CIF, cryptocurrencies, and regulations
By Stelios Yiannaki
Treppides & Co Ltd
What is a cryptocurrency trading?
Cryptocurrencies have taken the world by surprise in recent years, and transformed as the absolute trend in the virtual investing world. Countries were caught unprepared to fully understand the essence of cryptocurrencies and impose regulations on this type of digital assets.
Cryptocurrency trading by Investment Firms in Cyprus falls under two categories with different set of regulations.
The first type of cryptocurrency trading is in the form of contract for differences (CFD’s), derivatives, where the underlying asset of the transaction is the cryptocurrency. This type of trading can be performed by Cyprus Investment Firms (CIF’s), as MiFID II categorizes this under financial instruments, with a specific authorization by the Cyprus Securities and Exchange Commission (CySEC). CIF’s trading under this regime needs to comply with the rules of the Investment Services and Activities and Regulated Markets Law.
The second type of cryptocurrency trading lies in the form where the transactions relate to the actual cryptocurrency where they can be transferred and traded electronically.
Investment firms and crypto assets
Before the introduction of CASP regulations by CySEC, CIFs were exceptionally permitted under section 5(5)(b) of the Investment Services Law to be involved in crypto assets activities as a non-regulated activity.
Following the implementation of the AML/CFT Law, CySEC requested such CIF’s, permitted to act on this status, to prepare a phase out plan to disengage from crypto assets activities by the end of 2022 and stipulate their intention to set up a separate entity to register as a CASP.
CySEC strongly encourages and supports the set-up of a separate entity to operate as a CASP in order to protect investment firms industry from the risks related around the crypto assets world and the unpredictability involved in such trading. Whereas CIF’s intend to have a dual role with crypto assets activities will be only be granted such CySEC authorization under exceptional cases and provided that this is needed to support the position of ιnvestment services.
Existing Crypto assets businesses
Existing Crypto assets were obliged to follow the CASP application process by October 2021. CySEC has no intention to stand against those crypto assets businesses that pursued to operate on such basis, especially where the crypto asset activities represented a necessary and material part of their operations before the enforcement of AML/CFT Law.
Application required for CASP activities
CIF’s application to CASP Register using the CASP Application Form will be performed in a more simplified approach by CySEC as some evaluations, such as for the ultimate beneficial owners (UBO’s), the management team and positions will not need to be re-evaluated. Nevertheless all the applications will be subject to scrutiny in order to protect the investment firms industry.
Treppides & Co Ltd is the largest independent consulting company in Cyprus with an established international presence and offices in Great Britain and Malta. Today the company employs approximately 200 professionals. It offers a full range of consulting, tax, accounting services to groups, companies and investors operating internationally in a variety of financial and business sectors. The Company, which started its operations in 1985, has 36 years of expertise and an elite team of experienced executives who can guide and assist investors and businesses during the establishment process and subsequent investment activity in Cyprus and internationally.
Nicosia: Treppides Tower, Kafkasou 9, Aglantzia, CY 2112, Nicosia, Cyprus
Limassol: Andrea Kariolou 38, Ayios Athanasios, CY 4102, Limassol, Cyprus
London:7 Milner Street, London SW3 2QA
Malta: Level 1, Somnium, Tower Road, Swatar, Birkirkara BKR 4012