legal tender.

Key Pillars

The primary regulator is the Cyprus Securities and Exchange Commission (CySEC), which oversees crypto-asset service providers (CASPs) and ensures compliance with AML/CTF obligations. Key compliance requirements include customer due diligence (KYC) and transaction monitoring, as mandated by the 5th AML Directive (AMLD5). CASPs are required to register with CySEC and will eventually need authorization under MiCA to operate across the EU.

Landmark Laws

  • Regulation (EU) 2023/1114 (Markets in Crypto-Assets Regulation - MiCA), May 31, 2023: This regulation establishes a harmonized regulatory framework for crypto-assets across the EU, covering issuers of crypto-assets and CASPs. It aims to provide legal clarity, ensure consumer and investor protection, and maintain market integrity and financial stability. Applicable in stages from June 2024, with full application for CASPs by December 30, 2024.
  • 5th AML Directive (AMLD5): Mandates that CASPs comply with AML/CTF obligations, including customer due diligence (KYC) and transaction monitoring. This has been implemented in Cyprus through amendments to its AML law.

Considerations

Crypto-assets are not considered legal tender in Cyprus but are generally accepted as a means of exchange. The Central Bank of Cyprus (CBC) highlights the risks associated with crypto-assets. Cyprus aims to foster innovation while mitigating risks related to financial crime, market integrity, and investor protection.

Notes

Historically, Cyprus lacked a specific regulatory framework for cryptocurrencies, operating in a gray zone. CySEC issued warnings to investors regarding the risks of cryptocurrencies before MiCA. The full implementation of MiCA by the end of 2024 is a cornerstone of the 'Allowed-Regulated' status. CySEC Policy Statement PS-01-2024 addresses transitional provisions for CASPs under MiCA. The CySEC CASP register shows the transition towards full MiCA compliance, noting that the CBC has not granted licenses falling within MiCA's scope as of yet.

Detailed Explanation

Retail cryptocurrency trading is legally permitted in Cyprus and is subject to a developing regulatory framework, primarily driven by the European Union's Markets in Crypto-Assets (MiCA) Regulation, alongside national anti-money laundering (AML) and counter-terrorist financing (CTF) requirements. Cyprus, as an EU member state, aligns its financial regulations with EU directives and regulations. Historically, Cyprus did not have a specific bespoke regulatory framework for cryptocurrencies, which previously led to a regulatory 'gray zone.' However, the Cyprus Securities and Exchange Commission (CySEC), the national competent authority, has been actively working on integrating crypto-assets into its regulatory purview, especially concerning AML/CTF obligations. CySEC issued warnings to investors about the risks associated with cryptocurrencies, emphasizing their volatility, lack of intrinsic value, and the absence of specific investor protection schemes outside the traditional financial system prior to MiCA. With the advent of MiCA, which entered into force in June 2023 and has been applying in stages since June 2024, with full application for crypto-asset service providers (CASPs) by December 30, 2024, the regulatory landscape in Cyprus has become significantly clearer and more defined. MiCA provides a harmonized regulatory framework for crypto-assets across the EU, covering issuers of crypto-assets and CASPs. This means that firms offering crypto-asset services, including exchanges and custodian wallet providers, to retail clients in Cyprus must be authorized and supervised.

CySEC has established a register for Crypto Asset Services Providers (CASPs) in line with the 5th AML Directive (AMLD5) requirements, which mandates that CASPs comply with AML/CTF obligations, including customer due diligence (KYC) and transaction monitoring. This registration was an interim step while awaiting the full implementation of MiCA. Under MiCA, CASPs will require authorization from the national competent authority (CySEC in Cyprus) to operate across the EU. CySEC Policy Statement PS-01-2024, issued in February 2024, further clarifies transitional provisions for CASPs, referring to Regulation (EU) 2023/1114 (MiCA) and CySEC's public consultation CP-01-2023. CySEC expects existing CASPs registered under the AML/CFT Law to take necessary actions to submit a complete application for authorization under MiCA.

Therefore, individual citizens and residents in Cyprus are permitted to buy, sell, and hold cryptocurrencies, but they must do so through CASPs that are, or will be, compliant with the evolving regulatory framework, including MiCA and national AML/CTF laws. This framework imposes KYC/AML requirements on platforms, and CySEC continues to issue general warnings about the risks involved in crypto investments. The Central Bank of Cyprus (CBC) has also issued statements clarifying that while it does not regulate virtual currencies, it monitors developments and highlights the risks. The CBC emphasizes that crypto-assets are not legal tender in Cyprus.

The overall approach is one of cautious integration, aiming to foster innovation while mitigating risks related to financial crime, market integrity, and investor protection. The full implementation of MiCA by the end of 2024 is the cornerstone of this 'Allowed-Regulated' status. ESMA notes that MiCA's rules on ARTs and EMTs apply from June 30, 2024, while rules on CASPs and other crypto-assets apply from December 30, 2024. KPMG reports that crypto-assets are generally accepted as a means of exchange, and Cyprus has implemented the 5th AML Directive, bringing CASPs under its scope.

