As nations take on the wheel of crypto regulation, Cyprus is introducing strict penalties for cryptocurrency service providers who are unregistered with the relevant authorities. Cyprus is taking proactive measures to establish a regulatory framework for the cryptocurrency sector within its jurisdiction, aiming to ensure effective oversight of this rapidly growing industry.
Cryptocurrency Service Providers (CSPs) need to be cautious, as penalties in the form of fines and potential imprisonment await those found in violation. Offenders may face fines of up to €350,000, as well as imprisonment terms of up to five years. In certain circumstances, both fines and imprisonment could be imposed.
Furthermore, the nation is introducing proposed legislative amendments to the “Prevention and Suppression of Money Laundering Law” to the Parliamentary Committee on Legal Affairs, demonstrating its dedication to enhancing existing laws.
The Ministry of Finance’s proposal seeks to align Cyprus with international standards set by the Financial Action Task Force (FATF) and address illicit financial activities.
Under the proposed amendments, Cryptocurrency service providers (CSPs) would be required to register with the Cyprus Securities and Exchange Commission (CySEC), with non-compliance resulting in severe penalties.
However, the Cyprus Bar Association expresses reservations about the law’s requirement for CSPs to register both in Cyprus and other EU member states. Instead, the association suggests incorporating the “Travel Rule” into Cyprus’ legislative framework.
The Travel Rule, a Bank Secrecy Act Rule, mandates the transfer of certain information between financial institutions in transactions involving multiple entities.
In response, the Finance Ministry emphasizes the role of the initial registration state in monitoring entities operating within the single market of the European Union, rather than the host state.
Notably, the Finance Ministry, in collaboration with relevant authorities, is actively working on implementing the “Travel Rule” within Cyprus’ existing legislation.
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