CYPRUS Law and Practice Contributed by: Angelina Fitoz, Svetlana Remezova, Darya Averyanova and Sude Dogan, Lawitt Buro
Lawitt Buro 171 Arch. Makarios III Avenue Limassol 3027 Cyprus Tel: +357 95 774496 Email: info@lawittburo.com Web: lawittburo.com
1. Fintech Market 1.1 Evolution of the Fintech Market
2. Fintech Business Models and Regulation in General 2.1 Predominant Business Models
Over the past year, Cyprus has strengthened its posi - tion as a regional fintech hub, primarily due to EU harmonisation rather than domestic reform. The tran - sition to the directly applicable Markets in Crypto- Assets Regulation (MiCA) has increased governance, capital and operational substance requirements. The sector has professionalised: lightly structured platforms have exited, while established investment firms and electronic money institutions have expand - ed into digital assets within a clearer supervisory perimeter. Regulatory tolerance for informal models has narrowed, with emphasis on operational presence and compliance capability. Key Issues Impacting the Next 12 Months Three main developments will shape the market. • Crypto firms must move from simple registration to full EU licensing, with stronger governance, capital and compliance standards. • Fintech companies must ensure their IT systems are secure, well-managed and resilient, with clear reporting and oversight of outsourced providers. • Rising regulatory and capital requirements are increasing operating costs, pushing smaller firms to restructure, merge or exit the market. Artificial Intelligence in Fintech AI is increasingly embedded in AML monitoring, onboarding and robo-advisory tools. Regulators remain technology-neutral but require explainability, auditability and human oversight. The focus is on gov - ernance rather than innovation.
Cyprus functions as a regional fintech hub serving cross-border clients through EU passporting. The principal verticals are as follows. • Investment services and WealthTech (Cyprus Investment Firms), historically focused on retail foreign exchange and contracts for difference, now offering broader multi-asset and app-based trading models. • Payments and electronic money, supporting e-commerce and cross-border business flows, with growth in B2B services such as virtual IBANs. • Crypto-asset services, mainly exchange and cus - tody models transitioning to full EU authorisation. • Regtech, providing onboarding, screening and compliance tools to regulated firms. Legacy Versus New Players Legacy institutions increasingly partner with fintech providers, while newer entrants focus on specialised services rather than full-service banking models. Cyprus regulates fintech based on what the firm does, not what it calls itself. There is no single fintech law. The main regulators are: • CySEC, which supervises investment services, market conduct and most crypto-asset services; and • the Central Bank of Cyprus, which supervises pay - ment services, electronic money and banks. 2.2 Regulatory Regime Supervisory Architecture
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