Cyprus is taking a decisive stance against unregistered crypto asset service providers (CASPs), signaling that hefty penalties will soon be enforced for those operating without registration with the country’s regulatory authority.
The move to crack down on unlicensed crypto businesses in Cyprus was prompted by the Ministry of Finance’s submission of a proposed legislative amendment to the “Prevention and Suppression of Money Laundering Law.” This proposal is currently under consideration by the Parliamentary Committee on Legal Affairs.
According to local reports, unlicensed crypto enterprises in Cyprus will potentially face substantial penalties, including a hefty fine of €350,000 or a prison sentence of up to five years, or a combination of both.
The legislation currently being deliberated by the House Finance Committee draws inspiration from penalties imposed on non-compliant and unlicensed crypto service providers in other European Union (EU) member states. It aims to create a consistent regulatory framework within the EU.
Furthermore, the Ministry of Finance’s proposed amendment aligns with recommendations and directives issued by international bodies, such as the Financial Action Task Force (FATF) and the MONEYVAL report published in November 2022. These recommendations emphasize the importance of robust anti-money laundering measures in the crypto industry.
The proposed amendment, if enacted, will necessitate that all crypto asset service providers register with CYSEC before offering any cryptocurrency-related products and services. This regulatory measure is aimed at safeguarding investors by mitigating the risks associated with illicit activities and money laundering in the crypto sector. Cyprus is making a clear commitment to ensuring the integrity of its cryptocurrency ecosystem through enhanced oversight and enforcement.
Moreover, the Cyprus Bar Association has provided valuable insights regarding the legislation’s scope, particularly focusing on the requirement for crypto service providers (CSPs) registered in other European Union (EU) member states to also register with the regulatory authority in Cyprus.
Across various EU member states, significant penalties and enforcement actions have been enacted to combat non-compliant virtual asset service providers. In Malta, for instance, regulatory authorities have imposed substantial fines, amounting to nearly half a million Euros, on cryptocurrency platforms Bequant Pro Ltd and Bequant Exchange Ltd.
Additionally, they have taken parallel enforcement actions against virtual asset service providers failing to adhere to anti-money laundering regulations. Malta has established stringent penalties, including imprisonment of up to six years and fines reaching as high as €15 million, as part of its regulatory framework.
Luxembourg, another EU member state, has taken a stern stance by imposing fines of up to €5 million on crypto businesses operating without the required licenses. Similarly, Belgium has instituted penalties ranging from €400,000 to €800,000 for violations in the crypto sector.
France and Ireland have also implemented robust regulatory measures, including strict penalties and the possibility of imprisonment, to address offenses related to cryptocurrency services. These collective efforts across EU nations underscore the region’s commitment to ensuring compliance and integrity within the cryptocurrency industry.