Fintech 2026

CYPRUS Law and Practice Contributed by: Angelina Fitoz, Svetlana Remezova, Darya Averyanova and Sude Dogan, Lawitt Buro

Financial Instruments (Security Tokens) If a token gives rights equivalent to shares or bonds (eg, profit participation or voting), it is treated as a financial instrument under MiFID II. It falls outside MiCA and must comply with prospectus, venue and investor protection rules. Tokenised equity requires a legally enforceable link between the token and the shareholder register. Crypto-Assets (MiCA) Tokens that are not financial instruments are regulated under MiCA. Utility tokens require White Paper dis - closure but are not treated as securities unless they embed financial return features. Stablecoins (ARTs and EMTs) Stablecoins are split into: • EMTs (single fiat reference), supervised by the Cen - tral Bank under e-money rules; and • ARTs (multi-asset reference), subject to stricter capital and reserve safeguards. NFTs Genuinely unique NFTs are generally outside MiCA. However, large-scale or fractionalised NFT structures may be reclassified as regulated crypto-assets or From 1 January 2026, disposal gains on crypto-assets are taxed at a flat 8%. Mining income is taxed under ordinary income rules. 10.4 Regulation of “Issuers” of Blockchain Assets In Cyprus, issuers of crypto-assets are regulated under MiCA. Unregulated ICO-style offerings have been replaced by a disclosure and authorisation regime. Categories of Issuers Requirements depend on the type of asset. • Utility tokens (“other crypto-assets”) – no prior authorisation required, but the issuer must be a legal entity and notify CySEC of a MiCA-compliant White Paper at least 20 days before the offer. financial instruments. Tax Treatment (2026)

• Payments/settlement – exploring DLT rails for cross-border corporate flows and faster internal settlement; stablecoins are considered mainly via regulated partnerships rather than direct issuance. • Tokenisation (RWA) – interest in tokenised bonds/ fund units and fractional participation models, often through EU frameworks (DLT Pilot where instruments qualify as securities). • Compliance/identity – “reusable KYC” and prove - nance-style audit trails are explored as efficiency tools, but constrained by GDPR, outsourcing con - trols and operational resilience expectations. • Digital euro readiness – investment in back-end upgrades to support future CBDC distribution and conditional-payment use cases. 10.2 Local Regulators’ Approach to Blockchain Cyprus regulators treat blockchain as regulated infra - structure, not a separate system, following an EU-first approach (MiCA, DLT Pilot, DORA) supported by local supervision on governance, substance and reporting. Key developments include the following. • DLT Pilot perimeter – CySEC guidance/directives enable DLT market infrastructures for tokenised financial instruments under the EU Pilot framework. • MiCA transition – CySEC messaging prioritises orderly authorisation and supervision of CASPs, with focus on governance substance and market integrity. • Stablecoin/EMT boundary – CBC involvement increases where EMTs and payment functionality touch the e-money/payment perimeter. • Reporting and transparency – increasing use of standardised reporting expectations (tax/AML transparency frameworks referenced where rel - evant). • Innovation Hub – remains the entry point for inter - pretative discussions (RWA tokenisation, regtech/ AI and smart contracts). 10.3 Classification of Blockchain Assets In Cyprus, blockchain assets are classified based on the rights they grant, not the technology used. The system is tiered and applies a strict “substance over form” test.

183 CHAMBERS.COM