Cyprus SEC Embraces Blockchain Despite Unclear Crypto Regulation

The Securities and Exchange Commission (CySEC) of Cyprus has published a report in which it discussed about the ongoing activities of its Innovation Hub – a new cooperative entity which launched in October 2018 with the main goal to engage the communication between CySEC and entities operating in the fintech and regtech sectors. The Cyprus SEC now embraces the blockchain technology and is intended to facilitate knowledge-sharing between regulators and innovators.

The commission will also be in charge of promoting the development of regulations which foster innovation and ensure compliance within dynamic and emerging tech industries. It will also engage with third parties seeking to participate with emerging financial innovations, including law firms, credit institutions and education institutions.

A press release shows that the chairwoman at Cyprus SEC Demetra Kalogerou described the Hub as working to strengthen investor protections “by embracing new innovations in financial and regulatory technology,” adding that the regulator’s mission is to “create a robust ecosystem in which fintech firms can flourish responsibly in Cyprus.”

Despite the efforts to foster innovation within the DLT sector, activities involving cryptocurrencies remain an unregulated activity within the country. A recent interview showed Kalogerous saying that the agency is still “evaluating the risk and benefits of crypto innovation to determine whether further actions and legislative requirements are needed to ensure full investor protection.”

The chairwoman also added that the Cyprus SEC team does not wish to act prematurely as its main mission is to prevent “any dislocation in an otherwise smooth functioning […] capital market.”

Before this, CySEC published warnings regarding three unauthorized forex and cryptocurrency brokers including Naga Markets, CALIBUR CAPITAL and IcFxMarkets of operating illegally within the country. The commission noted that the companies fraudulently claimed to have affiliation with entities regulated within the jurisdiction.

As the blockchain news showed, the Cyprus securities regulator partnered with the University College London’s Blockchain Technology for Algorithmic Regulation and Compliance (BARAC), which researches applications for blockchain technology in automating the compliance and regulatory procedures.

In 2019, the cabinet in the country published its National Strategy on Distributed Ledger Technologies, aiming to provide a platform for both public and public-private initiatives employing blockchain applications.