CATEGORY: MONEY LAUNDERING
I. Amendment of Cyprus AML Law
The Cyprus Parliament has approved on 18 February 2021 an amendment to the Prevention and Suppression of Money Laundering and Terrorist Financing Law 188 (I) 2017 (the “AML Law”), which has been issued in the Official Gazette on 23 February 2021 and has therefore become effective. The amended AML Law implements the EU Directive 2018/843 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (the “5th AML EU Directive”).
II. Introduction of the Crypto Asset Services Providers in Cyprus AML Law
One of the key changes introduced by the amended AML Law is the introduction of the notion of “Crypto Assets Service Providers” which are included in the definition of “Obliged Entities” (entities that are obliged to abide by the AML Law) and are defined as the persons that provide one of the below services:
(a) exchange between crypto assets and fiat currencies;
(b) exchange between crypto assets;
(c) management and/or transfer and/or retention and/or safekeeping, including custodianship, of crypto assets or cryptographic keys or means enabling control over crypto assets;
(d) offering and/or selling crypto assets, including the initial public offering; and
(e) participation and/or provision of financial services related to the distribution, offering and/or sale of crypto assets, including the initial public offering.
The amended AML Law defines “Crypto Assets” as a digital representation of value, that is neither issued nor guaranteed by a central bank or public authority, is not necessarily connected with a legally established currency and does not have the legal status of currency or money, but is accepted by persons as a means of transaction or investment, may be transferred, stored or traded electronically and is not:
(a) fiat currency, or;
(b) electronic money, or;
(c) financial instruments as defined in n Part III of the First Appendix of the Law on the Provision of Investment Services and Activities and Regulated Markets.
The Cyprus Securities and Exchange Commission (“CySec”) has been appointed as the supervising authority for the purpose of supervising the compliance of Crypto Asset Service Providers with the AML Law; issuing directions in relation to their obligations and imposing sanctions in case of infringement. The Crypto Asset Service Providers that offer services from or in Cyprus must be registered in a registry to be kept by CySec and will be entitled to such registration on the condition that they fulfil the relevant requirements as included in the directions to be issued by CySec.
III. European Union
On a European level, the European Commission has issued on 20 September 2020 the proposal for a Regulation on Markets in Crypto Assets (“MiCA Regulation”) which sets out a regime that regulates issuers of Crypto Assets and providers of crypto asset services, including exchanges, custodians, and firms providing investment type services in respect of crypto-assets and its scope is limited to crypto assets that do not qualify as financial instruments.
The proposal for the MiCA Regulation forms part of a broader package of measures that falls under the Commission’s Digital Finance Strategy, whose aim is to further enable and support the potential of digital finance in terms of innovation and competition while mitigating the risks. The Commission’s Digital Finance Strategy also includes a legislative proposal for a pilot regime to test distributed ledger technology (“DLT”) market infrastructure solutions for the trading and settlement of financial instruments, which would apply to crypto assets qualifying as financial instruments.
IV. The future of the crypto assets industry
The changes to the AML Law constitute the first legislative act towards the creation of a regulatory framework in Cyrus for the crypto assets industry and is considered as a great step for its development in Cyprus. More changes are expected on a national and European level, which are highly anticipated by the relevant stakeholders, considering the importance of legal certainly and a clear regulatory regime in this industry.
Author: MYRIA GEORGIOU