CYPRUS Law and Practice Contributed by: Angelina Fitoz, Svetlana Remezova, Darya Averyanova and Sude Dogan, Lawitt Buro
Decentralised Exchanges (DEXs) Purely decentralised platforms without an identifiable operator may fall outside licensing. However, where a controlling entity exists, regulators apply a substance- over-form approach and may require authorisation. Supervisory tools increasingly include blockchain analytics and monitoring of on/off-ramp activity. Tax and Reporting (From 2026) Gains from crypto disposals are taxed at a flat 8%. Exchanges are treated as financial intermediaries for AML and EU tax transparency purposes, with enhanced reporting and transfer traceability duties. 6.4 Listing Standards In Cyprus, listing standards differ between traditional Admission to the Cyprus Stock Exchange is governed by Regulatory Administrative Act 326/2009 and the MiFID II framework. Issuers must meet requirements on legal form, financial history, free float and ongoing disclosure, with continuing obligations under trans - parency and market abuse rules. Crypto-Assets (MiCA) securities and crypto-assets. Traditional Securities (CSE) Under MiCA (Title V), platforms must apply clear admission rules. Most assets require a compliant White Paper, and platforms must assess transparency, structural risk and market abuse exposure. Opaque or highly anonymous structures face closer scrutiny. Market Practice Beyond formal law, platforms commonly require proof-of-reserves for stablecoins, independent smart- contract audits for DeFi tokens and sustainability dis - closures on consensus mechanisms. 6.5 Order Handling Rules In Cyprus, order handling duties apply to both invest - ment firms and crypto-asset service providers. The core principle is prompt, fair and expeditious execu - tion, with client interests prevailing over the firm’s own. General Principles Under MiFID II and MiCA, firms must follow docu - mented order-handling procedures and, as a rule, exe -
cute orders in the sequence received unless objective market conditions justify otherwise. Front-running and unfair prioritisation are prohibited. Aggregation and Allocation Orders may be aggregated only where this is unlikely to disadvantage clients. In partial executions, alloca - tion must follow a pre-defined, fair methodology, with client positions taking priority over proprietary trades. Crypto-Specific Rules Under Title V of MiCA, trading platforms must provide non-discriminatory access to order books and avoid undisclosed preferential treatment. They must define order finality clearly and retain order records for at least five years to support market abuse oversight. Payment for Order Flow Payment for order flow is prohibited as it creates a conflict with best execution duties. 6.6 Rise of Peer-to-Peer Trading Platforms Peer-to-peer platforms in Cyprus have widened mar - ket access while reducing reliance on traditional inter - mediaries. Impact on Market Participants Banks face stronger competition in SME and con - sumer lending and have responded through partner - ships and platform-based models. Licensed fintech brokers are also adapting, developing hybrid models that combine regulated infrastructure with peer-driven or social features. Retail users can now act as lenders or liquidity providers, increasing participation but also raising investor protection concerns. Regulatory Challenges The key issue is identifying accountability. Where a platform has identifiable management or control, it may fall under the MiCA or crowdfunding regimes. Fully decentralised models create enforcement chal - lenges, particularly in relation to AML, consumer pro - tection and supervisory oversight. 6.7 Rules of Payment for Order Flow Payment for order flow (PFOF) is prohibited for retail clients under MiFID II, as it is viewed as incompatible with best execution.
179 CHAMBERS.COM
Powered by FlippingBook