Cyprus's Regulatory Body Still Exploring Crypto Regulations

CryptoGlobe Staff Writer

Chairwoman of Cyprus's financial regulatory body, CySEC (Cyprus Securities and Exchange Commission), Demetra Kalogerou recently sat down with finance publication Finance Magnates to discuss CySEC's innovative hub, the Mediterranean island's approach to distributed technology and cryptocurrencies.

Kalogerou, when asked about the reasons behind CySEC setting up a Fintech Innovation Hub explained:CySEC's Innovation Hub according to Kalogerou:

The pace of change in financial services means new products and services are coming to market quicker than ever before. The application of new technology to an already complex industry brings with its new supervisory challenges – digitalization is no longer an add-on, but fundamentally embedded in how consumers and investors engage with banking, insurance, payments, asset and wealth management products.

CySEC's Innovation Hub according to Kalogerou:

will serve as a communication channel for supervised and non-supervised entities to understand how existing regulation applies to new products or business models, whilst identifying what regulatory frameworks and licensing requirements might need to be established to ensure the safety and security of the end-investor, without stifling innovation

This approach differs to that of regulatory sandboxes as the Hub seeks to collaborate with regulated and non-regulated companies. Participating firms will be offered support and guidence as opposed to simply field testing new products and services:

It is designed to be a two-way information exchange, too – creating a platform for innovative firms to share ideas about new financial technology at the same time as identifying opportunities for our own regtech innovation. We see it as a two-way street.

When the subject turned to blockchain, Kalogerou pointed out that applications for the technology are not limited to cryptocurrencies, and CySEC is currently exploring the feasibility of blockchain being harnessed to automate the regulatory process alongside University College London through the institutes BARAC project.

Cyprus's regulator, unlike Malta, Estonia and other countries attempting to become Europe's go-to cryptocurrency destinations, has opted for a more measured approach:

We have been evaluating the risks and benefits of crypto innovation to determine whether further actions and legislative requirements are needed to ensure full investor protection. We are keeping a very close eye on the types of products firms are bringing to market – and whether our existing regulatory framework at the EU level adequately caters to them, and if not, why not?

Putting emphasis on the need for companies offering cryptocurrency products or services to remain MiFID compliant, when questioned as to why Cyprus's cryptocurrency regulations were behind Gibraltar and other island nations Kalogerou replied:

We cannot neglect that both retail and professional investors appear to be interested in this fledging area but we’re not going to be rushed into regulating a product set that is yet to be fully developed.