Crypto Firms Welcome CySEC Regulation, but Challenges Remain
After more than a decade of existence and several unicorns, a majority of the cryptocurrency industry is still looking for a friendly jurisdiction where they can be recognized and operate as crypto service providers. But, that situation is changing.
Over the past few years, many smaller jurisdictions are bringing crypto-specific regulations recognizing the companies in the space as crypto services providers. Cyprus, which is a popular base for Europe-bound financial services companies, is the most recent one to issue a policy statement for the registration and authorization of crypto firms.
Under the new framework, the Cyprus Securities and Exchange Commission (CySEC) will recognize cryptocurrency companies as crypto service providers.
“It is a welcoming news that the CySEC has started looking into the direction of regulating cryptocurrencies and it should have the effect of bringing more companies under their umbrella,” FXOpen’s Head of Sales, Natalia Zakharova, told Finance Magnates. “ We, therefore, believe that it will have a positive impact on the industry.”
Other industry players are also welcoming the move, as Marie Tatibouet, CMO at gate.io, said: “This is very good.”
She further added that many crypto companies will now prefer to move their base to Cyprus as there is a regulatory uncertainty around cryptocurrencies in other jurisdictions.
An Entry to the EU
Under the newly introduced rules, the Cypriot regulator will categorize the crypto companies based on their business structure. The rules will also comply with the AMLD5 guidelines of the European Union.
“One of the most critical aspects of the CySec regulations is the incorporation of crypto-asset businesses under the scope of the EU AML legislation under the amended AMLD5 Law in Cyprus,” Tatibouet added.
“Under this law, crypto exchanges and custodians were brought under EU anti-money laundering rules for the first time. I think this is a crypto-friendly step as it is a crucial step toward business legitimization.”
The CySEC is known as the gateway to the European Union for financial services firms. It hosts dozens of brokers and other financial companies that also operate across the European Economic Area (EEA) by passporting their Cyprus Investment Firm (CIF) license.
Suggested articles
Ready to kick-off your Trading Game with Manchester United?Go to article >>
“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,” said former CySEC’s Chair, Demetra Kalogerou.
Some Challenges
Despite so many advantages, some requirements might be a bit tough for crypto companies. First, they need to hire four local directors. Additionally, the companies need to pay EUR 10,000 for authorization under the new framework, along with renewal fees of EUR 5,000.
As Apifiny’s founder and Chief Executive Officer, Haohan Xu pointed out, the introduction of the new rules does not really mean that crypto companies will start migrating towards the Mediterranean island.
“If the Cyprus government or its main regulator, CySEC, is creating the legislation, it comes with many ‘strings attached’,” Xu said. “Most licenses in Cyprus, such as a broker-dealer or VASP licenses, have the mandate to hire as many as four Cypriots as directors. Also, the broker-dealer must hire an accountant, legal, and a secretary to deliver documents to CySec. That is a total of seven employees before a company hires its own staff.”
“The seed money for a company seeking a license is also very high in Cyprus compared to other jurisdictions. For example, 750,000 EUR is required as the cash component on the company’s balance sheet.”
He further said that offshore jurisdictions Bermuda and The Cayman Islands are offering much more friendly regulatory frameworks to crypto firms. “Bermuda has its own regulated exchange that the BMA (Bermuda Monetary Authority) has opened to qualified digital asset listings. Bermuda also offers a tiered registration package for start-up projects with little capital and a minimal footprint on the island,” he added.
But, Cyprus’ European Union membership remains the most attractive criteria to lure crypto firms.
Cyprus Is Not Alone
The CySEC, however, is not the first financial regulator within the EU to bring a crypto-specific framework. Gibraltar and Malta already brought similar rules years ago, and though there was enthusiasm at first, those could not attract many crypto companies.
“The siren call that Cyprus attempts to offer is the EU passport of digital assets, Epiphany CEO said. “Malta and Gibraltar both have the same EU status, but that status is ever-changing. France and Germany really have led the way; both have set banking and broker-dealer regulations regarding crypto, and the industry has responded.”
“But jurisdiction alone is not the most pressing factor as the digital asset industry grows. Rather, the openness of markets and the oversight of traditional kingpins are also important factors.”
Read more: https://mcc.exchange/2021/09/23/crypto-firms-welcome-cysec-regulation-but-challenges-remain/
Text source: MCC.EXCHANGE
