Despite its small size, Cyprus’s ambition of becoming a fintech hub has been boosted by the decision of Binance, the world’s largest cryptocurrency trading platform, to establish a presence on the island.
The announcement was made by Binance’s CEO Changpeng Zhao in an interview with Kathimerini Cyprus, placing the island on the map as a destination for cryptocurrency and blockchain tech firms.
Binance offers crypto-to-crypto trading in more than 600 cryptocurrencies and virtual tokens.
In his interview CZ, as Binance’s CEO is known in the fintech world, called Cyprus a “crypto-friendly” destination.
CZ is the 30th richest person in the world by the Bloomberg Billionaires Index. His estimated net worth was $33 bln in October.
“We just got our registration last month in Cyprus for a cryptocurrency exchange license.
“We are thankful for the support the Cyprus regulators and government have been giving us.
“So yes, I visit places that are crypto-friendly,” said CZ.
He confirmed that Binance is about to set up an office and hire more staff on the island:
“Now that we have the registration, we want to establish a local presence, office, team etc.”.
Binance’s CEO was in Cyprus as a guest of the University of Nicosia to discuss crypto and the future of blockchain currencies.
His interview comes in the wake of a scandal that has shaken the crypto world, threatening its existence.
FTX, a crypto exchange, filed for bankruptcy protection in the United States on November 11 after traders pulled $6 bln from the platform in three days following revelations that owners were embezzling investors’ money.
FTX’s founder Sam Bankman-Fried was caught using clients’ money to purchase assets in the Bahamas.
“I think it destroyed a lot of people’s confidence in our industry.
“Regulators are becoming more sceptical.
“They ask a lot more questions. I think new licenses will be much harder to get, and existing licenses will become more expensive with a lot more effort to maintain,” said CZ.
He added that following the scandal, everyone is in favour of better regulation, which is something that Cyprus is working on.
“More regulation doesn’t mean that it’s good or bad.
“More ‘good’ regulation is good, and more ‘bad’ regulation is bad.
“If more regulation means countries ban Bitcoin, like in China, then that’s not the regulation that we want.
“if it’s thoughtful regulation that protects consumers while encouraging innovation, giving clarity and certainty in our industry, usually those are the types of regulations we like”.
After what happened with FTX, regulators are looking more closely at user asset protection or how to prevent crypto players from moving their customer’s money.
“I think regulations on those fronts, more transparency, more safety for the customers, those are all good.
“But overreaction, like banning cryptocurrency completely, is not good”.
Meanwhile, in a communication with the Financial Mirror, the Cyprus Securities and Exchange Commission (CySEC) said it is working on improving the regulatory framework for crypto providers.
CySEC is designated, under the Anti-Money Laundering Law, as the competent authority to supervise Crypto-Asset Service Providers (CASPs).
The authority has recently launched a tender for Crypto-Asset Markets Data and Blockchain Analysis Platform Services as applications by Crypto-assets service providers rise.
According to the tender documents, the €120,000 two-year contract grants CySEC access to real-time data provided by blockchain data platforms that will assist the Commission in understanding crypto-assets risks.
It must check transactions exposed to risky activities such as sanctions, child abuse material, terrorist financing, darknet markets, fraud, high-risk exchanges, ransomware, scams, and stolen funds.
Cyprus has proven to be a sound choice for crypto firms attempting to establish regulated entities in EU countries to ensure they can offer services across the bloc, ahead of the EU’s Markets in Crypto-Assets regulation, or MiCA.
MiCA is designed to provide greater consumer protection and stamp out scams, money laundering and other financial crime in the crypto industry.
CySEC has received 27 applications from CAPS to acquire a license, of which it has approved five.
It has also approved another five firms licensed by other European Competent Authorities, including Revolut and eToro.
In its monthly review, Sapienta Economics, an economic consultancy agency, said the FTX collapse would slow crypto sector growth in Cyprus.
In comments to the Financial Mirror, economist Fiona Mullen said: “The FTX debacle will clearly lead to much more caution about cryptocurrency investment in future, which in turn will hold back the potential growth of the crypto-financial sector in Cyprus”.
She noted that the FTX scandal has even brought about the debate over whether the collapse means blockchain has no future.
“Slower growth in the crypto sector is probably not bad for Cyprus in the long run, as it will mean the authorities will have more time to align regulation.
“One of the reasons why the umbrella bill has not been passed, for example, is the need to ensure that it will not be incompatible with what is coming at the EU level.”
Cyprus is working on tightening rules for cryptocurrency payments to crack down on fraud and criminal activities hiding behind transactions made with virtual money.
A bill amending the 2021 Law on Combating Fraud and Forgery of Non-Cash Payment Means, submitted earlier in September by the government, is awaiting approval by the House.
The amended bill is expected to be voted I before the end of the year, with reports saying that MPs are on board with the government’s proposed changes.