The Cyprus Ministry of Finance has published a document describing the possible risks associated with cryptocurrency and interactions with virtual asset service providers.
The statement says that while the authorities have a limited understanding of the risks and now they rely only on practical experience of using cryptocurrencies. At the same time, it is noted that the Cyprus Securities and Exchange Commission (CySEC) and law enforcement agencies have a “high level of understanding of the sector,” but it is necessary to “delve into market research.”
The ministry recommended that financial institutions develop policies to comply with the rules for conducting banking transactions using digital currencies. The authorities, for their part, should set up a process for storing and exchanging data related to cryptocurrencies and virtual asset service providers (VASP).
Now the Travel Rule principle concerning the exchange of customer information is not enshrined in the regulatory documents. That is, VASPs are not required to exchange information about transaction participants. However, this can be corrected in bylaws.
“It is believed that now the level of use of cryptocurrencies in the country is low, but when it grows, we will have data to identify risks earlier,” the document says.
In addition, cooperation with other countries that have experience with cryptocurrencies can be beneficial for Cyprus. The ministry stated:
“International cooperation can become a channel for Cyprus to accelerate the pace of development in the digital assets sector and in working with VASP.”
The Cypriot authorities are committed to using technology to regulate financial processes in the country. In September, it became known that the Cyprus National Betting Agency is studying the possibilities of the blockchain and considering its potential for use in the gambling industry.
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