Cyprus's CySEC issues first cryptocurrency regulations

The Cyprus Securities and Exchange Commission (CySEC), Cyprus securities watchdog, last week issued its first cryptocurrency regulations.

The new rules presented in Circular C417 are designed to ensure that Cyprus Investment Firms (CIFs), make provision to cover investments in cryptocurrencies, and that risks involving cryptocurrencies are managed properly.

“It is a good first step for the country,” comments Dimitris Papoutsis, a lawyer with Elias Neocleous & Co. in Limassol. “The Circular addresses much-needed direction so that CIFs can invest in cryptocurrency and be assured of compliance.”

Papoutsis points out that the Circular cites the lack of previous regulation for cryptocurrencies. “As noted in the EBA's (European Banking Authority) report on crypto assets there is no reference in the current prudential framework for crypto assets,” the Circular says.

“So it is natural that CySEC should fill this gap for CIFs to be able to calculate their own funds and capital adequacy ratio, accordingly,” he adds.

CIFs must first obtain authorisation from CySEC to trade in cryptocurrencies, because they are not specifically regulated by previous financial regulation, whether in Cyprus, or at the level of the EU.