crypto-asset supervision — The Cyprus Securities and Exchange Commission (CySEC) is taking significant steps to tighten crypto-asset supervision, launching a public consultation on a new directive aimed at enhancing oversight for crypto-asset service providers.
This initiative is part of a broader effort to align with the EU’s Markets in Crypto-Assets Regulation (MiCAR), which was introduced in June 2023 as a key element of the European Commission’s Digital Finance Strategy. MiCAR aims to provide a cohesive regulatory framework across the EU, focusing on investor protection and financial stability.
Crypto-asset supervision: New Reporting Requirements for Providers
The proposed directive outlines specific prudential supervisory information that crypto-asset service providers must submit to CySEC. These requirements include periodic reporting that covers essential financial metrics such as trial balances, balance sheets, and profit and loss statements, in addition to audited annual financial statements.
CySEC has stated that this new reporting framework is designed to bolster its supervisory capabilities and ensure compliance with MiCAR’s prudential standards. The directive is set to apply to all crypto-asset service providers authorised by CySEC under Article 63 of MiCAR.
Timelines for Implementation
MiCAR’s phased implementation will first affect issuers of asset-referenced and e-money tokens starting in June 2024, followed by crypto-asset service providers facing similar requirements by the end of December 2024. CySEC’s consultation aims to gather input on how best to align these new directives with existing EU regulations.
Consistency with Existing Regulations
The commission has made clear that the proposed directive does not extend to central securities depositories, Cyprus investment firms, market operators, management companies, or alternative investment fund managers that offer crypto-asset services through notification. These entities will remain exempt from the prudential supervision obligations outlined in the new directive.
CySEC’s move reflects an ongoing commitment to adapt to the rapidly evolving landscape of digital finance, ensuring that regulatory measures keep pace with technological advancements in the crypto sector.
