The Cyprus Securities and Exchange Commission (the “CySEC”) has recently established a transitional regime for crypto-asset service providers (the “CASPs”), coinciding with the European Securities and Markets Authority’s (the “ESMA”) revised Q&A on the Markets in Crypto-Assets Regulation (MiCAR). This alignment underscores a concerted effort among regulatory authorities to manage the evolving landscape of the crypto market.
CySEC’s transitional regime permits existing CASPs to operate while they work through the licensing requirements set out in the new MiCAR framework. This is crucial, as CASPs must adhere to rigorous standards, including anti-money laundering (the “AML”) protocols and the protection of client assets. The regime is designed to foster a compliant environment for crypto activities in Cyprus, ensuring service providers align with forthcoming regulations.
According to CySEC’s announcement on 17 October 2024, CASPs registered in the CASP Register according to national rules before 30 December 2024, can continue their operations until 01 July 2026, or until they receive approval or denial of their application for authorization under Article 63 of MiCAR, whichever occurs first. Notably, after 17 October 2024, CySEC will no longer accept applications for registration under national rules.
Additionally, CySEC will halt the acceptance of notifications under national rules from entities based in the European Economic Area (the “EEA”) that are registered with one or more EEA National Competent Authorities for crypto-asset services by 30 October 2024. Entities that successfully submit notifications by this deadline will be allowed to continue their services on a cross-border basis in Cyprus during the transitional period mentioned earlier.
This timing is particularly relevant given ESMA’s updated Q&A regarding the status of entities providing crypto-asset services within the grandfathering regime. One pertinent question addressed is whether CASPs that operated in compliance with applicable laws before 30 December 2024 and are authorized to continue under a Member State’s law are considered CASPs under MiCAR during the transitional period. The answer is no; while these providers can continue their activities until the end of the transitional period (no later than 01 July 2026), they are not recognized as CASPs under MiCAR until they obtain formal authorization.
The interaction between CySEC’s transitional regime and ESMA’s guidance emphasizes the necessity of regulatory consistency throughout the EU as member states implement MiCAR. This collaborative approach not only strengthens the regulatory framework for crypto-assets but also bolsters investor confidence by ensuring that service providers adhere to established standards.
For further details, refer to CySEC’s announcement here and ESMA’s updated Q&A here.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Stephanos Ayiomamitis, Partner at our Limassol Office, Tel +357 25363685 or email stephanos.ayiomamitis@kyprianou.com.