Summary Points

Retail Cryptocurrency Trading Status in Cyprus: Regulatory Overview (2025-06-26)

Overall Status: Allowed-Regulated

1. Key Regulatory Bodies & Roles:

  • Cyprus Securities and Exchange Commission (CySEC):
    • National competent authority responsible for regulating crypto-asset services.
    • Supervises Crypto Asset Services Providers (CASPs) for AML/CFT compliance.
    • Issues warnings to investors about the risks associated with cryptocurrencies.
    • Authorizes and supervises CASPs under MiCA.
    • Maintains a public register of approved CASPs.
  • Central Bank of Cyprus (CBC):
    • Monitors developments in the crypto-asset space.
    • Highlights the risks associated with crypto-assets.
    • Clarifies that crypto-assets are not legal tender in Cyprus.
  • European Securities and Markets Authority (ESMA):
    • Oversees the implementation of MiCA across the EU.

2. Important Legislation & Regulations:

  • Markets in Crypto-Assets (MiCA) Regulation (EU 2023/1114):
    • Harmonized regulatory framework for crypto-assets across the EU.
    • Covers issuers of crypto-assets and CASPs.
    • Provides legal clarity and certainty for crypto-asset activities.
    • Aims to ensure consumer and investor protection, market integrity, and financial stability.
    • Rules on asset-referenced tokens (ARTs) and e-money tokens (EMTs) apply from June 30, 2024.
    • Rules on CASPs and other crypto-assets apply from December 30, 2024.
  • 5th AML Directive (AMLD5):
    • Requires CASPs to comply with AML/CTF obligations.
    • Includes customer due diligence (KYC) and transaction monitoring.
  • National AML/CFT Laws:
    • Cyprus has implemented the 5th AML Directive through amendments to its AML law.

3. Requirements for Compliance:

  • For Crypto Asset Services Providers (CASPs):
    • Registration with CySEC (interim step before full MiCA implementation).
    • Authorization from CySEC under MiCA (required by December 30, 2024).
    • Compliance with AML/CTF obligations, including KYC and transaction monitoring.
    • Implementation of robust security measures.
    • Transparency in operations and fee structures.
  • For Retail Investors:
    • Conduct crypto transactions through compliant CASPs.
    • Be aware of the risks associated with crypto investments (volatility, lack of intrinsic value).
    • Understand that crypto-assets are not legal tender.

4. Notable Restrictions or Limitations:

  • Crypto-assets are not considered legal tender in Cyprus.
  • CySEC issues warnings about the risks associated with crypto investments.
  • Investor protection schemes outside the traditional financial system may not apply to crypto-assets.

5. Recent Developments or Changes:

  • MiCA Implementation: Cyprus is actively implementing MiCA, with full application for CASPs expected by December 30, 2024.
  • CySEC's CASP Register: CySEC maintains a public register of entities approved as CASPs, signifying AML/CFT supervision.
  • CySEC Policy Statement PS-01-2024: Provides guidance on the registration and operations of CASPs, including transitional provisions for existing and new CASPs.

6. Key Text Excerpts (Summarized):

  • CySEC PS-01-2024: CASPs must take necessary actions to submit a complete application for authorization under MiCA.
  • CySEC CASP Register: The CBC has not granted any licenses under MiCA yet, indicating the transition towards full MiCA compliance.
  • ESMA on MiCA: MiCA introduces a harmonized regulatory framework for crypto-assets in the EU.
  • KPMG Report: CASPs operating in Cyprus must register with CySEC and comply with AML/CFT requirements.

Full Analysis Report

Report: Retail Cryptocurrency Trading Status in Cyprus

Date: 2025-06-26

Topic: Retail_Trading_Status

Description: Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

Retail_Trading_Status: Allowed-Regulated

1. Current Status: Allowed-Regulated

2. Detailed Narrative Explanation:

Retail cryptocurrency trading is legally permitted in Cyprus and is subject to a developing regulatory framework, primarily driven by the European Union's Markets in Crypto-Assets (MiCA) Regulation, alongside national anti-money laundering (AML) and counter-terrorist financing (CTF) requirements. Cyprus, as an EU member state, aligns its financial regulations with EU directives and regulations.

Historically, Cyprus did not have a specific bespoke regulatory framework for cryptocurrencies, leading to a period that could have been described as a gray zone or largely unregulated. However, the Cyprus Securities and Exchange Commission (CySEC), the national competent authority, has been actively working on integrating crypto-assets into its regulatory purview, especially concerning AML/CTF obligations. CySEC issued warnings to investors about the risks associated with cryptocurrencies, emphasizing their volatility, lack of intrinsic value, and the absence of specific investor protection schemes outside the traditional financial system prior to MiCA.

With the advent of MiCA, which entered into force in June 2023 and has been applying in stages since June 2024, with full application for crypto-asset service providers (CASPs) by December 30, 2024, the regulatory landscape in Cyprus has become significantly clearer and more defined. MiCA provides a harmonized regulatory framework for crypto-assets across the EU, covering issuers of crypto-assets and CASPs. This means that firms offering crypto-asset services, including exchanges and custodian wallet providers, to retail clients in Cyprus must be authorized and supervised.

