Cyprus Crypto Regulation Transition Creates Opening for Fraud

Cyprus is experiencing a significant change in its crypto regulations under the EU's Markets in Crypto-Assets Regulation (MiCA). The regulation transition has forced unauthorised providers to withdraw, creating an opportunity for fraudsters to target investors. To safeguard their assets, customers are urged to check which company holds their assets and verify that it is permitted to operate under MiCA.

Since July 1, companies may provide crypto-asset services in Cyprus only if they are authorised under MiCA. The deadline marked the end of a temporary arrangement that allowed businesses already operating under Cyprus' previous national framework to continue temporarily. Companies wishing to remain in the market were required to submit their applications by February 27, and those that did not apply had to prepare plans for winding down their operations.

The change means that a company's earlier presence on Cyprus' national register is no longer enough. Investors must now confirm that the legal entity providing their account is permitted to operate under MiCA. The Cyprus Securities and Exchange Commission (CySEC) maintains two registers: one for crypto-asset service providers authorised under article 63, and another for regulated financial companies using the article 60 notification route.

Authorised companies receiving new customers must conduct appropriate checks and ensure their staffing, onboarding procedures, and transaction-monitoring systems can cope with any increase in activity. Customers should not automatically be rejected because they previously used an unauthorised provider. Instead, CySEC said companies should examine each case individually and apply stronger checks where higher risks are identified.