CySEC Chairman Briefs on the 2023's Supervisory Efforts: AML/CFT, Fines, MiCA and Beyond

Last week, Dr. George Theocharide, Chairman of the Cyprus Securities and Exchange Commission (CySEC), convened a press conference to outline the regulator's endeavors over the past year. Amidst a plethora of updates, the implementation of MiCA, the Markets in Crypto Assets Regulation, in 2024 stands out as a focal point garnering attention from industry peers.

Before delving into CySEC's strategic approach to digital asset regulation, let's take a look at what they have done.:

The Cypriot Regulator had a 12% Increase of Supervised Entities in the Last Four Years

CySEC witnessed a notable 12% increase in supervised entities over the past four years, with 82 entities gaining approval in 2023 alone. This surge brings the total number of supervised financial firms to 830 as of February 2024.

To ensure compliance with Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regulations, CySEC conducted over 700 on-site and remote inspections over the year in spite of having a massive number of regulated entities. These inspections encompassed various aspects, including adherence to prudential supervision frameworks and monitoring of prudential requirements for Cypriot Investment Firms (CIFs) impacted by Russia-Ukraine sanctions.

Notably, CySEC prioritized enforcing the Council of the European Union Restrictive Measures against Russia by scrutinizing transfer transactions of Russian securities/tokens, termed 'Forced Transfers,' executed by individuals and entities in Cyprus.

Persistent Enforcement Actions: The Second Year that CySEC Issued €2 Million+ Fines

In 2023, CySEC imposed fines totaling approximately €2.2 million, marking the second consecutive year of surpassing the €2 million mark in penalties (the regulator fined €2.9 million back in 2022), of which €1 million was on a single CIF​, which is Itrade Global. The firm was fined for multiple violations of The Investment Services and Activities and Regulated Markets Law of 2017, according to a Fazzaco News unveiled last April.

Additionally, CySEC issued corrective measures to 103 regulated firms to ensure compliance with legal provisions and directives on preventing money laundering and terrorist financing. Furthermore, 19 CIFs had their operating licenses revoked or suspended, and two cases involved the revocation of Collective Investment Undertakings' licenses. Most recently, the software developer Leverate's CIF was withdrawn, as confirmed by CySEC, however, the withdrawal was voluntarily made by Leverate. 

CySEC also conducted entry investigations in six CIFs, concluded 42 investigations, and had 48 investigations ongoing as of the end of 2023. Additionally, CySEC scrutinized promotional materials from over 35 CIFs, advising necessary changes to rectify misleading marketing information.

MiCA Horizon in Cyprus Elaborated

Fazzaco did a series back in 2022 titled "Cryptocurrency Regulations: A World Tour​". Now, the introduction of the Markets in Crypto Assets Regulation (MiCA) in June 2023 positions the European Union (EU) as a frontrunner in establishing a comprehensive crypto regulatory framework.

Dr. Theocharide highlighted CySEC's proactive stance in preparing for MiCA's adoption, aligning with the European Securities and Markets Authority (ESMA)'s roadmap for implementing Level 2 and Level 3 measures.

"All supervisory authorities in the European territory, including the Cyprus Securities and Exchange Commission, are already preparing for the adoption of these changes, informing both regulated entities and other interested parties in the sector in general. It is important that supervised entities prepare for their adoption in a timely manner by acquiring the appropriate systems or further staffing them with the appropriate human resources to enable them to meet the new requirements." Dr Theocharides said.

He also warned against the dangers of inadequate awareness and exuberance surrounding these products, which could lead to substantial investor losses. "The lack of adequate awareness of the complexity and the high risk involved in these products combined with the widespread online enthusiasm around them can lead to significant losses for investors", he added.