CySEC sees expansion and gears up for digital currencies

The Cyprus Securities and Exchange Commission (CySEC) reported that it had experienced a 200% rise in its market supervision activities since 2011 with the number of entities under its supervision increasing from 250 to almost 800.

In particular, said new chairman George Theocharides, said investment fund assets currently being managed in Cyprus had grown to €11.6 billion in total with a lot of potential for further growth. In terms of investment firms, there were currently 240 companies under supervision, half of which were traditional firms providing services to institutional investors while the remainder offered trading services to private investors.

Theocharides said that, following the UK’s exit from the European Union, Cyprus now hosts the most digital platforms in the EU. According to data provided by the commission, all investment companies in Cyprus employ around 6,000 people. A significant number of these companies also offered additional services, including legal, auditing and compliance services.

“It is, therefore, a sector which, in addition to the revenue it brings to the Cypriot economy, also offers many job positions,” the CySEC chairman said.

Regarding the regulation of digital currencies, Theocharides said that CySEC’s intentions were to foster innovation in the financial technology space while adhering to all regulatory legislation. The commission had already received applications from prospective cryptocurrency asset service providers and has begun evaluating and processing applications.

In a policy statement, released last September, CySEC listed the rules for cryptocurrency asset service providers which were based on existing legislation on combatting money laundering and terrorist financing, as well as the European Commission’s directives on the matter.

“This initiative will mitigate some, but not all, of the risks involved in investing in cryptocurrency assets, although these are expected to be addressed at a later time by the EU and under the relevant legislation,” CySEC said.

“Our timely communication with cryptocurrency companies, facilitated by the European Central Bank’s Innovation Lab framework, aiming to support innovative businesses and to provide consultation to emerging financial technology (fintech) providers, has made our expectations clear,” CySEC president Demetra Kalogerou said last September.

“Our work on financial innovation at both the national and European level is ongoing, and we are determined to encourage responsible innovation, while at the same time ensuring the smooth operation of markets,” he added.

The commission explained that, depending on their structure, some cryptocurrency assets may meet the definition of financial instruments. This would make them subject to legislation on investment services as defined by the European Commission’s E-Money Directive (EMD), as well as the Markets in Financial Instruments Directive (MiFID II). Also, these assets may be considered a digital representation of value that is neither issued nor guaranteed by the Central Bank of Cyprus or other public authority.”.

“The digital currency sector will grow significantly in the future and the EU is preparing to issue a directive,” Theocharides said. “Therefore, the commission must be ready to deal with these platforms.”
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