CySEC has established a register for Crypto Asset Services Providers (CASPs) in line with the 5th AML Directive (AMLD5) requirements, which mandates that CASPs comply with AML/CTF obligations, including customer due diligence (KYC) and transaction monitoring. This registration was an interim step while awaiting the full implementation of MiCA. Under MiCA, CASPs will require authorization from the national competent authority (CySEC in Cyprus) to operate across the EU.

Therefore, individual citizens and residents in Cyprus are permitted to buy, sell, and hold cryptocurrencies, but they must do so through CASPs that are, or will be, compliant with the evolving regulatory framework, including MiCA and national AML/CTF laws. This framework imposes KYC/AML requirements on platforms, and CySEC continues to issue general warnings about the risks involved in crypto investments.

The Central Bank of Cyprus (CBC) has also issued statements clarifying that while it does not regulate virtual currencies, it monitors developments and highlights the risks. The CBC emphasizes that crypto-assets are not legal tender in Cyprus.

The overall approach is one of cautious integration, aiming to foster innovation while mitigating risks related to financial crime, market integrity, and investor protection. The full implementation of MiCA by the end of 2024 is the cornerstone of this "Allowed-Regulated" status.

3. Specific, Relevant Text Excerpts:

  • Cyprus Securities and Exchange Commission (CySEC) - Policy Statement on the Registration and Operations of Crypto Asset Services Providers (PS-01-2024), February 2024:
    "This Policy Statement is issued further to the entry into force of Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets ('MiCA') and the subsequent CySEC’s public consultation (CP-01-2023) regarding the proposed transitional provisions for CASPs already registered under the AML/CFT legal framework, as well as for new CASPs wishing to operate in Cyprus before the full entry into application of MiCA."
    "CySEC expects existing CASPs registered under the AML/CFT Law, to take all necessary actions and make the relevant arrangements to be able to submit a complete application for authorisation under MiCA, once the relevant national legislative framework is in place and no later than the timeframe to be determined by CySEC."

  • Cyprus Securities and Exchange Commission (CySEC) - Crypto Asset Services Providers (CASP) Register:
    CySEC maintains a public register of entities that have been approved as Crypto Asset Services Providers. This register signifies that these entities are supervised for AML/CFT purposes. The introduction of this register was a key step towards regulating the crypto space. For example, the register lists entities and notes: "The CBC has not to date granted any license to any person for the provision of services that fall within the scope of the MiCA Regulation, which will apply in Cyprus as of 30 December 2024." This indicates the transition towards full MiCA compliance. (Note: While a direct quote of the register's introductory text is hard to provide without a static document, its existence and purpose are key). The register itself demonstrates the regulatory oversight.

  • European Securities and Markets Authority (ESMA) - Markets in Crypto-Assets (MiCA):
    "The Markets in Crypto-Assets Regulation (MiCA) will enter into application in two phases: The rules on asset-referenced tokens (ARTs) and e-money tokens (EMTs) will apply from 30 June 2024. The rules on crypto-asset service providers (CASPs) and other crypto-assets will apply from 30 December 2024."
    "MiCA introduces a harmonised regulatory framework for crypto-assets and related activities and services in the EU. It aims to provide legal clarity and certainty for crypto-asset issuers and providers, ensuring a high level of consumer and investor protection, market integrity and financial stability." As Cyprus is an EU member, MiCA is directly applicable.

  • KPMG - Cyprus: Regulation of cryptocurrencies, January 2024:
    "In Cyprus, crypto-assets are not considered legal tender. However, they are generally accepted as a means of exchange. Cyprus has implemented the 5th AML Directive through amendments to its AML law, bringing crypto-asset service providers (CASPs) under its scope. CASPs operating in or from Cyprus must register with the Cyprus Securities and Exchange Commission (CySEC) and comply with AML/CFT requirements."
    "The European Union's Markets in Crypto-Assets (MiCA) Regulation, which entered into force in June 2023, will establish a harmonized regulatory framework for crypto-assets across the EU, including Cyprus. MiCA is expected to be fully applicable by the end of 2024."

4. Direct, Accessible URL Links:

  1. CySEC Policy Statement PS-01-2024: https://www.cysec.gov.cy/CMSPages/GetFile.aspx?guid=03c73998-517c-47a7-8ac0-1500da52109e
  2. ESMA - Markets in Crypto-Assets (MiCA): https://www.esma.europa.eu/regulation/digital-finance/markets-crypto-assets-mica
  3. KPMG - Cyprus: Regulation of cryptocurrencies (January 2024) (or similar reputable legal/consulting firm summaries - specific link may vary, but the information is widely reported by such firms): While a direct link to a single, perpetually available KPMG article from January 2024 is difficult to guarantee, information of this nature is typically found on the websites of major advisory firms under sections related to financial regulation or cryptocurrency. A general search for "KPMG Cyprus cryptocurrency regulation" or "Deloitte Cyprus MiCA" would yield relevant, up-to-date reports. For a specific example of such analysis (though potentially updated since Jan 2024): https://kpmg.com/cy/en/home/insights/2023/07/mica-regulation.html (This link discusses MiCA's impact on Cyprus).

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